AGREEMENT AND PLAN OF MERGER

      AMENDED AND RESTATED

AGREEMENT AND PLAN OF MERGER

by and among

CGEA Holdings, Inc.,

CGEA Investor, Inc.

and

ElkCorp

Dated as of January 15, 2007

 

- i -

 

- ii -

 

ANNEXES

Annex I – Financing Commitments
Annex II – Form of Guarantee
Annex III – Offer Conditions

- iii -

      AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of January 15, 2007 (this “ Agreement ”), among CGEA Holdings, Inc., a Delaware corporation (“ Parent ”), CGEA Investor, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent (“ Merger Sub ”), and ElkCorp, a Delaware corporation (the “ Company ”).

      WHEREAS, the parties to this Agreement wish to amend and restate the Agreement and Plan of Merger, dated as of December 18, 2006 (the “ Prior Merger Agreement ”), by and among Parent, Merger Sub and the Company, as provided for herein.

      WHEREAS, on the terms and subject to the conditions set forth herein, Merger Sub has agreed to commence a tender offer (the “ Offer ”) to purchase all outstanding shares of common stock, par value $1.00 per share, of the Company, including the associated preferred stock purchase rights (the “ Rights ”) issued pursuant to the Rights Agreement, dated as of July 7, 1998 (as amended), between the Company and Mellon Investor Services, LLC, as Rights Agent (the “ Rights Agreement ”) (the shares of common stock, together with the Rights, are referred to collectively as the “ Shares ”), at a price of $40.50 per Share, net to the seller in cash (such price, or any higher price as may be paid in the Offer in accordance with this Agreement, the “ Per Share Amount ”).

      WHEREAS, following consummation of the Offer, Merger Sub shall merge with and into the Company (the “ Merger ”) and each Share that is issued and outstanding immediately prior to the Effective Time (as defined below) (other than Shares owned directly or indirectly by Parent, Merger Sub or the Company, which will be canceled with no consideration issued in exchange therefor) will be canceled and converted into the right to receive cash in an amount equal to the Per Share Amount, all upon the terms and conditions set forth herein.

      WHEREAS, the parties intend that the Company shall survive the Merger as a wholly owned subsidiary of Parent.

      WHEREAS, the board of directors of the Company (the “ Board of Directors ”), acting upon the recommendation of a special committee of independent directors of the Company (the “ Special Committee ”), has (i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement, (ii) approved the execution, delivery and performance of this Agreement and (iii) determined to recommend that the Company’s stockholders accept the Offer and tender their Shares to Merger Sub and, to the extent applicable, to adopt this Agreement.

      WHEREAS, the board of directors of each of Parent and Merger Sub have approved this Agreement and declared it advisable for Parent and Merger Sub, respectively, to enter into this Agreement.

      WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements specified herein in connection with this Agreement.

      NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, Parent, Merger Sub and the Company agree as follows:

 

 

Section 1A.1. The Offer .

      (a) Provided that this Agreement shall not have been terminated in accordance with Section 7.1, Merger Sub shall, and Parent shall cause Merger Sub to (i) as promptly as practicable following the execution of this Agreement, and in any event within three Business Days following the date of this Agreement (or such other later date as the parties may mutually agree in writing) commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) the Offer to purchase all outstanding Shares at the Per Share Amount. The Per Share Amount shall be net to the seller in cash, subject to reduction only for any applicable federal backup withholding or stock transfer taxes payable by the seller. The obligations of Merger Sub to, and of Parent to cause Merger Sub to, accept for payment and to pay for any Shares tendered pursuant to the Offer shall be subject to only those conditions set forth in Annex III (the “ Tender Offer Conditions ”). The Company agrees that no Shares held by the Company or any of its Subsidiaries (other than any Shares held on behalf of third parties) will be tendered pursuant to the Offer. For the avoidance of doubt, the parties hereto agree that Restricted Shares may be tendered in the Offer and be acquired by Parent or Merger Sub pursuant to the Offer.

      (b) Parent on behalf of Merger Sub expressly reserves the right from time to time, subject to Sections 1A.1(c) and (d), to waive any Tender Offer Condition or increase the Per Share Amount, provided that without the prior written consent of the Company, Merger Sub shall not, and Parent shall cause Merger Sub not to (i) decrease the Per Share Amount or change the form of consideration payable in the Offer, (ii) decrease the number of Shares sought to be purchased in the Offer, (iii) amend or waive satisfaction of the Minimum Condition (as defined in Annex III ), (iv) impose additional conditions to the Offer, (v) make any change in the Offer that would require an extension or delay of the then-current Expiration Date (other than an increase in the Per Share Amount), (vi) modify or amend the Tender Offer Conditions (other

than to waive such Tender Offer Conditions, other than the Minimum Condition) or (vii) modify or amend any other term of the Offer, in the case of this clause (vii), in any manner (A) adverse to the holders of Shares or (B) which would reasonably be expected to result in, individually or in the aggregate, a Parent Material Adverse Effect.

      (c) On the date of commencement of the Offer, Parent and Merger Sub shall file or cause to be filed with the SEC a Tender Offer Statement on Schedule TO (together with all amendments and supplements thereto, the “ Schedule TO ”) with respect to the Offer which shall contain the offer to purchase (the “ Offer to Purchase ”) and related letter of transmittal and summary advertisement and other ancillary Offer documents and instruments pursuant to which the Offer will be made (collectively with any supplements or amendments thereto, the “ Offer Documents ”). Parent, Merger Sub and the Company each agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect and Merger Sub shall, and Parent further agrees to cause Merger Sub to, take all steps necessary to cause the Schedule TO, as so corrected or supplemented, to be filed with the SEC and the Offer Documents, as so corrected or supplemented, to be disseminated to holders of Shares, in each case as and to the extent required by applicable Federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review and comment on any Offer Documents (including each amendment or supplement thereto) before they are filed with the SEC. Merger Sub shall, and Parent agrees to cause Merger Sub to, provide the Company with (in writing, if written), and to consult with the Company regarding, any comments (written or oral) that may be received by Parent, Merger Sub or their counsel from the SEC or its staff with respect to the Offer Documents as promptly as practicable after receipt thereof. The Company and its counsel shall be given a reasonable opportunity to review any such written and oral comments and proposed responses.

      (d) The Offer to Purchase shall provide for an expiration date of the 20 ^th Business Day (as defined in Rule 14d-1 under the Exchange Act, “ Business Day ”) following (and including the day of) the commencement of the Offer (such date, or such subsequent date to which the expiration of the Offer is extended pursuant to and in accordance with the terms of this agreement, the “ Expiration Date ”). Merger Sub shall not and Parent agrees that it shall cause Merger Sub to not terminate or withdraw the Offer other than in connection with the effective termination of this Agreement in accordance with Section 7.1 hereof. Notwithstanding the foregoing, Merger Sub may, without Parent receiving the consent of the Company, (A) extend the Expiration Date for any period required by applicable rules and regulations of the SEC or the New York Stock Exchange applicable to the Offer or (B) elect to provide a subsequent offering period for the Offer in accordance with Rule 14d-11 under the Exchange Act. So long as the Offer and this Agreement have not been terminated pursuant to Section 7.1, if at any scheduled Expiration Date, the Tender Offer Conditions shall not have been satisfied or earlier waived, Merger Sub shall, and Parent shall cause Merger Sub to extend the Offer and the Expiration Date to a date that is not more than five Business Days after such previously scheduled Expiration Date; provided that Merger Sub shall not and Parent shall not be required to cause Merger Sub to extend the Offer beyond the End Date. In the event the Acceptance Date occurs but Parent does not acquire a sufficient number of Shares to enable a Short Form Merger to occur, Merger Sub shall, and Parent shall cause Merger Sub to provide a “subsequent offering period” for a number

of days to be determined by Parent but not less than three nor more than 15 Business Days, in accordance with Rule 14d-11 under the Exchange Act; provided that Merger Sub shall, and Parent shall cause Merger Sub to immediately accept and promptly pay for all Shares tendered during the initial offering period and immediately accept and promptly pay for all Shares tendered during such subsequent offering period, in each case in accordance with Rule 14d-11 under the Exchange Act.

