e10vk

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JuhkBiLtdKZpTQeuRE7qmMNcj8i8AWe/a9vxgJJT2y6GWOpnYyeBsc4RhayK6DQs VMbiK0fXTfPqiIY/zb4t2w== 0000950123-10-017038.txt : 20100225 0000950123-10-017038.hdr.sgml : 20100225 20100225155945 ACCESSION NUMBER: 0000950123-10-017038 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20091231 FILED AS OF DATE: 20100225 DATE AS OF CHANGE: 20100225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OM GROUP INC CENTRAL INDEX KEY: 0000899723 STANDARD INDUSTRIAL CLASSIFICATION: SECONDARY SMELTING & REFINING OF NONFERROUS METALS [3341] IRS NUMBER: 521736882 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12515 FILM NUMBER: 10633589 BUSINESS ADDRESS: STREET 1: 1500 KEY TOWER STREET 2: 127 PUBLIC SQUARE CITY: CLEVELAND STATE: OH ZIP: 44114 BUSINESS PHONE: 2167810083 MAIL ADDRESS: STREET 1: 1500 KEY TOWER STREET 2: 127 PUBLIC SQUARE CITY: CLEVELAND STATE: OH ZIP: 44114 10-K 1 l38672e10vk.htm FORM 10-K e10vk

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K


x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2009		Commission file number 001-12515


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OM GROUP, INC.

(Exact name of Registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		52-1736882 (I.R.S. Employer Identification No.)

127 Public Square, 1500 Key Tower, Cleveland, Ohio (Address of principal executive offices)		44114-1221 (Zip Code)

216-781-0083
Registrant’s telephone number, including area code

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


Title of each class		Name of each exchange on which registered

Common Stock, par value $0.01 per share		New York Stock Exchange

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer x		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller Reporting company o

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

The aggregate market value of Common Stock, par value $.01 per share, held by nonaffiliates (based upon the closing sale price on the NYSE) on June 30, 2009 was approximately $871.6 million.

As of January 31, 2010 there were 30,558,262 shares of Common Stock, par value $.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s Proxy Statement for the 2010 Annual Meeting of Stockholders are incorporated by reference in Part III.

OM Group, Inc.

TABLE OF CONTENTS


PART I
Item 1.	Business	2
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	17
Item 4.	Submission of Matters to a Vote of Security Holders	17

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 8.	Financial Statements and Supplementary Data	47
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	98
Item 9A.	Controls and Procedures	98
Item 9B.	Other Information	98

PART III
Item 10.	Directors and Executive Officers of the Registrant amd Corporate Governance	99
Item 11.	Executive Compensation	99
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	99
Item 13.	Certain Relationships and Related Transactions, Director Independence	100
Item 14.	Principal Accountant Fees and Services	100

PART IV
Item 15.	Exhibits and Financial Statement Schedules	101
	Signatures	106
EX-10.8
EX-21
EX-23
EX-24
EX-31.1
EX-31.2
EX-32

PART I


Item 1.	Business

General

OM Group, Inc. (the “Company”) is a global solutions provider of specialty chemicals, advanced materials, electrochemical energy storage, and technologies crucial to enabling its customers to meet increasingly stringent market and application requirements. The Company believes it is the world’s largest refiner of cobalt and producer of cobalt-based specialty products.

The Company is executing a deliberate strategy to grow through continued product innovation, as well as tactical and strategic acquisitions. The strategy is part of a transformational process to leverage the Company’s core strengths in developing and producing value-added specialty products for dynamic markets while reducing the impact of metal price volatility on financial results. The strategy is designed to allow the Company to deliver sustainable and profitable volume growth in order to drive consistent financial performance and enhance the Company’s ability to continue to build long-term shareholder value.

On January 29, 2010, the Company completed the acquisition of EaglePicher Technologies, LLC from EaglePicher Corporation for approximately $172 million in cash, subject to customary post closing adjustments. Based in Joplin, Missouri, EaglePicher Technologies is a leader in portable power solutions and energy storage technologies serving aerospace, defense and medical markets and it is developing technologies in advanced power storage to serve alternative energy storage markets. EaglePicher Technologies product offerings can be grouped into two broad categories, proprietary battery products and complementary battery support products that consist of energetic devices, chargers, battery management systems and distributed products. In fiscal year 2009, EaglePicher Technologies recorded revenues of approximately $125 million, of which approximately 60 percent came from its defense business, approximately 33 percent from its aerospace business and the balance from its medical and other businesses. EaglePicher Technologies will operate and be reported within a new segment called Battery Technologies.

Unless indicated otherwise, the discussion contained in Item 1 of the Form 10-K relates solely to the Company’s business as of December 31, 2009 and does not include EaglePicher Technologies.

Segments

The Company was organized into two segments during 2009: Advanced Materials and Specialty Chemicals. Financial information and further discussion of these segments and geographic areas, including external sales and long-lived assets, are contained in Note 20 to the accompanying consolidated financial statements of this Annual Report on Form 10-K.

Advanced Materials segment

The Advanced Materials segment consists of inorganics, a smelter joint venture and metal resale. The Advanced Materials segment manufactures inorganic products using unrefined cobalt and other metals and serves the battery materials, powder metallurgy, ceramic and chemical end markets by providing functional characteristics critical to the success of our customers’ products. These products improve the electrical conduction of rechargeable batteries used in cellular phones, video cameras, portable computers, power tools and hybrid electrical vehicles, and also strengthen and add durability to diamond and machine cutting tools and drilling equipment used in construction, oil and gas drilling, and quarrying. The smelter joint venture, Groupement pour le Traitement du Terril de Lubumbashi Limited (“GTL”) is owned by the Company (55%), La Générale des Carrières et des Mines (20%) and George Forrest Group (25%) and operates a smelter in the Democratic Republic of Congo (the “DRC”). The GTL smelter is the Company’s primary source of cobalt raw material feed. GTL is consolidated in the Company’s financial statements because the Company has a controlling interest in the joint venture.

Specialty Chemicals segment

The Specialty Chemicals segment is comprised of Electronic Chemicals, Advanced Organics, Ultra Pure Chemicals (“UPC”) and Photomasks.

Electronic Chemicals: Electronic Chemicals develops and manufactures chemicals for the printed circuit board, memory disk, general metal finishing and electronic packaging and finishing markets. Chemicals developed and manufactured for the printed circuit board market include oxide treatments, electroplating additives, etching technology and electroless copper processes used in the manufacturing of printed circuit boards, widely used in computers, communications, military/aerospace, automotive, industrial and consumer electronics applications. Chemicals developed and manufactured for the memory disk market include electroless nickel solutions and preplate chemistries for the computer and consumer electronics industries, for the manufacture of hard drive memory disks used in memory and data storage applications. Memory disk applications include computer hard drives, digital video recorders, MP3 players, digital cameras and business and enterprise servers.

Advanced Organics: Advanced Organics offers products for the coating and inks, chemical and tire markets. Products for the coatings and inks market promote drying and other performance characteristics. Within the chemical markets, the products accelerate the curing of polyester resins found in reinforced fiberglass. In the tire market, the products promote the adhesion of metal to rubber. During 2009, the Company announced and began to implement a restructuring plan for the carboxylate portion of the Advanced Organics business to better align the cost structure and asset base to industry conditions resulting from weak customer demand, commoditization of the products and overcapacity. The restructuring plan includes exiting the Manchester, England manufacturing facility and workforce reductions at the Belleville, Ontario, Canada; Kokkola, Finland; Franklin, Pennsylvania and Westlake, Ohio locations. The majority of position eliminations are expected to be completed by mid-2010. The restructuring plan does not involve the discontinuation of any material product lines or other functions.

Ultra Pure Chemicals: UPC develops, manufactures and distributes a wide range of ultra-pure chemicals used in the manufacture of electronic and computer components such as semiconductors, silicon chips, wafers and liquid crystal displays. These products include chemicals used to remove controlled portions of silicon and metal, cleaning solutions, photoresist strippers, which control the application of certain light-sensitive chemicals, edge bead removers, which aid in the uniform application of other chemicals, and solvents. UPC also develops and manufactures a broad range of chemicals used in the manufacturing of photomasks and provides a range of analytical, logistical and development support services to the semiconductor industry. These include Total Chemicals Management, under which the Company manages the clients’ entire electronic process chemicals operations, including coordination of logistics services, development of application-specific chemicals, analysis and control of customers’ chemical distribution systems and quality audit and control of all inbound chemicals.

Photomasks: Photomasks manufactures photo-imaging masks (high-purity quartz or glass plates containing precision, microscopic images of integrated circuits) and reticles for the semiconductor, optoelectronics, microelectronics and micro electro mechanical systems industries under the Compugraphics brand name. Photomasks are a key enabling technology to the semiconductor and integrated circuit industries and perform a function similar to that of a negative in conventional photography.

