Note 2: DISCONTINUED OPERATIONS

On August 1, 2006, the Company completed the sale of its Performance Coatings & Finishes business (the "Coatings Business") to PPG Industries, Inc. ("PPG") for $115,000,000 in cash upon the closing, plus a post-closing adjustment. As part of the post-closing adjustment PPG has paid $11,308,000, which includes interest through the payment date, and is disputing $3,423,000. The Company believes it is entitled to the disputed amount under the terms of the Purchase Agreement (the "Agreement"). The Company and PPG are in active negotiations to resolve the dispute. If the parties are unable to resolve the dispute the Agreement provides a process for resolution. Certain assets were excluded from the sale, including cash and cash equivalents and certain real properties that were used in the Coatings Business. The Company intends to sell the retained properties in the next 12 to 18 months and expects to generate additional proceeds of approximately $15,000,000 based on current estimates of market values. The gain or loss on such sales is not expected to be material. The retained properties are included in other assets (Note 7).

Pursuant to the Agreement, PPG assumed certain liabilities related to the Coatings Business, including, without limitation, (i) warranty and guaranty obligations and liabilities for products sold or manufactured by the Company, (ii) all environmental liabilities associated with the real properties that PPG acquired and (iii) general tort liability. PPG also agreed to a cost-sharing arrangement with respect to any product liability claims relating to the Company's operation of the Coatings Business prior to the closing of the transaction.

Pursuant to the Agreement, PPG did not assume certain other liabilities related to the Company's operations of the Coatings Business prior to the closing of the transaction, including,without limitation, (i) any liability of the Coatings Business arising out of asbestos, silica or lead and (ii) any pre-closing environmental liabilities related to the real properties that the Company retained. Additionally,PPG will not be assuming any liabilities related to the Company's lawsuits with Dominion Exploration and Production, Inc. and Pioneer Natural Resources USA, Inc. and with Sable Offshore Energy, Inc.more fully described in Note 15.

The results of discontinued operations were as follows for the years ended November 30:

The income taxes on gain from sale of discontinued operations reflects the allocation of sales proceeds to various taxing jurisdictions, which resulted in certain tax losses without tax benefits. Prior period income statement amounts have been reclassified to present the operating results of the Coatings Business as a discontinued operation. Prior period balance sheets and cash flow statements have not been adjusted.