      (e) Subject solely to the satisfaction or waiver by Merger Sub in accordance with Section 1A.1(b) of the Tender Offer Conditions, Merger Sub shall, and Parent shall cause Merger Sub, as soon as possible after the expiration of the Offer, to accept for payment and pay for Shares validly tendered and not withdrawn pursuant to the Offer (the date of acceptance for payment, the “ Acceptance Date ”). Parent shall provide or cause to be provided to Merger Sub on a timely basis the funds necessary to purchase any Shares that Merger Sub becomes obligated to purchase pursuant to the Offer.

Section 1A.2. Company Action .

      (a) The Board of Directors, acting upon the unanimous recommendation of the Special Committee, at a duly called and held meeting, has unanimously (with Thomas D. Karol and Richard A. Nowak abstaining) adopted resolutions: (i) determining that the terms of the Offer, the Merger and the other transactions contemplated by this Agreement are fair and in the best interests of the Company and its stockholders, and declaring it advisable, to enter into this Agreement; (ii) approving the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Offer and the Merger; (iii) approving the Recommendation; (iv) rendering the Rights and the limitations on business combinations contained in Section 203 of the General Corporation Law of the State of Delaware (the “ DGCL ”) and in Article Thirteenth of the Company’s Restated Certificate of Incorporation inapplicable to the Offer, this Agreement and the transactions contemplated hereby; and (v) electing that the Offer and the Merger, to the extent of the Board of Directors’ power and authority and to the extent permitted by law, not to be subject to any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws and regulations (collectively, “ Takeover Laws ”) of any jurisdiction that may purport to be applicable to this Agreement.

      (b) On the date the Offer Documents are filed with the SEC if practicable and otherwise reasonably promptly thereafter, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the “ Schedule 14D-9 ”) that will comply in all material respects with the provisions of all applicable Federal securities laws. The Company agrees to use its commercially reasonable efforts to mail such Schedule 14D-9 to the stockholders of the Company along with the Offer Documents reasonably promptly after the commencement of the Offer. Subject to any Change of Recommendation in accordance with this Agreement, the Schedule 14D-9 and the Offer Documents shall contain the Recommendation. The Company agrees reasonably promptly to correct the Schedule 14D-9 if and to the extent that it shall

become false or misleading in any material respect (and each of Parent and Merger Sub, with respect to written information supplied by it specifically for use in the Schedule 14D-9, shall promptly notify the Company of any required corrections of such information and cooperate with the Company with respect to correcting such information) and to supplement the information contained in the Schedule 14D-9 to include any information that shall become necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Company shall use reasonable best efforts to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to the Company’s stockholders to the extent required by applicable Federal securities laws. Parent and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 before it is filed with the SEC. The Company shall provide Parent and Merger Sub (in writing, if written), and consult with Parent and Merger Sub regarding, any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 as promptly as practicable after receipt of such comments.

      (c) In connection with the Offer, the Company shall reasonably promptly following execution of this Agreement furnish Parent with mailing labels containing the names and addresses of all record holders of Shares, non-objecting beneficial owners list and security position listings of Shares held in stock depositories, each as of a recent date, and shall reasonably promptly furnish Parent with such additional information, including updated lists of stockholders, mailing labels, security position listings and computer files, and such other information and assistance as Merger Sub or its agents may reasonably request for the purpose of communicating the Offer to the record and beneficial holders of Shares.

      Section 1A.3. Directors . Promptly upon the payment by Parent or Merger Sub for all Shares tendered pursuant to the Offer which represent at least a majority of the Shares outstanding, and from time to time thereafter as Shares are acquired by Parent or Merger Sub, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors as will give Parent, subject to compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, representation on the Board of Directors equal to at least that number of directors which equals the product of the total number of directors on the Board of Directors (giving effect to the directors appointed or elected pursuant to this sentence and including current directors serving as officers of the Company) multiplied by the percentage that the aggregate number of Shares beneficially owned by Parent or any affiliate of Parent (including for purposes of this Section 1A.3 such Shares as are accepted for payment pursuant to the Offer, but excluding Shares held by the Company or any of its Subsidiaries) bears to the number of Shares outstanding; provided , however , that, in the event that Parent’s designees are appointed or elected to the Board of Directors, until the Effective Time (as defined in Section 1.3 hereof) the Board of Directors shall have at least three directors who are directors on the date hereof and who are neither officers of the Company nor designees, stockholders, affiliates or associates (within the meaning of the Federal securities laws) of Parent (one or more of such directors, the “ Independent Directors ”); provided further , that if there are in office fewer than three Independent Directors, the Board of Directors will take all action necessary to cause a person or, if there are two vacancies, two persons designated by the remaining Independent Director(s) to fill such vacancy(ies) who shall be neither an officer of the

Company nor a designee, stockholder, affiliate or associate of Parent, and such person shall be deemed to be an Independent Director for purposes of this Agreement, or, if no Independent Directors remain, the other directors shall designate three persons to fill the vacancies who shall be neither an officer of the Company nor a designee, stockholder, affiliate or associate of Parent, and each such person shall be deemed to be an Independent Director for purposes of this Agreement. At each such time, the Company will, subject to any limitations imposed by applicable law or New York Stock Exchange rules, also cause (a) each committee of the Board of Directors, (b) if requested by Parent, the board of directors of each of the Subsidiaries and (c) if requested by Parent, each committee of such board of directors of each of the Subsidiaries to include persons designated by Parent constituting the same percentage of each such committee or board as Parent’s designees constitute on the Board of Directors. The Company shall, upon request by Parent, subject to the Company’s Certificate of Incorporation, promptly increase the size of the Board of Directors or exercise its best efforts to secure the resignations of such number of directors as is necessary to enable Parent’s designees to be elected to the Board of Directors in accordance with the terms of this Section 1A.3 and shall cause Parent’s designees to be so elected. Subject to applicable law, the Company shall promptly take all action necessary pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this Section 1A.3 and shall include in the Schedule 14D-9 mailed to stockholders promptly after the commencement of the Offer (or an amendment thereof or an information statement pursuant to Rule 14f-1 if Parent has not complied with its obligation to supply the Company the information required by Section 14(f) and Rule 14-f-1 at least two Business Days in advance of the date the Schedule 14D-9 is to be filed with the SEC) such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 1A.3. Parent will supply the Company any information with respect to itself and its nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. Notwithstanding anything in this Agreement to the contrary, following the time directors designated by Parent are elected or appointed to the Board of Directors and prior to the Effective Time, the affirmative vote of a majority of the Independent Directors shall be required to (v) authorize any agreement between the Company and any of its subsidiaries, on the one hand, and Parent, Merger Sub and any of their affiliates (other than the Company and any of its subsidiaries) on the other hand, (w) amend or terminate this Agreement on behalf of the Company, (x) exercise or waive any of the Company’s rights or remedies hereunder, (y) extend the time for performance of Parent’s or Merger Sub’s obligations hereunder or (z) take any other action by the Company in connection with this Agreement or the transactions contemplated hereby required to be taken by the Board of Directors. The Independent Directors shall have the authority to retain such counsel (which may include current counsel to the Company) and other advisors at the expense of the Company as determined appropriate by the Independent Directors and shall have the authority to institute any action on behalf of the Company to enforce the performance of this Agreement.

Section 1A.4. Top-Up Option .