Products

The Company is a diversified global developer, producer and marketer of value-added specialty chemicals and advanced materials, and believes it is the world’s leading producer of cobalt-based specialty products. The Company’s businesses serve more than 60 industries worldwide, producing a variety of value-added specialty chemicals and advanced materials. The Company’s products leverage the Company’s production capabilities and bring value to its customers through superior product performance. Typically, these products represent a small portion of the customer’s total cost of manufacturing or processing, but are critical to the customer’s product performance. The products frequently are essential components in chemical and industrial processes where they facilitate a chemical or physical reaction and/or enhance the physical properties of end-products. The Company’s products are sold in various forms such as solutions, crystals, cathodes, powders and quartz or glass plates.

The Advanced Materials segment consists of inorganics, the DRC smelter joint venture and metal resale. The powders and specialty chemicals that this business produces are used in a variety of industries, including rechargeable battery, construction equipment and cutting tools, catalyst, and ceramics and pigments. Products in this segment, grouped by end market, are:

Chemical — Cobalt Acetate, Cobalt Carbonate, Cobalt Hydroxide, Cobalt Nitrate, Cobalt Oxide, Cobalt Sulfate, Coarse Grade Powders, Germanium Dioxide, Nickel Carbonate, Nickel Sulfate, Recycling

Pigments and Ceramics:

Ceramic Pigments — Cobalt Carbonate, Cobalt Oxides, Cobalt Sulfate, Nickel Carbonate,

Plastic Pigments — Cobalt Oxides, Cobalt Hydroxide, Nickel Hydroxide

Glass Pigments — Cobalt Oxides

Powder Metallurgy — S-Series Cobalt Powders, T-Series Cobalt Powders, R-Series Cobalt Powders, Granulated Cobalt Powders, Recycling, Coarse Grade Powders

Battery Materials:

Precursors — Battery Grade Cobalt Oxides, Standard Grade Nickel Hydroxide, Mixed Metal Hydroxides

Raw Materials — Fine Cobalt Powder, Cobalt Hydroxide, Battery Grade Cobalt Powders, Cobalt Sulfate, Nickel Sulfate, Recycling

The Specialty Chemicals segment is comprised of Electronic Chemicals, Advanced Organics, UPC and Photomasks.


•	*Electronic Chemicals:* This unit works with electroless nickel, precious metals and related products used in the production of printed circuit board assemblies, memory disks, general metal finishing and electronic packaging. Products/processes in Electronic Chemicals, grouped by end market, are:

Printed Circuit Board Chemistry — Graphite-based SHADOW^® Direct Metalization, Electroless Copper, E-PREP Desmear Chemistries, CO-BRA BOND^® Innerlayer Bonding chemistries, Lead — free solderable finishes including Organic Solderability Preservatives (OSP), Electroless Nickel-Immersion Gold (ENIG), Immersion Silver, specialty cleaners and etchants for copper, acid copper and acid tin electroplating additives, SolStrip for solar cells

Memory Disk — Electroless Nickel Products, Pre-treatment Products

General Metal Finishing — Auxiliary Chemicals, Electroless Nickel Processes, Nickel/Gold Strippers and Other Products, Polishing Chemicals, Zincate and Post Treatment Chemistries

Electronic Packaging and Finishing Technologies — Base Metal Processes, Electronic Grade Base Metal Concentrates, Electronic Grade Methane Sulfonate Concentrates, Lead Free Plating Processes, Pre-Plate and Post-Plate Processes, Tin-Lead Alloy Plating Processes


•	*Advanced Organics:* Metal-based specialty chemicals from this business are used to meet the critical needs of a range of industries, including coatings and inks, tire, catalyst, and lubricant and fuel additives. Advanced Organics products, grouped by end market, include:

Coatings & Inks — Additives for Paints, Driers for Paints and Printing Inks

Tire — Rubber Adhesion Promoters

Chemicals — Composite and other Catalysts

Additives — Fuel Oil Additives, Lubricant & Grease Additives

Ultra Pure Chemicals: The UPC business develops, manufactures and distributes a wide range of ultra-pure chemicals used in the manufacture of electronic and computer components such as semiconductors, silicon chips, wafers, and liquid crystal displays. UPC products and services, grouped by application, include:

Cleaner — Acetone, Ammonia Solution, Hydrochloric Acid, Hydrogen Peroxide

Etchant — Chrome Etchant, Hydrofluoric Acid, Mixed Acid, Nitric Acid, Phosphoric Acid

Photolithography — Isopropyl Alcohol, Butyl Acetate, Nanostrip, Nitric Fuming, Photoresist Stripper

Services — Analytical Services, Chemicals Management, Logistics Services, Total Chemical Management.

•

Photomasks: The Photomasks business manufactures photo-imaging masks (high-purity quartz or glass plates containing precision, microscopic images of integrated circuits) and reticles for the semiconductor, optoelectronics and microelectronics industries under the Compugraphics brand name. Photomasks are a key component of the semiconductor and integrated circuit value chains and perform a function similar to that of a negative in conventional photography.

Raw Materials

The primary raw material used by the Advanced Materials segment is unrefined cobalt. Unrefined cobalt is obtained from three basic sources: primary cobalt mining, as a by-product of another metal — typically copper or nickel, and from recycled material. Cobalt raw materials include ore, concentrates, slag, scrap and metallic feed. The availability of unrefined cobalt is dependent on global market conditions, cobalt prices and the prices of copper and nickel. Also, political and civil instability in supplier countries, variability in supply and worldwide demand, including demand in developing countries such as China, have affected and will likely continue to affect the supply and market price of raw materials. The cost of the Company’s raw materials fluctuates due to changes in the cobalt reference price, actual or perceived changes in supply and demand of raw materials, and changes in availability from suppliers. Fluctuations in the price of cobalt have historically been significant and the Company believes that cobalt price fluctuations are likely to continue in the future. The Company attempts to mitigate increases in raw material prices by passing through such increases to its customers in the prices of its products and by entering into sales contracts that contain variable pricing that adjusts based on changes in the price of cobalt. During periods of rapidly changing metal prices, however, there may be price lags that can impact the short-term profitability and cash flow from operations of the Company both positively and negatively. Reductions in the price of raw materials or declines in the selling prices of the Company’s finished goods can result in the Company’s inventory carrying value being written down to a lower market value, as occurred in the fourth quarter of 2008.

The GTL smelter in the DRC is a primary source for the Company’s cobalt raw material feed. After smelting in the DRC, cobalt is sent to the Company’s refinery in Kokkola, Finland. The planned maintenance shut-down of the GTL smelter began in February 2010 and is expected to last six to ten weeks. The Company expects the shutdown to impact the timing of deliveries from GTL to Kokkola but does not expect the shutdown to impact external sales to customers. As was the case in the previous shutdown, the Company has adequate raw material inventory on-hand to meet anticipated demand.

In 2007, the Company entered into five-year supply agreements with Norilsk Nickel for up to 2,500 metric tons per year of cobalt metal, up to 2,500 metric tons per year of crude in the form of cobalt hydroxide concentrate, up to 1,500 metric tons per year of cobalt in the form of crude cobalt sulfate and up to 5,000 metric tons per year of copper in the form of copper cake. The Norilsk agreements strengthen the Company’s supply chain and secure a consistent source of raw materials, providing the Company with a stable supply of cobalt metal. Complementary geography and operations shorten the supply chain and allow the Company to leverage its cobalt-based refining and chemicals expertise with Norilsk’s cobalt mining and processing capabilities. The Company’s supply of cobalt is principally sourced from the DRC, Russia and Finland. The majority of the Company’s unrefined cobalt is derived from GTL and the Norilsk contracts.

A graph of the end of the month reference price of low grade cobalt (as published in Metal Bulletin magazine) per pound for 2004 through 2009 is as follows:

The Specialty Chemicals segment uses a variety of raw materials purchased from a broad supplier base. The principal raw materials utilized by the Specialty Chemicals segment include cobalt, nickel sulphate crystals, sodium hypophosphite, ethylhexoic and neodecanoic acids, photomasks blanks and other various acids. Multiple suppliers are generally available for each of these materials; however some raw materials are sourced from a single supplier. Temporary shortages of raw materials may occasionally occur and cause temporary price increases. Historically, these shortages have not resulted in unavailability of raw materials. The Company attempts to mitigate increases in raw material prices by passing through such increases to its customers in the prices of its products and, when possible, by entering into sales contracts that contain variable pricing that adjusts based on changes in the price of certain raw materials. Certain nickel-based raw materials used in the Company’s Electronic Chemicals business are obtained from Norilsk Nickel under the five-year supply agreements discussed above.

Competition

The Company encounters a variety of competitors in each of its product lines, but no single company competes with the Company across all of its existing product lines. Competition in these markets is based primarily on product quality, supply reliability, price, service and technical support capabilities. The markets in which the Company participates have historically been competitive and this environment is expected to continue.

The Company’s principal competitors by business are as follows:


•	*Advanced Materials:* Sherritt International Corporation, Umicore S.A., Eurotungstene Poudres S.A.S., and The Shepherd Chemical Company

•	*Advanced Organics:* Dura Chemicals Inc.; Elementis plc; Troy Corporation; Byk-Chemie; Ciba Inc. (a subsidiary of BASF Group); Shepherd Chemical Company; Dainippon Ink and Chemicals, Incorporated; and Taekwang Industrial Co., Ltd

•	*Electronic Chemicals:* Atotech (a subsidiary of Total S.A.); Cookson Group plc; MacDermid Incorporated; Rohm & Haas Company (a subsidiary of Dow Chemical Company.); and Uyemura International, Inc.