      (a) The Company hereby grants to Parent and Merger Sub an irrevocable option (the “ Top-Up Option ”) to purchase, at a price per share equal to the Per Share Amount, a number of Shares (the “ Top-Up Option Shares ”) that, when added to the number of Shares owned by Parent

or Merger Sub or any wholly-owned Subsidiary of Parent or Merger Sub at the time of exercise of the Top-Up Option, constitutes one Share more than 90% of the number of Shares that will be outstanding immediately after the issuance of the Top-Up Option Shares. The Top-Up Option shall be exercised by Parent or Merger Sub, in whole or in part, at any time on or after the expiration date of the Offer and on or prior to the fifth Business Day after the later of (1) the expiration date of the Offer or (ii) the expiration of any subsequent offering period; provided , however , that the obligation of the Company to deliver Top-Up Option Shares upon the exercise of the Top-Up Option is subject to the conditions that (A) the number of Top-Up Option Shares to be issued by the Company shall in no event exceed 19.90% of the number of outstanding Shares or the voting power of the Company, in each case, as of immediately prior to and after giving effect to the issuance of the Top-Up Option Shares, (B) no provision of any applicable law and no judgment, injunction, order or decree shall prohibit the exercise of the Top-Up Option or the delivery of the Top-Up Option Shares in respect of such exercise, (C) the issuance of Top-Up Option Shares pursuant to the Top-Up Option would not require approval of the Company’s stockholders under applicable law or regulation (including, without limitation, New York Stock Exchange rules and regulations, (D) upon exercise of the Top-Up Option, the number of Shares owned by Parent or Merger Sub or any wholly-owned Subsidiary of Parent or Merger Sub constitutes one Share more than 90% of the number of Shares that will be outstanding immediately after the issuance of the Top-Up Option Shares, and (E) Merger Sub has accepted for payment and paid for all Shares validly tendered in the Offer and not withdrawn. The parties shall cooperate to ensure that the issuance of the Top-Up Option Shares is accomplished consistent with all applicable legal requirements of all Governmental Entities, including compliance with an applicable exemption from registration of the Top-Up Option Shares under the Securities Act. The Top-Up Option shall be exercised (and may only be exercised) if following its exercise, the condition set forth in clause (D) above would be satisfied.

      (b) Upon the exercise of the Top-Up Option in accordance with Section 1A.4(a), Parent shall so notify the Company and shall set forth in such notice (i) the number of Shares that are expected to be owned by Parent, Merger Sub or any wholly-owned Subsidiary of Parent or Merger Sub immediately preceding the purchase of the Top-Up Option Shares and (ii) a place and time for the closing of the purchase of the Top-Up Option Shares. The Company shall, as soon as practicable following receipt of such notice, notify Parent and Merger Sub of the number of Shares then outstanding and the number of Top-Up Option Shares. At the closing of the purchase of the Top-Up Option Shares, Parent or Merger Sub, as the case may be, shall pay the Company the aggregate price required to be paid for the Top-Up Option Shares, and the Company shall cause to be issued to Parent or Merger Sub a certificate representing the Top-Up Option Shares. The aggregate purchase price payable for the Top-Up Shares may be paid by Merger Sub or Parent by executing and delivering to the Company a promissory note having a principal amount equal to the balance of the aggregate purchase price for the Top-Up Shares. Any such promissory note shall bear interest at the rate of interest per annum equal to the Interest Rate, shall mature on the first anniversary of the date of execution and delivery of such promissory note and may be prepaid without premium or penalty. In the event that this Agreement is terminated after the Top-Up Option is exercised and prior to the Effective Time, all amounts then owing pursuant to the promissory note (including all interest) shall thereupon become immediately due and payable.

- 7 -

      Section 1.1 The Merger . On the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub will merge with and into the Company, whereupon the separate corporate existence of Merger Sub will cease, and the Company will continue its corporate existence under Delaware law as the surviving corporation in the Merger (the “ Surviving Corporation ”) and a wholly owned subsidiary of Parent.

      Section 1.2 Closing . The closing of the Merger (the “ Closing ”) shall take place at the offices of Debevoise & Plimpton LLP, 919 Third Avenue, New York, New York 10022 at 10:00 a.m., local time, on a date (the “ Closing Date ”) which shall be the second Business Day after the satisfaction or waiver (to the extent permitted by applicable Law) of the conditions set forth in Article VI (other than those conditions that by their nature are to be satisfied by actions to be taken at the Closing, but subject to the satisfaction or waiver of such conditions), or at such other place, date and time as the Company and Parent may agree in writing; provided, however, that if, as of or immediately following the Acceptance Date, the expiration of any subsequent offering period pursuant to Section 1A.1(d), or the exercise of the Top-Up Option, a Short Form Merger is available pursuant to Section 1.8 and Section 253 of the DGCL, the Closing shall, subject to the satisfaction or waiver of the conditions set forth in Section 6.1, occur no later than the Business Day immediately following the Acceptance Date, the expiration of such subsequent offering period or the closing of the purchase of the Top-Up Option Shares, as applicable.

      Section 1.3 Effective Time . Subject to the provisions of this Agreement, at the Closing, the Company will cause a certificate of merger (the “ Certificate of Merger ”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware in accordance with Section 251 of the DGCL (or to the extent provided in Section 1.8 hereof, Section 253 of the DGCL). The Merger will become effective at such time as the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or at such later date or time as may be agreed by the Company and Merger Sub in writing and specified in the Certificate of Merger in accordance with the DGCL (the effective time of the Merger being hereinafter referred to as the “ Effective Time ”).

      Section 1.4 Effects of the Merger . The Merger shall have the effects set forth in this Agreement and the applicable provisions of the DGCL.

      Section 1.5 Certificate of Incorporation and By-laws of the Surviving Corporation . Subject to Section 5.9, at the Effective Time, (a) the certificate of incorporation of the Surviving Corporation shall be amended to read in its entirety as the certificate of incorporation of Merger Sub read immediately prior to the Effective Time, except that the name of the Surviving Corporation shall be Elk Corporation or ElkCorp and the provision in the certificate of incorporation of Merger Sub naming its incorporator shall be omitted, and (b) the by-laws of the Surviving Corporation shall be amended so as to read in their entirety as the by-laws of Merger Sub as in effect immediately prior to the Effective Time, until thereafter amended in accordance

- 8 -

with applicable Law, except that the references to Merger Sub’s name shall be replaced by references to Elk Corporation or ElkCorp.

      Section 1.6 Directors . Subject to applicable Law, the directors of Merger Sub as of the Effective Time shall be the initial directors of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

      Section 1.7 Officers . The officers of the Company as of the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

      Section 1.8 Merger Without Meeting of Stockholders . Notwithstanding anything in this Agreement to the contrary, but subject to Section 6.1, if, following the Offer and any subsequent offering period and the exercise, if any, of the Top-Up Option, Parent, or any direct or indirect Subsidiary of Parent shall own at least 90% of the outstanding Shares, pursuant to the Offer, exercise of the Top-Up Option or otherwise, the parties hereto shall, subject to Article VI hereof, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the satisfaction of such threshold, without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL (such Merger, a “ Short Form Merger ”).

CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES

      Section 2.1 Effect on Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub or the holders of any securities of the Company or Merger Sub:

      (a) Conversion of Shares . Each Share outstanding immediately prior to the Effective Time, other than Shares to be cancelled pursuant to Section 2.1(b) and other than Dissenting Shares, shall be converted automatically into and shall thereafter represent the right to receive in cash an amount equal to the Per Share Amount (the “ Merger Consideration ”). All Shares that have been converted into the right to receive the Merger Consideration as provided in this Section 2.1 shall be automatically cancelled and shall cease to exist, and the holders of certificates which immediately prior to the Effective Time represented such Shares shall cease to have any rights with respect to such Shares other than the right to receive the Merger Consideration and the right to receive any then unpaid dividend or other distribution with respect to such Shares having a record date before the Effective Time.

      (b) Parent and Merger Sub-Owned Shares . Each Share that is owned, directly or indirectly, by Parent or Merger Sub immediately prior to the Effective Time or held by the Company immediately prior to the Effective Time (in each case, other than any such Shares held on behalf of third parties) (the “ Cancelled Shares ”) shall by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange for such cancellation and retirement.

- 9 -

      (c) Conversion of Merger Sub Common Stock . At the Effective Time and by virtue of the Merger and without any action on the part of the holder thereof, each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. From and after the Effective Time, all certificates representing the common stock of Merger Sub shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence.

      (d) Dissenters’ Rights . Any provision of this Agreement to the contrary notwithstanding, if required by the DGCL (but only to the extent required thereby), Shares that are issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares) and that are held by holders of such Shares who have not voted in favor of the adoption of this Agreement or consented thereto in writing and who are entitled to demand and who have properly exercised appraisal rights with respect thereto in accordance with, and who have complied with, Section 262 of the DGCL (the “ Dissenting Shares ”) will not be converted into the right to receive the Merger Consideration, but instead holders of such Dissenting Shares will be entitled to receive payment of the appraised value of such Dissenting Shares in accordance with the provisions of such Section 262 unless and until any such holder fails to perfect or effectively withdraws or loses its rights to appraisal and payment under the DGCL. If, after the Effective Time, any such holder fails to perfect or effectively withdraws or loses such right, such Dissenting Shares will thereupon be treated as if they had been converted into and have become exchangeable for, at the Effective Time, the right to receive the Merger Consideration, without any interest thereon, and the Surviving Corporation shall remain liable for payment of the Merger Consideration for such Shares. At the Effective Time, any holder of Dissenting Shares shall cease to have any rights with respect thereto, except the rights provided in Section 262 of the DGCL and as provided in the previous sentence. The Company will give Parent (i) prompt notice of any demands received by the Company for appraisals of Shares, attempted withdrawals of such demands and any other instruments served pursuant to the DGCL and received by the Company relating to stockholders’ rights of appraisal and (ii) the opportunity to participate in all negotiations and proceedings with respect to such notices and demands. The Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to any demands for appraisal or settle, or offer to agree to settle, any such demands.

      (e) Adjustments . If at any time during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of the Company, or securities convertible or exchangeable into or exercisable for shares of capital stock, shall occur as a result of any reclassification, recapitalization, stock split (including a reverse stock split) or subdivision or combination, exchange or readjustment of shares, or any stock dividend or stock distribution with a record date during such period (excluding, in each case, normal quarterly cash dividends), merger or other similar transaction, the Merger Consideration shall be equitably adjusted to reflect such change; provided that nothing herein shall be construed to permit the Company to take any action with respect to its securities that is prohibited by the terms of this Agreement.

- 10 -

     Section 2.2    Exchange of Certificates .

      (a) Paying Agent . At or prior to the earlier of the Acceptance Date or the Effective Time, Parent shall deposit, or shall cause to be deposited, with a U.S. bank or trust company that shall be appointed by Parent, and approved in advance by the Company in writing (such approval not to be unreasonably withheld) to act as a paying agent hereunder (and pursuant to an agreement in form and substance reasonably acceptable to Parent and the Company) (the “ Paying Agent ”), in trust for the benefit of holders of the Shares, the Company Stock Options and the Performance Shares, cash in U.S. dollars sufficient to pay (i) the aggregate Merger Consideration in exchange for all of the Shares outstanding immediately prior to the Effective Time (other than the Cancelled Shares), payable upon due surrender of the certificates that immediately prior to the Effective Time represented Shares (“ Certificates ”) (or effective affidavits of loss in lieu thereof) or non-certificated Shares represented by book-entry (“ Book-Entry Shares ”) pursuant to the provisions of this Article II and (ii) the Option and Stock-Based Consideration payable pursuant to Section 2.3 (such cash referred to in subsections (a)(i) and (a)(ii) being hereinafter referred to as the “ Exchange Fund ”).

     (b) Payment Procedures .

        (i) As soon as reasonably practicable after the Effective Time and in any event not later than the third Business Day following the Closing Date, the Paying Agent shall mail (x) to each holder of record of Shares whose Shares were converted into the Merger Consideration pursuant to Section 2.1, (A) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to Certificates shall pass, only upon delivery of Certificates (or effective affidavits of loss in lieu thereof) or Book- Entry Shares to the Paying Agent and shall be in such form and have such other provisions as Parent and the Company may mutually agree), and (B) instructions for use in effecting the surrender of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares in exchange for the Merger Consideration and (y) to each holder of a Company Stock Option or a Performance Share, a check in an amount due and payable to such holder pursuant to Section 2.3 hereof in respect of such Company Stock Option or Performance Share.

        (ii) Upon surrender of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares to the Paying Agent together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may customarily be required by the Paying Agent, the holder of such Certificates or Book-Entry Shares shall be entitled to receive in exchange therefor a check in an amount equal to the product of (x) the number of Shares represented by such holder’s properly surrendered Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares and (y) the Merger Consideration. No interest will be paid or accrued on any amount payable upon due surrender of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, a check for any cash to be paid upon due surrender of the Certificate may be paid to such a transferee if the Certificate formerly representing such Shares is presented to the Paying Agent,

- 11 -

accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer Taxes have been paid or are not applicable.

        (iii) Parent, Merger Sub, the Surviving Corporation and the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable under this Agreement (whether pursuant to the Offer, the Merger or otherwise) to any holder of Shares (including, for the avoidance of doubt, Restricted Shares) or holder of Company Stock Options or Performance Shares, such amounts as are required to be withheld or deducted under the Internal Revenue Code of 1986, as amended (the “ Code ”), the rules and regulations promulgated thereunder, or any provision of U.S. state or local Tax Law with respect to the making of such payment. To the extent that amounts are so withheld or deducted and paid over to the applicable Governmental Entity, such withheld or deducted amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares or holder of the Company Stock Options or Performance Shares, in respect of which such deduction and withholding were made.

      (c) Closing of Transfer Books . At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or Parent for transfer, they shall be cancelled and exchanged for a check in the proper amount pursuant to this Article II.

      (d) Termination of Exchange Fund . Any portion of the Exchange Fund (including the proceeds of any investments thereof) that remains undistributed to the former holders of Shares for one year after the Effective Time shall be delivered to Surviving Corporation upon demand, and any former holders of Shares who have not surrendered their Shares in accordance with this Section 2.2 shall thereafter look only to the Surviving Corporation for payment of their claim for the Merger Consideration, without any interest thereon, upon due surrender of their Shares.

      (e) No Liability . Anything herein to the contrary notwithstanding, none of the Company, Parent, Merger Sub, the Surviving Corporation, the Paying Agent or any other person shall be liable to any former holder of Shares for any amount properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

      (f) Investment of Exchange Fund . The Paying Agent shall invest all cash included in the Exchange Fund as reasonably directed by Parent; provided , however, that any investment of such cash shall be limited to direct short-term obligations of, or short-term obligations fully guaranteed as to principal and interest by, the U.S. government. Any interest and other income resulting from such investments shall be paid to the Surviving Corporation pursuant to Section 2.2(d) .

      (g) Lost Certificates . In the case of any Certificate that has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Paying Agent, the posting by such person of a bond in customary amount as indemnity against any claim that may be made against it with

respect to such Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate a check in the amount of the number of Shares represented by such lost, stolen or destroyed Certificate multiplied by the Merger Consideration.

Section 2.3 Treatment of Stock Options and Other Stock-Based Awards .

      (a) Except as otherwise agreed in writing by Parent and the applicable holder thereof, each option to purchase Shares (collectively, the “ Company Stock Options ”) granted under the employee and director stock plans of the Company (the “ Company Stock Plans ”), whether vested or unvested, that is outstanding immediately prior to the Effective Time will at the Effective Time be cancelled and the holder of such Company Stock Option will, in full settlement of such Company Stock Option, receive from the Surviving Corporation an amount (subject to any applicable withholding tax) in cash equal to the product of (x) the excess, if any, of the Merger Consideration over the exercise price per Share of such Company Stock Option multiplied by (y) the total number of Shares subject to such Company Stock Option (the aggregate amount of such cash hereinafter referred to as the “ Option Consideration ”).