•	*UPC:* Kanto Chemical Co., Inc.; Mitsubishi Chemical Corporation; KMG Chemicals, Inc.; Honeywell International Inc.; and BASF Group

•	*Photomasks:* Photronics, Inc.; Toppan Photomasks, Inc. (a wholly-owned subsidiary of Toppan Printing Co., Ltd.)

Customers

The Company’s business serves over 3,600 customers. During 2009, approximately 50% of the Company’s net sales were to customers in Asia, 32% to customers in Europe and 18% to customers in the Americas. Sales to Nichia Chemical Corporation represented approximately 16%, 22% and 23% of net sales in 2009, 2008 and 2007, respectively. Sales to the Company’s top five customers represented approximately 26% of net sales in 2009. The loss of one or more of these customers could have a material adverse effect on the Company’s business, results of operations or financial position.

While customer demand for the Company’s products is generally non-seasonal, supply/demand and price perception dynamics of key raw materials do periodically cause customers to either accelerate or delay purchases of the Company’s products, generating short-term results that may not be indicative of longer-term trends. Historically, Advanced Materials revenues during July and August have been lower than other months due to the summer holiday season in Europe. Furthermore, the Company historically has used the summer season to perform its annual maintenance shut-down at its refinery in Finland.

The Company generally has written sales agreements with its customers. In some cases, these arrangements are in the form of a written contract containing provisions applicable to the sales, including the terms of the sales arrangement. In other cases, sales are made pursuant to a written purchase order that is issued in connection with a sale and contains terms and conditions applicable to the sale.

Foreign Currency

The Company has manufacturing and other facilities in North America, Europe, Africa and Asia-Pacific, and markets its products worldwide. Although a significant portion of the Company’s raw material purchases and product sales are based on the U.S. dollar, sales at certain locations, prices of certain raw materials, non-U.S. operating expenses and income taxes are denominated in local currencies. As such, the Company’s results of operations are subject to the variability that arises from exchange rate movements. In addition, fluctuations in exchange rates may affect product demand and profitability in U.S. dollars of products provided by the Company in foreign markets in cases where payments for its products are made in local currency. Accordingly, fluctuations in currency prices affect the Company’s operating results. The primary currencies for which the Company has foreign currency rate exposure are the European Union Euro, British Pound Sterling, Japanese Yen, Taiwanese Dollar and the Congolese Franc.

Research and Development

The Company’s research and new product development program is an integral part of its business. Research and development focuses on adapting proprietary technologies to develop new products and working with customers to meet their specific requirements, including joint development arrangements with customers that involve innovative products. New products include new chemical formulations, metal-containing compounds, and concentrations of various components and product forms. Research and development expenses were approximately $9.2 million in 2009, $10.8 million in 2008 and $8.2 million for 2007.

The Company’s research staff conducts research and development in laboratories located in Westlake, Ohio; South Plainfield, New Jersey; Kuching, Malaysia; Singapore; Lagenfeld, Germany; Kokkola, Finland; Riddings, England; Chung Li, Taiwan; Maple Plain, Minnesota; and Saint Fromond, France.

During 2009, the Company entered into a license and supply agreement with Rahu Catalytics Limited (“Rahu”). The Company acquired the rights to use Rahu’s oxidation catalyst within applications for the coatings and inks and composites markets.

During 2008, the Company invested $0.7 million in CrisolteQ Oy (“CrisolteQ”), a private Finnish company, through the purchase of common stock and a convertible loan. CrisolteQ is developing and commercializing new metal recycling technology for spent catalyst materials.

Company and QSI have agreed to co-develop new, proprietary applications for the high-growth, high-margin clean-energy and portable power sectors. In addition, the Company has the right to market and distribute certain QSI products.

Patents and Trademarks

The Company holds patents registered in the United States and foreign countries relating to the manufacturing, processing and use of metal-organic and metal-based compounds. Specifically, the majority of these patents cover proprietary technology for base metal refining, metal and metal oxide powders, catalysts, metal-organic compounds and inorganic salts. Although the Company believes these patents are important to its specific businesses, it does not consider any single patent or group of patents to be material to its business as a whole.

Environmental Matters

The Company is subject to a wide variety of environmental laws and regulations in the United States and in foreign countries as a result of its operations and use of certain substances that are, or have been, used, produced or discharged by its plants. In addition, soil and/or groundwater contamination presently exists and may in the future be discovered at levels that require remediation under environmental laws at properties now or previously owned, operated or used by the Company. At December 31, 2009 and 2008, the Company had environmental reserves of $2.8 million and $3.4 million, respectively. The Company continually evaluates the adequacy of its reserves and adjusts the reserves when determined to be appropriate.

Ongoing environmental compliance costs, which are expensed as incurred, were approximately$10.9 million in 2009 and $10.6 million in 2008 and included costs relating to product stewardship; waste water analysis, treatment, and disposal; hazardous and non-hazardous solid waste analysis and disposal; air emissions control; sustainability programs and related staff costs. The Company anticipates that it will continue to incur compliance costs at moderately increasing levels for the foreseeable future as environmental laws and regulations are becoming increasingly stringent. This includes the European Union’s Registration, Evaluation and Authorization of Chemicals (“REACH”) legislation, which has established a new system to register and evaluate chemicals manufactured in, or imported to, the European Union. REACH-related activities and studies will require additional testing, documentation and risk assessments for the chemical industry and will affect a broad range of substances manufactured and sold by the Company. The Company has created an internal team to manage REACH implementation and is working closely with its business partners to ensure that the requirements can be met in an effective and efficient manner. REACH-related activities, included in ongoing environmental compliance costs above, were $0.1 million and $0.9 million in 2008 and 2009, respectively. The Company anticipates spending approximately $3.1 million on REACH-related studies and activities in 2010.

The Company also incurred capital expenditures of approximately $0.5 million and $3.3 million in 2009 and 2008, respectively, in connection with ongoing environmental compliance. The Company anticipates that capital expenditure levels for these purposes will be approximately $4.1 million in 2010, as it continues to modify certain processes to ensure they continue to comply with environmental regulation and undertakes new pollution prevention and waste reduction projects.

Due to the ongoing development of facts and remedial options and due to the possibility of unanticipated regulatory developments, the amount and timing of future environmental expenditures could vary significantly. Although it is difficult to quantify the potential impact of compliance with or liability under environmental protection laws, based on presently available information, the Company believes that its ultimate aggregate cost of environmental remediation as well as liability under environmental protection laws will not materially adversely effect its financial condition or results of operations.

Employees

At December 31, 2009, the Company had 2,007 full-time employees, with 345 located in North America, 741 located in Europe, 390 located in Africa and 531 located in Asia-Pacific. The employees located in Africa are employed by GTL, the smelter joint venture. Employees at the Company’s facility in Kokkola, Finland are members of several national workers’ unions under various union agreements. Employees in the DRC are members of various

trade unions. The union agreements have a term of three years expiring in May 2011. The Company expects to enter into new agreements covering those employees upon expiration of the current agreements. Other European employees are represented by either a labor union or a statutory works council arrangement. The Company believes that relations with its employees are good.

SEC Reports

The Company makes available free of charge through its website (www.omgi.com) its reports on Forms 10-K, 10-Q and 8-K as soon as reasonably practicable after the reports are electronically filed with the Securities and Exchange Commission. A copy of any of these documents is available in print free of charge to any stockholder who requests a copy, by writing to OM Group, Inc., 127 Public Square, 1500 Key Tower, Cleveland, Ohio 44114-1221 USA, Attention: Troy Dewar, Director of Investor Relations.


Item 1A.	Risk Factors

Our business faces significant risks. These risks include those described below and may include additional risks and uncertainties not presently known to us or that we currently deem immaterial. Our business, financial condition and results of operations could be materially adversely affected by any of these risks. These risks should be read in conjunction with the other information in this Annual Report on Form 10-K.

THE GLOBAL ECONOMIC DOWNTURN HAS HAD AND MAY CONTINUE TO HAVE A NEGATIVE EFFECT ON OUR BUSINESS AND OPERATIONS.

The global economic downturn has caused, among other things, a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and lower business spending, all of which has had and may continue to have a negative effect on our business, results of operations, financial condition and liquidity. Many of our customers, distributors and suppliers have been affected by the current economic conditions. Current or potential customers may be unable to fund purchases or may determine to reduce purchases or inventories or may cease to continue in business, which has led to and could continue to lead to reduced demand for our products, reduced gross margins, and increased customer payment delays or defaults. In addition, suppliers may not be able to supply us with needed raw materials on a timely basis, may increase prices or go out of business, which could result in our inability to meet customer demand or could affect our gross margins. We also are limited in our ability to reduce costs to offset the results of a prolonged or severe economic downturn in light of certain fixed costs associated with our operations.