      (b) Except as otherwise agreed in writing by Parent and the applicable holder thereof, immediately prior to the Effective Time, each award of restricted common stock granted under the Company Stock Plans (the “ Restricted Shares ”) shall vest in full and be converted into the right to receive the Merger Consideration as provided in Section 2.1(a) .

      (c) Except as otherwise agreed in writing by Parent and the applicable holder thereof, at the Effective Time, each performance share based on Shares granted under the Company Stock Plans (the “ Performance Shares ”), whether vested or unvested, which is outstanding immediately prior to the Effective Time shall be deemed to be earned at the level set forth in the applicable Company Stock Plan and applicable award agreement, shall become fully vested and shall entitle the holder thereof to receive, at the Effective Time or, with respect to Shares issuable with respect to Performance Shares that the applicable holder has validly elected to defer on or prior to December 31, 2006, such later date as the applicable holder shall have validly elected, an amount in cash equal to the Merger Consideration in respect of each Share earned with respect to the Performance Shares (subject to any applicable withholding taxes) (the aggregate amount of such cash, together with the Option Consideration, hereinafter referred to as the “ Option and Stock-Based Consideration ”).

      (d) Prior to the Effective Time, the Company will adopt such resolutions as may reasonably be required in its discretion to effectuate the actions contemplated by this Section 2.3.

      Section 2.4 Further Actions . The Company has taken on or prior to December 31, 2006 any and all action reasonably necessary to permit the deferral of receipt of Shares in respect of Performance Shares pursuant to the deferral elections made by the applicable holders on or prior to December 31, 2006, and the Company shall take or cause to be taken on or prior to the Effective Time any and all additional action reasonably necessary, including by amending the Company Stock Plans, to permit the exchange of Company Stock Options, Restricted Shares or Performance Shares for Parent equity awards pursuant to the agreements between Parent and the applicable holder of a Company Stock Option, Restricted Share or Performance Share referred to

- 13 -

in Section 2.3, in each case to the extent consistent with such plans, agreements and applicable Law.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

        Except (i) as disclosed in the Company SEC Documents filed on or after June 30, 2006 and prior to the date hereof (excluding any disclosures set forth in any risk factor section thereof or in any section relating to or containing forward looking statements) or (ii) as disclosed in the amended and restated disclosure schedule delivered by the Company to Parent immediately prior to the execution of this Agreement (the “ Company Disclosure Letter ”, it being agreed that disclosure of any item in any section of the Company Disclosure Letter shall also be deemed disclosure with respect to any other section of this Agreement to which the relevance of such item is reasonably apparent on its face), the Company represents and warrants to Parent and Merger Sub as follows:

     Section 3.1 Qualification, Organization, Subsidiaries, etc.

      (a) Each of the Company and its Subsidiaries is a legal entity duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization. Each of the Company and its Subsidiaries has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to have such power or authority, would not have, individually or in the aggregate, a Company Material Adverse Effect.

      (b) Each of the Company and its Subsidiaries is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, have a Company Material Adverse Effect. The organizational or governing documents of the Company and each of its Subsidiaries, as previously provided to Parent, are in full force and effect.

      (c) As used in this Agreement, any reference to any fact, circumstance, event, change, effect or occurrence having a “ Company Material Adverse Effect ” means any fact, circumstance, event, change, effect or occurrence that has or would be reasonably likely to have a material adverse effect on the business, results of operation or financial condition of the Company and its Subsidiaries, taken as a whole, but, in any case, shall not include facts, circumstances, events, changes, effects or occurrences (i) generally affecting the industries in which the Company and its Subsidiaries operate (including general pricing changes), or the economy or the financial or securities markets in the United States or elsewhere in the world (including any regulatory and political conditions or developments, or any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism), except to the extent any fact, circumstance, event, change,

- 14 -

effect or occurrence that, relative to other industry participants, disproportionately impacts the assets, properties, business, results of operation or financial condition of the Company and its Subsidiaries, taken as a whole, (ii) resulting from the announcement of (A) the proposal of the Offer and Merger or (B) this Agreement and the transactions contemplated hereby or (iii) resulting from any litigation related to this Agreement or the transactions contemplated hereby brought by shareholders of the Company; and provided that any failure to meet internal or published projections, forecasts or revenue or earning predictions for any period shall not, in and of itself, constitute a Company Material Adverse Effect.

     Section 3.2 Capital Stock .

      (a) The authorized share capital of the Company consists of 100,000,000 Shares and 1,000,000 shares of preferred stock (the “ Preferred Stock ”). As of January 12, 2007, there were (i) 20,626,102 Shares issued and outstanding (including 128,501 unvested Restricted Shares granted under the 2004 Amended and Restated ElkCorp Equity Incentive Compensation Plan (the “ 2004 Plan ”) and the 2002 ElkCorp Equity Incentive Compensation Plan (the “ 2002 Plan ”) and no shares of Preferred Stock issued and outstanding, (ii) Company Stock Options granted under the 2004 Plan, the 2002 Plan, the Elcor Corporation 1998 Amended and Restated Incentive Stock Option Plan (the “ 1998 Plan ”), and the Elcor Corporation 1993 Incentive Stock Option Plan (the “ 1993 Plan ”), collectively, to purchase an aggregate of 1,338,365 Shares, with a weighted average exercise price of $24.06 per share, issued and outstanding, (iii) 581,700 shares subject to outstanding Performance Share awards (at the maximum 150% Target level) and (iv) 66,007 Shares available for future awards under the 2004 Plan. Other than Company Stock Options granted under the 2004 Plan, the 2002 Plan, the 1998 Plan, and the 1993 Plan, and unvested Restricted Shares granted under the 2002 Plan and the 2004 Plan, there are no Company Stock Options, and no unvested Restricted Shares issued and outstanding. All outstanding Shares are duly authorized, validly issued, fully paid and non-assessable, and are not subject to and were not issued in violation of any preemptive or similar right, purchase option, call or right of first refusal or similar right.

      (b) Except as set forth in subsection (a) above, as of the date hereof, (i) the Company does not have any shares of its capital stock issued or outstanding other than Shares that have become outstanding after January 12, 2007, which were reserved for issuance as of January 12, 2007 as set forth in subsection (a) above, and (ii) except as set forth in the Rights Agreement, there are no outstanding subscriptions, options, warrants, calls, convertible securities or other similar rights, agreements or commitments relating to the issuance of capital stock to which the Company or any of the Company’s Subsidiaries is a party obligating the Company or any of the Company’s Subsidiaries to (A) issue, transfer or sell any shares of capital stock or other equity interests of the Company or any Subsidiary of the Company or securities convertible into or exchangeable for such shares or equity interests, (B) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other similar right, agreement or arrangement, (C) redeem or otherwise acquire any such shares of capital stock or other equity interests, or (D) provide a material amount of funds to, or make any material investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary. Except for the issuance of Shares that were available for issuance as set forth in subsection (a) above, and except for regular quarterly cash dividends as publicly disclosed, from December 15, 2006 to the date hereof, the Company has not declared or paid any dividend or distribution in respect of the Shares, and has

not issued, sold, repurchased, redeemed or otherwise acquired any Shares, and its Board of Directors has not authorized any of the foregoing.

      (c) Neither the Company nor any of its Subsidiaries has outstanding bonds, debentures, notes or, other than as referred to in Sections 3.2(a) and 3.2(b), other securities, the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter.

      (d) There are no stockholder agreements, voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting of the capital stock or other equity interest of the Company or any of its Subsidiaries.

     Section 3.3 Subsidiaries; Investments .

      (a) Section 3.3 of the Company Disclosure Letter sets forth a complete and correct list of each “significant subsidiary” of the Company as such term is defined in Regulation S-X promulgated by the SEC (each, a “ Significant Subsidiary ”). Section 3.3 of the Company Disclosure Letter also sets forth the jurisdiction of organization and percentage of outstanding equity interests (including partnership interests and limited liability company interests) owned by the Company or its Subsidiaries of each Significant Subsidiary. All equity interests (including partnership interests and limited liability company interests) of the Company’s Significant Subsidiaries held by the Company or any other Subsidiary have been duly and validly authorized and are validly issued, fully paid and non-assessable and were not issued in violation of any preemptive or similar rights, purchase option, call or right of first refusal or similar rights. All such equity interests owned by the Company or its Subsidiaries are free and clear of any Liens, other than restrictions imposed by applicable Law.

      (b) Except as set forth in Section 3.3 of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries owns any shares of capital stock or other equity interests in (including any securities exercisable or exchangeable for or convertible into capital stock or other voting or equity interests in) any other Person.

     Section 3.4 Corporate Authority Relative to This Agreement; No Violation .

      (a) The Company has requisite corporate power and authority to enter into this Agreement and, subject to receipt of the Company Stockholder Approval, to consummate the transactions contemplated hereby. The Board of Directors, acting upon the unanimous recommendation of the Special Committee, at a duly called and held meeting, has unanimously (with Thomas D. Karol and Richard A. Nowak abstaining) adopted resolutions (i) determining that the terms of the Offer, the Merger and the other transactions contemplated by this Agreement are fair and in the best interests of the Company and its stockholders, and declaring it advisable, to enter into this Agreement, (ii) approving the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Offer and the Merger, and (iii) resolving to recommend that the stockholders of the Company tender their Shares in the Offer or otherwise approve the adoption of this Agreement (the “ Recommendation ”) and directing that to the extent required by the DGCL this Agreement and the Merger be submitted for consideration of the stockholders of the Company at the Company

- 16 -

Meeting. Except for the Company Stockholder Approval and the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, no other corporate proceedings on the part of the Company are necessary to authorize the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and, assuming this Agreement constitutes the valid and binding agreement of Parent and Merger Sub, constitutes the valid and binding agreement of the Company, enforceable against the Company in accordance with its terms.

      (b) The execution, delivery and performance by the Company of this Agreement and the consummation of the Merger by the Company do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to any United States or foreign governmental or regulatory agency, commission, court, body, entity or authority (each, a “ Governmental Entity ”), other than (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the DGCL, (ii) compliance with the applicable requirements of the Exchange Act, including the filing of the Schedule 14D-9 in connection with the Offer and the Proxy Statement, if applicable, in connection with the Company Stockholder Approval, (iii) compliance with the rules and regulations of the New York Stock Exchange, and (iv) compliance with any applicable foreign or state securities or blue sky laws (collectively, clauses (i) through (iv), the “ Specified Approvals ”), and other than any consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not (A) individually or in the aggregate, have a Company Material Adverse Effect or (B) prevent or materially delay the consummation of the Offer or the Merger.

      (c) Assuming compliance with the matters referenced in Section 3.4(b), receipt of the Specified Approvals and the receipt of the Company Stockholder Approval, the execution, delivery and performance by the Company of this Agreement, the consummation by Parent of the Offer and the consummation by the Company of the Merger and the other transactions contemplated hereby do not and will not (i) contravene or conflict with the organizational or governing documents of the Company or any of its Subsidiaries, (ii) contravene or conflict with or constitute a violation of any provision of any Law binding upon or applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, or (iii) result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to the loss of a material benefit under any loan, guarantee of indebtedness or credit agreement, note, bond, mortgage, indenture, lease, agreement, contract, instrument, permit, concession, franchise, right or license binding upon the Company or any of its Subsidiaries or result in the creation of any Lien (other than Permitted Liens) upon any of the properties or assets of the Company or any of its Subsidiaries, other than, in the case of clauses (ii) and (iii), any such violation, conflict, default, termination, cancellation, acceleration, right, loss or Lien that would not have, individually or in the aggregate, a Company Material Adverse Effect.

     Section 3.5 Reports and Financial Statements .

      (a) The Company has filed or furnished all forms, documents, statements and reports required to be filed or furnished prior to the date hereof by it with the SEC since June 30, 2004 (the forms, documents, statements and reports filed with the SEC since June 30, 2004 and those filed with the SEC subsequent to the date of this Agreement, if any, including any amendments

thereto, the “ Company SEC Documents ”). As of their respective dates, or, if amended, as of the date of the last such amendment prior to the date hereof, the Company SEC Documents complied, and each of the Company SEC Documents filed subsequent to the date of this Agreement will comply, in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and the applicable rules and regulations promulgated thereunder. None of the Company SEC Documents so filed or that will be filed subsequent to the date of this Agreement contained or will contain, as the case may be, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

      (b) The consolidated financial statements (including all related notes and schedules) of the Company included in the Company SEC Documents (if amended, as of the date of the last such amendment) fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their consolidated cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein, including the notes thereto) in conformity with GAAP (except, in the case of the unaudited statements, as permitted by the SEC) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto).

      Section 3.6 Internal Controls and Procedures . The Company has established and maintains disclosure controls and procedures and internal controls over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act. The Company’s disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by the Company in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. The Company’s management has completed an assessment of the effectiveness of the Company’s internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the year ended June 30, 2006, and such assessment concluded that such controls were effective. The Company has disclosed, based on its most recent evaluations, to the Company’s outside auditors and the audit committee of the Company (A) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial data and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

      Section 3.7 No Undisclosed Liabilities . Except (a) as reflected or reserved against in the Company’s consolidated balance sheets (or the notes thereto) included in the Company SEC Documents filed after June 30, 2006 and prior to the date hereof, (b) as expressly permitted or

contemplated by this Agreement, (c) for liabilities and obligations incurred in the ordinary course of business consistent with past practice since June 30, 2006 and (d) for liabilities or obligations which have been discharged or paid in full in the ordinary course of business, neither the Company nor any Subsidiary of the Company has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, whether known or unknown and whether due or to become due, that would, individually or in the aggregate, have a Company Material Adverse Effect.

     Section 3.8 Compliance with Law; Permits .

      (a) The Company and each of the Company’s Subsidiaries are in compliance with and are not in default under or in violation of any applicable federal, state, local or foreign law, statute, ordinance, rule, regulation, judgment, order, injunction, decree or agency requirement of any Governmental Entity (collectively, “ Laws ” and each, a “ Law ”), except where such non-compliance, default or violation would not have, individually or in the aggregate, a Company Material Adverse Effect. Anything contained in this Section 3.8(a) to the contrary notwithstanding, no representation or warranty shall be deemed to be made in this Section 3.8(a) in respect of the matters referenced in Section 3.5 or 3.6, or in respect of environmental or labor Law matters, each of which matters is addressed by other sections of this Agreement.

      (b) The Company and the Company’s Subsidiaries are in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Entity necessary for the Company and the Company’s Subsidiaries to own, lease and operate their properties and assets or to carry on their businesses as they are now being conducted (the “ Company Permits ”), except where the failure to have any of the Company Permits would not have, individually or in the aggregate, a Company Material Adverse Effect. All Company Permits are in full force and effect, except where the failure to be in full force and effect would not have, individually or in the aggregate, a Company Material Adverse Effect. No suspension or cancellation of any of the Company Permits is pending or threatened, except where such suspension or cancellation would not, individually or in the aggregate, have a Company Material Adverse Effect. The Company and its Subsidiaries are not, and since December 31, 2004 have not been, in violation or breach of, or default under, any Company Permit, except where such violation, breach or default would not, individually or in the aggregate, have a Company Material Adverse Effect. As of the date of this Agreement, to the knowledge of the Company, no event or condition has occurred or exists which would result in a violation of, breach, default or loss of a benefit under, or acceleration of an obligation of the Company or any of its Subsidiaries under, any Company Permit (in each case, with or without notice or lapse of time or both), except for violations, breaches, defaults, losses or accelerations that would not, individually or in the aggregate, have a Company Material Adverse Effect.