The timing, strength or duration of any recovery in the global economic markets remains uncertain, and there can be no assurance that market conditions will improve in the near future or that our results will not continue to be materially and adversely affected. Such conditions make it very difficult to forecast operating results, make business decisions and identify and address material business risks.

CONTINUED OR FURTHER DETERIORATION OF THE ECONOMY COULD LEAD TO REDUCED EARNINGS AND COULD RESULT IN FUTURE GOODWILL OR INTANGIBLE ASSET IMPAIRMENTS.

The weakness in the global economy may also impact the valuation of certain long-lived or intangible assets that are subject to impairment testing, potentially resulting in impairment charges that may be material to our financial condition or results of operations. As of December 31, 2009, we have $234.2 million of goodwill and $79.2 million of intangible assets recorded on our balance sheet. We perform annual impairment tests of our goodwill and indefinite-lived intangible assets and more often if indicators of impairment exist.

During 2009, we recorded goodwill impairment charges of $37.5 million. The primary factors contributing to these goodwill impairment charges were lower assumptions for revenue and volume growth in 2009 and beyond and the associated impact on operating cash flow from these reduced projections, and the change in our assumption with respect to the probability of future cash flows from opportunities related to a license agreement. In addition, we determined that certain indefinite-lived trade names and a license agreement were impaired due to downward

revisions in estimates of future revenue and cash flows. As a result, we recorded an impairment loss of $1.6 million in 2009 relating to these intangible assets.

We use a number of estimates and assumptions in calculating the estimated fair values of assets in our impairment testing, including future operating cash flow assumptions, future growth rates, future cobalt price assumptions and the weighted average cost of capital.

Factors that could trigger an impairment review outside of the required annual review include the following:


•	significant underperformance relative to projected operating results;

•	significant changes in estimates of future cash flows from ongoing operations and/or from future opportunities related to current license agreements;

•	significant changes in discount rates used in our impairment testing;

•	further market capitalization deterioration;

•	significant negative industry or economic trends.

Changes in our assumptions and estimates, or continued weakness or further deterioration in the economy, could materially affect the goodwill and intangible asset impairment tests. If any of these factors worsen, we may be required to recognize an additional goodwill and/or intangible asset impairment charge that may be material to our financial condition or results of operations.

WE ARE AT RISK AS A RESULT OF CURRENT CIRCUMSTANCES AND DEVELOPMENTS IN THE DRC.

A substantial amount of our supply of cobalt is sourced from the DRC, a nation that has historically experienced outbreaks of political instability, changes in national and local leadership and financial crisis. The global economic and financial market crisis along with the recent decline in metal prices has impacted the financial condition of the DRC. These factors heighten the risk of changes in the national and local policy towards investors, which, in turn, could result in modification of concessions or contracts, imposition of new and/or retroactive taxes and assessment of penalties, denial of permits or permit renewals or expropriation of assets. GTL has recently experienced an increase in claims by DRC national and local government agencies for additional taxes and customs duties and we cannot predict whether GTL will receive additional claims in the future. Furthermore, if additional claims are received, we cannot predict whether such additional claims will be successful, or, if successful, whether such claims would have a material adverse effect on our business, financial condition or results of operations.

EXTENDED BUSINESS INTERRUPTION AT OUR FACILITIES COULD HAVE AN ADVERSE IMPACT ON OPERATING RESULTS.

Our results of operations are dependent in large part upon our ability to produce and deliver products promptly upon receipt of orders and to provide prompt and efficient service to our customers. Any disruption of our day-to-day operations could have a material adverse effect on our business, customer relations and profitability. Our Kokkola, Finland facility is the primary refining and production facility for our Advanced Materials products. The GTL smelter in the DRC is the primary source for our cobalt raw material feed. Our Cleveland, Ohio facility serves as our corporate headquarters. These facilities are critical to our business, and a fire, flood, earthquake or other disaster or condition that damaged or destroyed any of these facilities could disable them. Any such damage to, or other condition significantly interfering with the operation of these facilities, such as an interruption of our supply lines, would have a material adverse effect on our business, financial condition and results of operations. Our insurance coverage may not be adequate to fully cover these potential risks. In addition, our insurance coverage may become more restrictive and/or increasingly costly, and there can be no assurance that we will be able to maintain insurance coverage in the future at an acceptable cost or at all.

WE ARE AT RISK FROM UNCERTAINTIES IN THE SUPPLY OF UNREFINED COBALT, WHICH IS OUR PRIMARY RAW MATERIAL.

There are a limited number of supply sources for unrefined cobalt. Production problems or political or civil instability in supplier countries, primarily the DRC, Finland and Russia, have from time to time affected and may in the future affect the market price and supply of unrefined cobalt.

In particular, political and civil instability and unexpected adverse changes in laws or regulatory requirements, including with respect to export duties and quotas, may affect the availability of raw materials from the DRC. If a substantial interruption should occur in the supply of unrefined cobalt from the DRC or elsewhere, we may not be able to obtain as much unrefined cobalt from other sources as would be necessary to satisfy our requirements at prices comparable to our current arrangements and our operating results could be adversely impacted.

WE ARE AT RISK FROM FLUCTUATIONS IN THE PRICE OF COBALT AND OTHER RAW MATERIALS.

Unrefined cobalt is the principal raw material we use in manufacturing Advanced Materials products, and the cost of cobalt fluctuates due to changes in the reference price caused by actual or perceived changes in supply and demand, and changes in availability from suppliers. Fluctuations in the price of cobalt have been significant in the past and we believe price fluctuations are likely to occur in the future. The London Metal Exchange (“LME”) is scheduled to commence trading in cobalt futures contracts in 2010. We are unable to predict the impact the trading of cobalt futures on the LME will have on cobalt price variability. Our ability to pass increases in raw material costs through to our customers by increasing the selling prices of our products is an important factor in our business. We cannot guarantee that we will be able to maintain an appropriate differential at all times.

We may be required under U.S. GAAP accounting rules to write down the carrying value of our inventory when cobalt and other raw material prices decrease. In periods of raw material metal price declines or declines in the selling prices of our finished products, inventory carrying values could exceed the amount we could realize on sale, resulting in a charge against inventory that could have a material adverse effect on our business, financial condition or results of operations.

THE MAJORITY OF OUR OPERATIONS ARE OUTSIDE THE UNITED STATES, WHICH SUBJECTS US TO RISKS THAT MAY ADVERSELY AFFECT OUR OPERATING RESULTS.

Our business is subject to risks related to the differing legal and regulatory requirements and the social, political and economic conditions of many jurisdictions. In addition to risks associated with fluctuations in foreign exchange rates, risks inherent in international operations include the following:


•	potential supply disruptions as a result of political instability, civil unrest or labor difficulties in countries in which we have operations, especially the DRC and surrounding countries;

•	agreements may be difficult to enforce, may be subject to government renegotiation, and receivables difficult to collect through a foreign country’s legal system;

•	Customers in certain regions may have longer payment cycles;

•	foreign countries may impose additional withholding taxes or otherwise tax our foreign income, impose tariffs or adopt other restrictions on foreign trade or investment, including currency exchange controls;

•	unexpected adverse changes in foreign laws or regulatory requirements may occur, including with respect to labor, taxation, royalties, divestment, imports, exports, trade regulations, currency and environmental matters; and

•	submission to the jurisdiction and judgments of foreign courts or arbitration panels, including judgments that may involve a sovereign nation, may adversely affect our business.

Our overall success as a global business depends, in part, upon our ability to succeed in differing legal, regulatory, economic, social and political conditions. We cannot assure you that we will implement policies and strategies that will be effective in each location where we do business. Furthermore, we cannot be sure that one or more of the

foregoing factors will not have a material adverse effect on our business, financial condition or results of operations.

We engage in business in certain countries where the risk of public sector corruption and bribery is high. We have implemented policies and procedures and conducted employee training to assure that our operations are in compliance with anti-bribery laws. If our compliance actions fail, a violation of anti-bribery laws could result in serious penalties, including criminal and civil sanctions. Such sanctions could have a material adverse effect on our business as a whole.

WE MAY EXPERIENCE DIFFICULTIES TRANSITIONING EAGLEPICHER TECHNOLOGIES TO OM GROUP, INC. AND MAY NOT REALIZE THE EXPECTED BENEFITS OF THE ACQUISITION.

The acquisition of EaglePicher Technologies involves the addition of lines of business in which we have not historically engaged and possible differences in corporate cultures and management philosophies that may increase the difficulties of the transition. The transition of EaglePicher Technologies will require the dedication of significant management resources and may temporarily divert management’s attention from operational matters. Employee uncertainty and lack of focus during the transition process may also disrupt our businesses. We may lose key personnel from the acquired organization and employees in the acquired organization may be resistant to change and may not adapt well to our corporate structure. The process of transitioning operations could cause an interruption of, or loss of momentum in, the activities of one or more of our businesses.

Achieving the anticipated benefits of the EaglePicher Technologies acquisition will depend in part upon our ability to transition EaglePicher Technologies operations in an efficient and effective manner, and we may be unable to accomplish the transition successfully. Inability to successfully transition the operations of EaglePicher Technologies could adversely affect our results of operations and financial condition.