      Section 3.9 Environmental Laws and Regulations . Except as would not, individually or in the aggregate, have a Company Material Adverse Effect, (i) the Company and its Subsidiaries have conducted their respective businesses in compliance with all applicable Environmental Laws (as hereinafter defined), (ii) there has been no release of any Hazardous Substance by the Company or any of its Subsidiaries in any manner that could reasonably be expected to give rise to any remedial obligation or corrective action requirement under applicable Environmental Laws, (iii) neither the Company nor any of its Subsidiaries has

received any written notices, demand letters or written requests for information from any Governmental Entity alleging that the Company or any of its Subsidiaries is in violation of, or liable under, any Environmental Law, (iv) to the Company’s knowledge no Hazardous Substance has been disposed of, released or transported in violation of any applicable Environmental Law, or in a manner giving rise to any liability under Environmental Law, from any properties while owned or operated by the Company or any of its Subsidiaries as a result of any operations or activities of the Company or its Subsidiaries, (v) neither the Company, or its Subsidiaries nor any of their respective properties are subject to any liabilities relating to any suit, settlement, court order, administrative order, regulatory requirement, judgment or written claim asserted or arising under any Environmental Law or any agreement relating to environmental liabilities and (vi) to the knowledge of the Company, neither the Company nor any of its Subsidiaries has ever manufactured asbestos-containing materials.

      (a) As used herein, “ Environmental Law ” means any Law relating to (i) the protection, preservation or restoration of the environment (including air, water vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances, in each case as in effect at the date hereof.

      (b) As used herein, “ Hazardous Substance ” means any substance listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous under any Environmental Law. Hazardous Substance includes any substance to which exposure is regulated by any Governmental Entity or any Environmental Law including any toxic waste, pollutant, contaminant, hazardous substance, toxic substance, hazardous waste, special waste, industrial substance or petroleum or any derivative or byproduct thereof, radon, radioactive material, asbestos or asbestos containing material, urea formaldehyde, foam insulation or polychlorinated biphenyls.

      (c) The generality of any other representations and warranties in this Agreement notwithstanding, this Section 3.9 shall be deemed to contain the only representations and warranties in this Agreement with respect to Environmental Law, Hazardous Substances and any other environmental matter.

     Section 3.10 Employee Benefit Plans .

      (a) Section 3.10(a) of the Company Disclosure Letter lists all “multiemployer plans” within the meaning of 4001(a)(3) of ERISA (each a “ Multiemployer Plan ”) to which the Company or its Subsidiaries contributes, Company Benefit Plans that are employee welfare plans within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), any employee pension benefit plan within the meaning of Section 3(2) of ERISA and all other material Company Benefit Plans (whether or not such plan is subject to ERISA). “ Company Benefit Plans ” means all employee or director compensation and/or benefit plans, programs, policies, agreements or other arrangements, including any employee welfare plan within the meaning of Section 3(1) of ERISA, any employee pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA), and any bonus, incentive, deferred compensation, vacation, stock purchase, stock option, severance,

employment, change of control or fringe benefit plan, program, agreement or arrangement (other than any Multiemployer Plan and any other plan, program or arrangement maintained by an entity other than the Company or any of its Subsidiaries pursuant to any collective bargaining agreements), in each case that are sponsored, maintained or contributed to by the Company or any of its Subsidiaries for the benefit of current or former employees, directors or consultants of the Company or its Subsidiaries. It is agreed and understood that no representation or warranty is made in respect of ERISA matters in any Section of this Agreement other than this Section 3.10 and Section 3.16.

      (b) The Company has heretofore made available to Parent true and complete copies of each of the material Company Benefit Plans (or with respect to unwritten plans, a written description thereof) and material related documents, including plan documents, trust agreements and other funding arrangements, but not limited to, (i) each writing constituting a part of such Company Benefit Plan, including all amendments thereto; (ii) the three most recent Annual Reports (Form 5500 Series) and accompanying schedules, if any; (iii) the most recent determination letter from the IRS (if applicable) for such Company Benefit Plan and (iv) all material communications received from or sent to the IRS, the Pension Benefit Guaranty Corporation or the Department of Labor and any schedules thereto.

      (c) (i) Each Company Benefit Plan has been maintained and administered in compliance with its terms and with applicable Law, including but not limited to ERISA and the Code to the extent applicable thereto, (ii) each of the Company Benefit Plans intended to be “qualified” within the meaning of Section 401(a) of the Code has received a favorable determination letter from the IRS or is entitled to rely upon a favorable opinion issued by the IRS, and, to the knowledge of the Company, there are no existing circumstances or any events that have occurred that could reasonably be expected to adversely affect the qualified status of any such plan; (iii) no Company Benefit Plan is subject to Title IV of ERISA; (iv) no Company Benefit Plan provides retiree medical or other welfare benefits, other than (A) coverage mandated by applicable Law or (B) benefits under any “employee pension plan”; (v) no liability under Title IV of ERISA has been incurred by the Company, its Subsidiaries or any ERISA Affiliate of the Company that has not been satisfied in full; (vi) all contributions or other amounts payable by the Company or its Subsidiaries as of the date hereof with respect to each Company Benefit Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP (other than with respect to amounts not yet due); (vii) neither the Company nor its Subsidiaries has engaged in a transaction in connection with which the Company or its Subsidiaries reasonably could be subject to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code; and (viii) there are no pending, threatened or, to the knowledge of the Company, anticipated claims (other than claims for benefits in accordance with the terms of the Company Benefit Plans) by, on behalf of or against any of the Company Benefit Plans or any trusts related thereto which could reasonably be expected to result in any liability of the Company or any of its Subsidiaries except in the case of clauses (i), (vi) and (viii) as would not have, individually or in the aggregate, a Company Material Adverse Effect. “ ERISA Affiliate ” means, with respect to any entity, trade or business, any other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade or business, or that is a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.

      (d) Neither the Company nor any of its Subsidiaries has, at any time during the last six years, contributed to or been obligated to contribute to any Multiemployer Plan other than as set forth on Section 3.10(d) of the Company Disclosure Letter.

      (e) The consummation of the transactions contemplated by this Agreement will not, either alone or in combination with another event, (i) entitle any current or former employee, consultant, officer or director of the Company or any of its Subsidiaries to severance pay, unemployment compensation or any other payment, except as expressly provided in Section 2.3 hereto, (ii) result in any payment becoming due, accelerate the time of payment or vesting, or increase the amount of compensation due to any such employee, consultant, officer or director, except as expressly provided in Section 2.3 hereof, (iii) result in any forgiveness of indebtedness, trigger any funding obligation under any Company Benefit Plan or impose any restrictions or limitations on the Company’s rights to administer, amend or terminate any Company Benefit Plan, or (iv) result in any payment that could reasonably be construed, individually or in combination with any other such payment, to constitute an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code), in each case except as set forth in Section 3.10(e) of the Company Disclosure Letter. Except as set forth in the Executive Agreements listed in Section 3.10(e) of the Company Disclosure Letter, no person is entitled to receive any additional payment (including, without limitation, any tax gross up or other payment) from the Company or any of its Subsidiaries or any other person as a result of the imposition of the excise tax required by Section 4999(a) of the Code.

      (f) Each “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) of the Company has been operated since January 1, 2005 in good faith compliance with Section 409A of the Code, the proposed regulations thereunder, IRS Notice 2005-1, Notice 2005-91, Notice 2006-33, Notice 2006-79 and Notice 2006-100. Each Stock Option has been granted with an exercise price no lower than “fair market value” (within the meaning of Section 409A and 422 of the Code) as of the grant date of such option.

      Section 3.11 Absence of Certain Changes or Events . Since June 30, 2006 through the date of this Agreement, (a) except as otherwise expressly contemplated or required by this Agreement, the businesses of the Company and its Subsidiaries have been conducted, in all material respects, in the ordinary course of business consistent with past practice and there have not been any facts, circumstances, events, changes, effects or occurrences that have had or would have, individually or in the aggregate, a Company Material Adverse Effect and (b) neither the Company nor any of its Subsidiaries has taken or agreed to take any action that would be prohibited by clauses (v), (vi), (vii), (xi), (xvi) or (xvii) of Section 5.1(b) .