In addition, there may be liabilities of EaglePicher Technologies that we failed to or were unable to discover during the due diligence investigation and for which we, as a successor owner, may be responsible. Indemnities and warranties obtained from the sellers may not fully cover the liabilities due to limitations in scope, amount or duration, financial limitations of the indemnitor or warrantor or other reasons.

WE INTEND TO CONTINUE TO SEEK ADDITIONAL ACQUISITIONS, BUT WE MAY NOT BE ABLE TO IDENTIFY OR COMPLETE TRANSACTIONS, WHICH COULD ADVERSELY AFFECT OUR STRATEGY.

Our strategy anticipates growth through future acquisitions. However, our ability to identify and consummate any future acquisitions on terms that are favorable to us may be limited by the number of attractive acquisition targets, internal demands on our resources and our ability to obtain financing. Our success in integrating newly acquired businesses will depend upon our ability to retain key personnel, avoid diversion of management’s attention from operational matters, and integrate general and administrative services and key information processing systems. In addition, future acquisitions could result in the incurrence of additional debt, costs and contingent liabilities. Integration of acquired operations may take longer, or be more costly or disruptive to our business, than originally anticipated, and it is also possible that expected synergies from future acquisitions may not materialize. We also may incur costs and divert management attention with regard to potential acquisitions that are never consummated.

There may be liabilities of the acquired companies that we fail to or are unable to discover during the due diligence investigation and for which we, as a successor owner, may be responsible. Indemnities and warranties obtained from the seller may not fully cover the liabilities due to limitations in scope, amount or duration, financial limitations of the indemnitor or warrantor or other reasons.

WE ARE EXPOSED TO FLUCTUATIONS IN FOREIGN EXCHANGE RATES, WHICH MAY ADVERSELY AFFECT OUR OPERATING RESULTS.

We have manufacturing and other facilities in North America, Europe, Asia-Pacific and Africa, and we market our products worldwide. Although a significant portion of our raw material purchases and product sales are transacted

in U.S. dollars, liabilities for non-U.S. operating expenses and income taxes are denominated in local currencies. In addition, fluctuations in exchange rates may affect product demand and may adversely affect the profitability in U.S. dollars of products provided by us in foreign markets where payment for our products is made in the local currency. Accordingly, fluctuations in currency rates may affect our operating results.

WE ARE SUBJECT TO STRINGENT ENVIRONMENTAL REGULATION AND MAY INCUR UNANTICIPATED COSTS OR LIABILITIES ARISING OUT OF ENVIRONMENTAL MATTERS.

We are subject to stringent laws and regulations relating to the storage, handling, disposal, emission and discharge of materials into the environment, and we have expended, and may be required to expend in the future, substantial funds for compliance with such laws and regulations. In addition, we may from time to time be subjected to claims for personal injury, property damages or natural resource damages made by third parties or regulators. Our annual environmental compliance costs were $10.9 million in 2009. In addition, we made capital expenditures of approximately $0.5 million in 2009 in connection with environmental compliance.

As of December 31, 2009, we had reserves of $2.8 million for environmental liabilities. However, given the many uncertainties involved in assessing liability for environmental claims, our current reserves may prove to be insufficient. In addition, our current reserves are based only on known sites and the known contamination on those sites. It is possible that additional remediation sites will be identified in the future or that unknown contamination at previously identified sites will be discovered. This could require us to make additional expenditures for environmental remediation or could result in exposure to claims in the future.

CHANGES IN ENVIRONMENTAL, HEALTH AND SAFETY REGULATORY REQUIREMENTS COULD AFFECT SALES OF OUR PRODUCTS.

New or revised governmental regulations relating to health, safety and the environment may affect demand for our products. For example, the European Union’s REACH legislation, which has established a new system to register and evaluate chemicals manufactured in, or imported to, the European Union and requires additional testing, documentation and risk assessments for the chemical industry, could affect our ability to sell certain products. Such new or revised regulations may result in heightened concerns about the chemicals involved and in additional requirements being placed on the production, handling, or labeling of the chemicals and may increase the cost of producing them and/or limit the use of such chemicals or products containing such chemicals, which could lead to a decrease in demand. As a result of these regulations, customers may avoid purchasing some products in favor of perceived “greener,” less hazardous or less costly alternatives which could adversely affect sales of our products. Additional new regulations may require us to incur significant additional compliance costs.

OUR RESTRUCTURING ACTIVITIES MAY NOT ACHIEVE THE RESULTS WE ANTICIPATE.

We have undertaken and may continue to undertake organizational restructurings to optimize our asset base, improve operating efficiencies and generate cost savings. In connection with many of these actions we have projected one-time and on-going cost savings. We cannot be certain that we will be able to complete these initiatives as planned or that the estimated operating efficiencies or cost savings from such activities will be fully realized or maintained over time. In addition, we have announced the closure of the Manchester, England manufacturing facility. We may not be successful in migrating our customers from that facility to other facilities. We may make further specific determinations to consolidate, close or sell additional facilities. Possible adverse consequences resulting from the announced restructuring plan or from decisions to restructure additional facilities may include adjustments to existing accruals and/or additional charges related to workforce reductions, including severance and other termination benefits, lease termination obligations, facility decommissioning, demolition and environmental remediation costs and other exit costs.

WE MAY NOT BE ABLE TO RESPOND EFFECTIVELY TO TECHNOLOGICAL CHANGES IN OUR INDUSTRY OR IN OUR CUSTOMERS’ PRODUCTS.

Our future business success will depend in part upon our ability to maintain and enhance our technological capabilities, develop and market products and applications that meet changing customer needs and successfully

anticipate or respond to technological changes on a cost-effective and timely basis. Our inability to anticipate, respond to or utilize changing technologies could have a material adverse effect on our business, financial condition or results of operations. Moreover, technological and other changes in our customers’ products or processes may render some of our specialty chemicals unnecessary, which would reduce the demand for those chemicals.

BECAUSE WE DEPEND ON SEVERAL LARGE CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR REVENUES, OUR OPERATING RESULTS COULD BE ADVERSELY AFFECTED BY ANY DISRUPTION OF OUR RELATIONSHIP WITH THESE CUSTOMERS OR ANY MATERIAL ADVERSE CHANGE IN THEIR BUSINESSES.

We depend on several large customers for a significant portion of our business. In 2009, our top five customers accounted for 26% of our net sales. Sales to Nichia Chemical Corporation represented approximately 16% of net sales in 2009. Any disruption in our relationships with our major customers, including any adverse modification of our agreements with them or the unwillingness or inability of them to perform their obligations under the agreements, could materially affect our business, financial condition or results of operations. In addition, any material adverse change in the financial condition of any of our major customers would have similar adverse effects.

WE OPERATE IN VERY COMPETITIVE INDUSTRIES, WHICH COULD ADVERSELY AFFECT OUR PROFITABILITY.

We have many competitors. Some of our principal competitors have greater financial and other resources and greater brand recognition than we have. Accordingly, these competitors may be better able to withstand changes in conditions within the industries in which we operate and may have significantly greater operating and financial flexibility than we do. As a result of the competitive environment in the markets in which we operate, we currently face and will continue to face pressure on the sales prices of our products from competitors and large customers. With these pricing pressures, we may experience future reductions in the profit margins on our sales, or may be unable to pass on future raw material price or operating cost increases to our customers, which also would reduce profit margins. As we have few long-term commitments from our customers, this competitive environment could give rise to a sudden loss of business.

INDUSTRY CONSOLIDATION BY COMPETITORS MAY LEAD TO INCREASED COMPETITION AND MAY HARM OUR OPERATING RESULTS.

There has been a trend toward industry consolidation in our markets. We believe that industry consolidation among our peers may result in stronger competitors with greater financial and other resources that are better able to compete for customers. This could lead to more variability in operating results and could have a material adverse effect on our business, financial condition or results of operations.

FAILURE TO RETAIN AND RECRUIT KEY PERSONNEL WOULD HARM OUR ABILITY TO MEET KEY OBJECTIVES.

Our key personnel are critical to the management and direction of our businesses. Our future success depends, in large part, on our ability to retain key personnel and other capable management personnel. It is particularly important that we maintain our senior management group that is responsible for implementing our strategic transformation. If we were not able to attract and retain talented personnel and replace key personnel should the need arise, the inability could make it difficult to meet key objectives and disrupt the operations of our businesses.

CHANGES IN EFFECTIVE TAX RATES OR ADVERSE OUTCOMES RESULTING FROM EXAMINATION OF OUR INCOME TAX RETURNS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION OR OPERATING RESULTS.

We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our worldwide provision for income taxes. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by


•	earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates

•	changes in the valuation of our deferred tax assets and liabilities

•	the timing and amount of earnings of foreign subsidiaries that we repatriate to the United States

•	changes in the relevant tax, accounting and other laws, regulations, principles and interpretations.

We are subject to tax audits in various jurisdictions, and such jurisdictions may assess additional income tax against us. The final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. The results of an audit or litigation could have a material adverse effect on our financial condition or results of operations in the period or periods for which that determination is made.

WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, WHICH MAY ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION, OR RESULTS OF OPERATIONS.

We rely on U.S. and foreign patents and trade secrets to protect our intellectual property. We attempt to protect and restrict access to our trade secrets and proprietary information, but it may be possible for a third party to obtain our information and develop similar technologies.

If a competitor infringes upon our patent or other intellectual property rights, enforcing those rights could be difficult, expensive and time-consuming, making the outcome uncertain. Even if we are successful, litigation to enforce our intellectual property rights or to defend our patents against challenge could be costly and could divert management’s attention.

OUR STOCK PRICE MAY CONTINUE TO BE VOLATILE.

Historically, our common stock has experienced substantial price volatility, particularly as a result of changes in metal prices, primarily unrefined cobalt, which is our primary raw material. In addition, the stock market has experienced and continues to experience significant price and volume volatility that has often been unrelated to our operating performance. These broad market fluctuations may adversely affect the market price of our common stock.

WE MAINTAIN CASH BALANCES IN U.S. AND FOREIGN FINANCIAL INSTITUTIONS WHICH COULD ADVERSELY AFFECT OUR LIQUIDITY.

While we monitor the financial institutions with which we maintain accounts, we may not be able to recover our funds in the event that a financial institution fails. As a result, this could adversely affect our ability to fund normal operations or capital expenditures.

THE INSURANCE THAT WE MAINTAIN MAY NOT FULLY COVER ALL POTENTIAL EXPOSURES.

We maintain property, business interruption and casualty insurance but such insurance may not cover all risks associated with the hazards of our business and is subject to limitations, including deductibles and maximum liabilities covered. We may incur losses beyond the limits, or outside the coverage, of our insurance policies, including liabilities for environmental remediation. We are potentially at risk if one or more of our insurance carriers fail. Additionally, severe disruptions in the domestic and global financial markets could adversely impact the ratings and survival of some insurers. Future downgrades in the ratings of enough insurers could adversely impact both the availability of appropriate insurance coverage and its cost. In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain.


Item 1B.	Unresolved Staff Comments

The Company has received no written comments regarding its periodic or current reports from the staff of the Securities and Exchange Commission that were issued 180 days or more preceding the end of its 2009 fiscal year and that remain unresolved.


Item 2.	Properties

The Company believes that its plants and facilities, which are of varying ages and of different construction types, have been satisfactorily maintained, are suitable for the Company’s operations and generally provide sufficient capacity to meet the Company’s production requirements. The depreciation lives of fixed assets associated with leases do not exceed the lives of the leases.

The Company’s Kokkola, Finland production facility is situated on property owned by Boliden Kokkola Oy. The Company and Boliden Kokkola Oy share certain physical facilities, services and utilities under agreements with varying expiration dates.

Information regarding the Company’s primary offices, research and product development, and manufacturing and refining facilities, is set forth below:


	Facility		Approximate
Location	Function*	Segment	Square Feet		Leased/Owned

Africa:
Lubumbashi, DRC	M	Advanced Materials		116,000	joint venture (55% owned)
North America:
Cleveland, Ohio	A	Corporate		24,500	Leased
Westlake, Ohio	A, R	Specialty Chemicals		35,200	Owned
Belleville, Ontario	M	Specialty Chemicals		38,000	Owned
Franklin, Pennsylvania	M	Specialty Chemicals		331,500	Owned
South Plainfield, New Jersey	A, R	Specialty Chemicals		18,400	Leased
Los Gatos, California	M, A	Specialty Chemicals		24,912	Leased
Fremont, California	M, A	Specialty Chemicals		16,000	Leased
Maple Plain, Minnesota	M, A, R	Specialty Chemicals		65,000	Owned
Asia-Pacific:
Kuching, Malaysia	M, A, R,	Specialty Chemicals		55,000	Land-Leased Building - Owned
Tokyo, Japan	A	Advanced Materials		2,300	Leased
Taipei, Taiwan	A	Specialty Chemicals		2,350	Leased
Chung-Li, Taiwan	M, A, R	Specialty Chemicals		88,000	Leased
Suzhou, China	M, A	Specialty Chemicals		85,530	Owned
Wuzhong, Suzhou, China	M, A	Specialty Chemicals		30,000	Leased
Shenzen, China	A, W	Specialty Chemicals		25,000	Leased
Singapore Electronic Chemicals	M, A, R	Specialty Chemicals		57,856	Leased
Singapore UPC	A, W	Specialty Chemicals		70,000	Leased
Europe:
Manchester, England	M, A, R	Specialty Chemicals		73,300	Owned
Kokkola, Finland	M, A, R	Advanced Materials		470,000	Land-Leased Building - Owned
Glenrothes, Scotland	M, A	Specialty Chemicals		80,000	Owned
Riddings, England	M, A, R	Specialty Chemicals		30,000	Leased
Saint Cheron, France	W	Specialty Chemicals		42,030	Owned
Saint Fromond, France	M, A, R	Specialty Chemicals		99,207	Owned
Rousset Cedex, France	A, W	Specialty Chemicals		14,400	Leased
Castres, France	M, A	Specialty Chemicals		43,000	Owned
Lagenfeld, Germany	A, R	Specialty Chemicals		47,430	Leased


*		M — Manufacturing/refining; A — Administrative; R — Research and Development; W — Warehouse


Item 3.	Legal Proceedings

The Company is a party to various legal and administrative proceedings incidental to its business. The Company believes that disposition of all suits and claims related to its ordinary course of business should not in the aggregate have a material adverse effect on the Company’s financial position or results of operations.


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

No matters were submitted to a vote of security holders during the fourth quarter of the Company’s 2009 fiscal year.

Executive Officers of the Registrant

The information under this item is being furnished pursuant to General Instruction G of Form 10-K.

There is set forth below the name, age, positions and offices held by each of the Company’s executive officers, as well as their business experience during the past five years. Years indicate the year the individual was named to the indicated position.

Joseph M. Scaminace — 56


•	Chairman and Chief Executive Officer, August 2005

•	Chief Executive Officer, June 2005

•	President, Chief Operating Officer and Board Member, The Sherwin-Williams Company 1999 — 2005

Kenneth Haber — 59


•	Chief Financial Officer, March 2006

•	Interim Chief Financial Officer, November 2005 — March 2006

•	Owner and President, G&H Group Company, dba Partners in Success, May 2000 — March 2006

Valerie Gentile Sachs — 54


•	Vice President, General Counsel and Secretary, September 2005

•	Executive Vice President, General Counsel and Secretary, Jo-Ann Stores, Inc., 2003 — 2005

Stephen D. Dunmead — 46


•	Vice President and General Manager, Specialties, January 2006

•	Vice President and General Manager, Cobalt Group, August 2003 — January 2006

Gregory J. Griffith — 54


•	Vice President, Strategic Planning, Development and Investor Relations, February 2007

•	Vice President, Corporate Affairs and Investor Relations, October 2005 — February 2007

•	Director of Investor Relations, July 2002 — October 2005

PART II


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

The Company’s common stock is traded on the New York Stock Exchange under the symbol “OMG”. As of December 31, 2009, the approximate number of record holders of the Company’s common stock was 1,300.

The high and low market prices for the Company’s common stock for each quarter during the past two years are presented in the table below:


	2009						2008
	Sales Price				Cash		Sales Price				Cash
	High		Low		Dividend		High		Low		Dividend

First quarter	$	24.38	$	13.90	$	—	$	66.00	$	49.00	$	—
Second quarter	$	30.10	$	18.94	$	—	$	62.14	$	32.65	$	—
Third quarter	$	35.97	$	25.24	$	—	$	37.84	$	20.36	$	—
Fourth quarter	$	34.44	$	26.41	$	—	$	25.62	$	12.20	$	—

The Company intends to continue to retain earnings for use in the operation and expansion of the business and therefore does not anticipate paying cash dividends in 2010.


Item 6.	Selected Financial Data


	Year Ended December 31,
	2009			2008		2007		2006		2005
(In millions, except per share data)

Income Statement Data:
Net sales	$	871.7		$	1,736.8	$	1,021.5	$	660.1	$	617.5
Amounts attributable to OM Group, Inc. common shareholders:
Income (loss) from continuing operations before cumulative effect of change in accounting principle, net of tax	$	(19.4	)	$	134.9	$	111.5	$	23.6	$	(12.4	)
Income (loss) from discontinued operations, net of tax		1.5			0.1		135.4		192.2		49.0
Cumulative effect of change in accounting principle, net of tax		—			—		—		0.3		2.3

Net income (loss)	$	(17.9	)	$	135.0	$	246.9	$	216.1	$	38.9

Net income (loss) per common share attribuable to OM Group, Inc. — basic:
Continuing operations	$	(0.64	)	$	4.48	$	3.73	$	0.80	$	(0.43	)
Discontinued operations		0.05			—		4.52		6.55		1.71
Cumulative effect of change in accounting principle		—			—		—		0.01		0.08

Net income	$	(0.59	)	$	4.48	$	8.25	$	7.36	$	1.36

Net income (loss) per common share attribuable to OM Group, Inc. — assuming dilution:
Continuing operations	$	(0.64	)	$	4.45	$	3.68	$	0.80	$	(0.43	)
Discontinued operations		0.05			—		4.47		6.50		1.71
Cumulative effect of a change in accounting principle		—			—		—		0.01		0.08

Net income	$	(0.59	)	$	4.45	$	8.15	$	7.31	$	1.36

Dividends declared and paid per common share	$	—		$	—	$	—	$	—	$	—
Balance Sheet Data:
Total assets	$	1,444.1		$	1,434.4	$	1,469.2	$	1,618.2	$	1,220.3
Long-term debt, excluding current portion(a)	$	—		$	26.1	$	1.1	$	1.2	$	416.1


(a)		Amount in 2006 excludes the $400.0 million of outstanding Notes. On February 2, 2007, the Company notified its noteholders that it had called for redemption all $400.0 million of its outstanding Notes. The Notes were classified as a current liability at December 31, 2006.