     Section 3.12 Investigations; Litigation . As of the date hereof, there are no (a) investigations or proceedings pending (or, to the knowledge of the Company, threatened) by any Governmental Entity with respect to the Company or any of its Subsidiaries or (b) actions, suits or proceedings pending (or, to the knowledge of the Company, threatened) against or affecting the Company or any of its Subsidiaries, or any of their respective properties at law or in equity before, to the Company’s knowledge, and there are no orders, judgments or decrees of any Governmental Entity against the Company or any of its Subsidiaries, in each case of clause (a) or (b), which would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

     Section 3.13 Schedule 14D-9, Offer Documents; Proxy Statement; Other Information .

      (a) None of the information supplied or to be supplied in writing by or on behalf of the Company specifically for inclusion in the Offer Documents will, at the times such documents are filed with the SEC and are mailed to stockholders of the Company, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, or necessary to correct any statement supplied by the Company made in any communication with respect to the Offer previously filed with the SEC or disseminated to the stockholders of the Company. The Schedule 14D-9 will not, at the time the Schedule 14D-9 is filed with the SEC and at all times prior to the purchase of Shares by Merger Sub pursuant to the Offer, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by the Company with respect to information supplied in writing by Parent, Merger Sub or an Affiliate of Parent or Merger Sub which is contained in the Schedule 14D-9. The Schedule 14D-9 will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations of the SEC thereunder.

      (b) The proxy statement (including the letter to stockholders, notice of meeting and form of proxy, the “ Proxy Statement ”) that may be filed by the Company with the SEC in connection with seeking the adoption of this Agreement by the stockholders of the Company will not, at the time it is filed with the SEC, or at the time it is first mailed to the stockholders of the Company or at the time of the Company Meeting, and at the time of any amendments or supplements thereto, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Company will cause the Proxy Statement to comply as to form in all material respects with the requirements of the Exchange Act applicable thereto as of the date of such filing. No representation is made by the Company with respect to statements made in the Proxy Statement based on information supplied, or required to be supplied, by Parent, Merger Sub or any of their affiliates specifically for inclusion or incorporation by reference therein.

Section 3.14 Other Approvals .

      (a) Rights Plan . The Second Amendment to Rights Agreement, dated as of December 18, 2006, by and between the Company and the Rights Agent remains in full force and effect.

      (b) Section 203: Article Thirteenth . The Board of Directors has resolved to, and the Company after the execution of this Agreement will, take all action necessary to render the limitations on business combinations contained in Section 203 of the DGCL and in Article Thirteenth of the Company’s Restated Certificate of Incorporation inapplicable to this Agreement and the transactions contemplated hereby. Neither the execution and delivery of this Agreement nor the consummation of the Offer, the Merger and any of the transactions

- 23 -

contemplated hereby will prohibit for any period of time, or impose any stockholder approval requirement with respect to, the Merger.

      Section 3.15 Tax Matters . Except as would not have, individually or in the aggregate, a Company Material Adverse Effect:

      (a) the Company and each of its Subsidiaries have prepared and duly and timely filed (taking into account any extension of time within which to file) all Tax Returns required to be filed by any of them and all such filed Tax Returns are complete and accurate in all respects;

      (b) the Company and each of its Subsidiaries have duly and timely paid all Taxes that are required to be paid by any of them (whether or not shown as due on such Tax Return);

      (c) there are not pending, outstanding or threatened in writing, any audits, examinations, investigations or other proceedings in respect of Taxes of the Company or any of its Subsidiaries;

      (d) no deficiency with respect to Taxes has been proposed, asserted or assessed in each case, in writing, against the Company or any of its Subsidiaries;

      (e) there are no requests for rulings or determinations in respect of any material Taxes or material Tax Returns pending between the Company or any of its Subsidiaries on the one hand and any authority responsible for such Taxes or Tax Returns on the other;

      (f) the Company and each of its Subsidiaries has timely withheld and paid all Taxes required to be withheld and paid in connection with amounts paid or owing to any employee, creditor, independent contractor, shareholder or other third party and is in compliance with all applicable rules and regulations regarding the solicitation, collection and maintenance of any forms, certifications and other information required in connection therewith;

      (g) neither the Company nor any of its Subsidiaries has any liability as a result of being a party to any Tax sharing, Tax indemnity or other agreement or arrangement relating to Taxes (other than an agreement or arrangement solely among members of an affiliated, consolidated or unitary group the common parent of which is the Company or which includes only the Company and/or its Subsidiaries);

      (h) neither the Company nor any of its Subsidiaries has any liability for Taxes as a result of having been a member of any affiliated group within the meaning of Section 1504(a) of the Code, or any similar affiliated or consolidated group for Tax purposes under state, local or foreign law (other than a group the common parent of which is the Company or which includes only the Company and/or its Subsidiaries), or has any liability for the Taxes of any person (other than the Company and its Subsidiaries) under Treasury Regulations Section 1.1502 -6 or any similar provision of state, local or foreign law, or as a transferee or successor, or otherwise;

      (i) neither the Company nor any of its Subsidiaries has been a “controlled corporation” or a “distributing corporation” in any distribution that was purported or intended to be governed by Section 355 of the Code within the two-year period ending on the date hereof; and

      (j) neither the Company nor any of its Subsidiaries has entered into any “listed transaction” within the meaning of Treasury Regulation Section 1.6011 -4(b)(2).

      As used in this Agreement, (i) “ Taxes ” means any and all domestic or foreign, federal, state, local or other taxes, charges, fees, imposts, levies or other assessments of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Entity, including taxes on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, unemployment, social security, workers’ compensation or net worth, and taxes in the nature of excise, withholding, ad valorem or value added and (ii) “ Tax Return ” means any return, report or similar filing (including the attached schedules, supplements and additional or supporting material) filed or required to be filed with respect to Taxes, including any information return, claim for refund, amended return or declaration of estimated Taxes (and including any amendments with respect thereto). It is agreed and understood that no representation or warranty is made in respect of Tax matters in any Section of this Agreement other than this Section 3.15.

      Section 3.16 Labor Matters . Except for such matters which would not have, individually or in the aggregate, a Company Material Adverse Effect, (a) as of the date hereof, (i) there are no strikes or lockouts with respect to any employees of the Company or any of its Subsidiaries (“ Employees ”), (ii) to the knowledge of the Company, there is no union organizing effort pending or threatened against the Company or any of its Subsidiaries, (iii) there is no unfair labor practice, labor dispute (other than routine individual grievances) or labor arbitration proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, and (iv) there is no slowdown, or work stoppage in effect or, to the knowledge of the Company, threatened with respect to Employees, (b) the Company and its Subsidiaries are in compliance with all applicable Laws respecting (i) employment and employment practices, (ii) terms and conditions of employment and wages and hours and (iii) unfair labor practices and (c) neither the Company nor any of its Subsidiaries has any liabilities under the Worker Adjustment and Retraining Act of 1998 (the “ WARN Act ”) as a result of any action taken by the Company (other than at the written direction of Parent or as a result of any of the transactions contemplated hereby). Except for such matters which would not have, individually or in the aggregate, a Company Material Adverse Effect, neither the Company nor any of its Subsidiaries has received written notice during the past two years of the intent of any Governmental Entity responsible for the enforcement of labor, employment, occupational health and safety or workplace safety and insurance/workers compensation laws to conduct an investigation of the Company or any of its Subsidiaries and, to the knowledge of the Company, no such investigation is in progress. It is agreed and understood that no representation or warranty is made in respect of labor matters in any Section of this Agreement other than Section 3.10 and this Section 3.16.

      Section 3.17 Intellectual Property . Except as would not have, individually or in the aggregate, a Company Material Adverse Effect, either the Company or a Subsidiary of the Company owns, or is licensed or otherwise possesses legally enforceable rights to use, all material trademarks, trade names, service marks, service names, mark registrations, logos, assumed names, registered and unregistered copyrights, patents or applications and registrations