Results for 2009 include a $37.5 million goodwill impairment charge, a $12.7 million pre-tax restructuring charge and a $4.7 million pre-tax gain on termination of the retiree medical plan.

Results for 2008 include a $27.7 million pre-tax adjustment to reduce the carrying value of certain inventory to market value, an $8.8 million goodwill impairment charge and a $46.6 million tax benefit related to an election to take foreign tax credits on prior year U.S. tax returns.

Results for 2007 include a pretax and after-tax gain on the sale of the Nickel business of $77.0 million and $72.3 million, respectively. In addition, 2007 results also include a $21.7 million pre-tax charge related to the redemption of the Notes and income tax expense of $45.7 million related to repatriation of cash from overseas primarily as a result of the redemption of the Notes in March 2007.

Results for 2006 include a $12.2 million pre-tax gain related to the sale of common shares of Weda Bay Minerals, Inc. Results for 2006 also include a $3.2 million pre-tax charge for the settlement of litigation related to the former chief executive officer’s termination. Income tax expense for 2006 includes $14.1 million to provide additional U.S. income taxes on $384.1 million of undistributed earnings of consolidated foreign subsidiaries in connection with the Company’s planned redemption of the Notes in March 2007.

Results for 2005 include $27.5 million of pre-tax income related to the receipt of net insurance proceeds related to shareholder class action and derivative lawsuits, and $4.6 million of pre-tax income related to the mark-to-market of 380,000 shares of common stock issued in connection with the shareholder derivative litigation, both partially offset by an $8.9 million charge related to the former chief executive officer’s termination.


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

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report.

General

The Company is a global solutions provider of specialty chemicals, advanced materials, electrochemical energy storage, and technologies crucial to enabling its customers to meet increasingly stringent market and application requirements. The Company believes it is the world’s largest refiner of cobalt and producer of cobalt-based specialty products.

On January 29, 2010, the Company completed the acquisition of EaglePicher Technologies, LLC from EaglePicher Corporation for approximately $172 million in cash, subject to customary post-closing adjustments. Based in Joplin, Missouri, EaglePicher Technologies is a leader in portable power solutions and energy storage technologies serving aerospace, defense and medical markets and it is developing technologies in advanced power storage to serve alternative energy storage markets. EaglePicher Technologies product offerings can be grouped into two broad categories, proprietary battery products and complementary battery support products that consist of energetic devices, chargers, battery management systems and distributed products. In fiscal year 2009, EaglePicher Technologies recorded revenues of approximately $125 million, of which approximately 60 percent came from its defense business, approximately 33 percent from its aerospace business and the balance from its medical and other businesses. EaglePicher Technologies will operate and be reported in 2010 within a new segment of the Company called Battery Technologies.

Unless indicated otherwise, the discussion contained in Item 7 of the Form 10-K relates solely to the Company’s business as of December 31, 2009 and does not include EaglePicher Technologies.

Segments

The Company was organized into two segments during 2009: Advanced Materials and Specialty Chemicals. The Advanced Materials segment consists of inorganics, a smelter joint venture (Groupement pour le Traitement du Terril de Lubumbashi Limited (“GTL”)) in the Democratic Republic of Congo (the “DRC”) and metal resale. The Specialty Chemicals segment is comprised of Electronic Chemicals, Advanced Organics, Ultra Pure Chemicals (“UPC”) and Photomasks.

The Advanced Materials segment manufactures inorganic products using unrefined cobalt and other metals and serves the battery materials, powder metallurgy, ceramic and chemical end markets by providing functional characteristics critical to the success of customers’ products. Among other things, these products improve the

electrical conduction of rechargeable batteries used in cellular phones, video cameras, portable computers, power tools and hybrid electrical vehicles. The GTL smelter is the Company’s primary source of cobalt raw material feed. GTL is consolidated in the Company’s financial statements because the Company has a 55% controlling interest in the joint venture.

The Specialty Chemicals segment consists of the following:

Advanced Organics: Advanced Organics offers products for the coating and inks, chemical and tire markets.

Ultra Pure Chemicals: UPC develops and manufactures a wide range of ultra-pure chemicals used in the manufacture of electronic and computer components such as semiconductors, silicon chips, wafers and liquid crystal displays.

Key Factors Affecting Operations

The Company’s business is critically connected to both the availability and price of raw materials. The primary raw material used by the Advanced Materials segment is unrefined cobalt. Unrefined cobalt is obtained from three basic sources: primary cobalt mining, as a by-product of another metal — typically copper or nickel, and from recycled material. Cobalt raw materials include ore, concentrate, slag, scrap and metallic feed. The availability of unrefined cobalt is dependent on global market conditions, cobalt prices and the prices of copper and nickel. Also, political and civil instability in supplier countries, variability in supply and worldwide demand, including demand in developing countries such as China, have affected and will likely continue to affect the supply and market price of raw materials. The Company attempts to mitigate changes in availability of raw materials by maintaining adequate inventory levels and long-term supply relationships with a variety of suppliers.

In the first quarter of 2007, the Company entered into five-year supply agreements with Norilsk Nickel for up to 2,500 metric tons per year of cobalt metal, up to 2,500 metric tons per year of crude in the form of cobalt hydroxide concentrate, up to 1,500 metric tons per year of cobalt in the form of crude cobalt sulfate, up to 5,000 metric tons per year of copper in the form of copper cake and various other nickel-based raw materials used in the Company’s Electronic Chemicals business. The Norilsk agreements strengthen the Company’s supply chain and secure a consistent source of raw materials, providing the Company with a stable supply of cobalt metal. Complementary geography and operations shorten the supply chain and allow the Company to leverage its cobalt-based refining and chemicals expertise with Norilsk’s cobalt mining and processing capabilities. The Company’s supply of cobalt is principally sourced from the DRC, Russia and Finland. The majority of the Company’s unrefined cobalt is derived from GTL and Norilsk.

The cost of the Company’s raw materials fluctuates due to changes in the cobalt reference price, actual or perceived changes in supply and demand of raw materials and changes in availability from suppliers. The Company attempts to pass through to its customers increases in raw material prices, and certain sales contracts and raw material purchase contracts contain variable pricing that adjusts based on changes in the price of cobalt. During periods of rapidly changing metal prices, however, there may be price lags that can impact the short-term profitability and cash flow from operations of the Company both positively and negatively. Fluctuations in the price of cobalt have historically been significant and the Company believes that cobalt price fluctuations are likely to continue in the future. Reductions in the price of raw materials or declines in the selling prices of the Company’s finished goods can result in the Company’s inventory carrying value being written down to a lower market value, as occurred in the fourth quarter of 2008.

product sales are based on the U.S. dollar, sales at certain locations, prices of certain raw materials, non-U.S. operating expenses and income taxes are denominated in local currencies. As such, the Company’s results of operations are subject to the variability that arises from exchange rate movements. The primary currencies that contribute to the Company’s foreign currency rate exposure are the European Union Euro, the British Pound Sterling, the Japanese Yen, the Taiwanese Dollar and the Congolese Franc. In addition, fluctuations in exchange rates may affect product demand and profitability in U.S. dollars of products provided by the Company in foreign markets in cases where payments for its products are made in local currency. Accordingly, fluctuations in currency prices affect the Company’s operating results.

Executive Overview

The deterioration of the global economy affected all of the Company’s businesses during 2009. Customer de-stocking, primarily during the first half of 2009, and weakness in end-market demand reduced the volumes of products sold by all of the Company’s businesses. This reduced volume, together with lower cobalt prices, had a significant adverse impact on the Company’s operating results during 2009 compared with 2008. As discussed below, the Company’s net sales and gross profit in 2009 were each approximately 50% of the respective 2008 amounts and the Company had an operating loss in 2009.

Cobalt prices continued to affect the Advanced Materials segment. The average reference price of low-grade cobalt listed in the trade publication Metal Bulletin was $46.19 and $45.93 in the first and second quarters of 2008, respectively, prior to a significant decline during the second half of 2008. Following this decline, the average reference price during the four 2009 quarterly periods ranged from a low of $13.37 to a high of $18.35. The lower level of the average reference price in 2009 compared with 2008 resulted in lower product selling prices in 2009. In addition, overall cobalt volume declined in 2009 compared to 2008. Demand for fine powders in powder metallurgy applications weakened significantly in 2009 as a result of customer de-stocking, primarily during the first half of 2009, and sharply declining demand in the automotive, construction and mining sectors. The rechargeable battery market has been impacted by decreased demand for portable consumer electronics. The chemical, ceramic and pigment markets also experienced decreased demand as compared with 2008. On a sequential basis, Advanced Materials experienced increased demand across all end markets in the second half of 2009 compared with the first half of 2009.

The deterioration in the global economy also negatively impacted Specialty Chemicals. Global demand for tires, coatings and chemicals slowed significantly near the end of the fourth quarter of 2008 and remained slow throughout 2009. The printed circuit board, semiconductor and electronics-related markets also have experienced decreased demand compared with 2008. However, demand in the second half of 2009 improved compared with the first half of 2009 in the key end markets of its Electronic Chemicals, Advanced Organics and UPC businesses.

In 2009, the Company recorded net goodwill impairment charges of $37.5 million related to its Advanced Organics, UPC and Photomasks businesses and restructuring charges totaling $12.7 million related to its Advanced Organics business. As discussed below, the Company has initiated a restructuring for the carboxylate portion of its Advanced Organics business to better align the cost structure and asset base to industry conditions resulting from weak customer demand, commoditization of the products and overcapacity.

The Company has taken steps to attempt to mitigate the impact of the current economic downturn. In addition to the restructuring of the carboxylate portion of the Advanced Organics business, it has reducing spending, eliminated 2009 discretionary salary increases, implemented headcount reductions, delayed capital projects and engaging in continuing efforts to reduce working capital. During 2009, the Company also repaid the outstanding balance under its revolving credit agreement and continued to generate cash from operations, resulting in a strong cash position of $355.4 million and no debt outstanding at December 31, 2009.

Consolidated Operating Results for 2009, 2008 and 2007

Set forth below is a summary of the Statements of Consolidated Operations for the years ended December 31,


	2009				2008				2007
(Millions of dollars & percent of net sales)

Net sales	$	871.7			$	1,736.8			$	1,021.5
Cost of products sold (excluding restructuring charges)		693.9				1,384.3				708.3
Restructuring charges		12.0				—				—

Gross profit		165.8		19.0%		352.5		20.3%		313.2		30.7%
Selling, general and administrative expenses		133.3		15.3%		166.1		9.6%		117.0		11.5%
Goodwill impairment, net		37.5				8.8				—
Restructuring charges		0.7				—				—
Gain on termination of retiree medical plan		(4.7	)			—				—

Operating profit (loss)		(1.0	)	−0.1%		177.6		10.2%		196.2		19.2%
Other income (expense), net		(0.1	)			(5.3	)			2.0
Income tax expense		(20.9	)			(16.1	)			(76.3	)

Income from continuing operations, net of tax		(22.0	)			156.2				121.9
Discontinued operations:
Income from discontinued operations, net of tax		1.5				0.1				63.1
Gain on sale of discontinued operations, net of tax		—				—				72.3

Total income from discontinued operations, net of tax		1.5				0.1				135.4

Consolidated net income (loss)		(20.5	)			156.3				257.3
Net (income) loss attributable to noncontrolling interest		2.6				(21.3	)			(10.4	)

Net income (loss) attributable to OM Group, Inc. common shareholders	$	(17.9	)		$	135.0			$	246.9

Earnings per common share — basic:
Income (loss) from continuing operations attributable to OM Group, Inc. common shareholders	$	(0.64	)		$	4.48			$	3.73
Income from discontinued operations attributable to OM Group, Inc. common shareholders		0.05				—				4.52

Net income (loss) attributable to OM Group, Inc. common shareholders	$	(0.59	)		$	4.48			$	8.25

Earnings per common share — assuming dilution:
Income (loss) from continuing operations attributable to OM Group, Inc. common shareholders	$	(0.64	)		$	4.45			$	3.68
Income from discontinued operations attributable to OM Group, Inc. common shareholders		0.05				—				4.47

Net income (loss) attributable to OM Group, Inc. common shareholders	$	(0.59	)		$	4.45			$	8.15

Weighted average shares outstanding
Basic		30,244				30,124				29,937
Assuming dilution		30,244				30,358				30,276
Amounts attributable to OM Group, Inc. common shareholders:
Income (loss) from continuing operations, net of tax	$	(19.4	)		$	134.9			$	111.5
Income from discontinued operations, net of tax		1.5				0.1				135.4

Net income (loss)	$	(17.9	)		$	135.0			$	246.9

2009 Compared with 2008

The following table identifies, by segment, the components of change in net sales in 2009 compared with 2008:


(In millions)

2008 Net Sales	$	1,736.8
Decrease in 2009 from:
Advanced Materials		(720.0	)
Specialty Chemicals		(144.9	)
Intersegment items		(0.2	)

2009 Net Sales	$	871.7

Net sales decreased $865.1 million, or 50%, primarily due to a $398.7 million decrease from lower product selling prices in the Advanced Materials segment, which resulted from a decrease in the average cobalt reference price in 2009 compared with 2008, and a $169.0 million decrease from the resale of cobalt metal. The weak economy drove decreases in volume in both Advanced Materials ($122.0 million) and Specialty Chemicals ($107.8 million) as a result of weak end-market demand and customer de-stocking. Advanced Materials copper by-product sales also were lower ($28.6 million) due to the lower average copper price and decreased volume in 2009 compared with 2008. Unfavorable selling prices and sales mix ($24.1 million) and currency impact ($14.3 million) also negatively impacted net sales in Specialty Chemicals.

During 2009, the Company announced and began to implement a restructuring plan of the carboxylate portion of its Advanced Organics business to better align the cost structure to industry conditions resulting from weak customer demand and overcapacity. The restructuring plan provides for exiting the Manchester, England manufacturing facility by mid-2010 and disposing of the fixed assets located in the Manchester facility, as well as smaller workforce reductions at other facilities. The restructuring plan does not involve the discontinuation of any material product lines or other functions for the Advanced Organics business as a whole. The Company recorded charges totaling $12.7 million in 2009 in connection with the restructuring during that period. As a result of this restructuring program, the Company expects net assets employed will be reduced by $15.7 million through a combination of fixed asset and net working capital reductions.

Gross profit decreased to $165.8 million in 2009, compared with $352.5 million in 2008. The largest factor affecting the $186.7 million decrease in gross profit was the change in the average cobalt reference price during 2008 and 2009. The average cobalt reference price rose from $40.00 at the beginning of 2008 to near $50.00 by the end of the first quarter and averaged $45.93 and $32.54 per pound in the second and third quarters of 2008, respectively, before dropping to an average of $20.81 per pound in the fourth quarter of 2008. The average reference price of cobalt was $13.37, $14.44, $17.30 and $18.35 in the first, second, third and fourth quarters of 2009, respectively. As a result, 2008 benefited from higher product selling prices due to the high average reference price for cobalt during the first half of 2008 and the favorable effect of a rising cobalt price environment during that period, which resulted in the sale at higher selling prices of products manufactured using lower cost cobalt raw materials. This set of circumstances did not exist during 2009, which included a lower and more stable price environment. The impact of the changing reference price reduced gross profit by $156.9 million in 2009 compared with 2008. As a result of the rapid and significant decline in the cobalt reference price during the second half of 2008, and in particular in the fourth quarter, 2008 results include a $27.7 million charge ($20.7 in Advanced Materials and $7.0 million in Specialty Chemicals) to reduce the carrying value of certain inventories to market value. Also impacting the Advanced Materials segment gross profit was decreased volume ($51.9 million) and a decrease in profit associated with copper by-product sales ($7.2 million). Advanced Materials was favorably impacted by a $23.7 million reduction in manufacturing and distribution expenses due primarily to reduced volume and the Company’s profit enhancement initiatives that included reductions in discretionary spending, headcount reductions, and decreased employee incentive compensation; and lower process-based material costs ($15.2 million). In the Specialty Chemicals segment, decreased volume and restructuring charges reduced gross profit by $36.8 million and $12.0 million, respectively. Specialty Chemicals was favorably impacted by a $12.6 million reduction in manufacturing and distribution expenses due primarily to the reduced volume and the Company’s profit

enhancement initiatives described above. The decrease in gross profit as a percentage of net sales (19.0% in 2009 versus 20.3% in 2008) was primarily due to the favorable effect of higher cobalt selling prices in 2008 partially offset by the $27.7 million inventory adjustment, as compared with the conditions that existed during 2009, which included the $12.0 million restructuring charge and fixed expenses spread over lower sales revenues.

Selling, general and administrative expenses (“SG&A”) decreased to $133.3 million in 2009 compared with $166.1 million in 2008. The decline in SG&A was primarily attributable to overall reduced spending due to reduced volume and the Company’s profit enhancement initiatives, including headcount reductions and decreased employee incentive compensation. The increase in SG&A as a percentage of net sales (15.3% in 2009 versus 9.6% in 2008) was due to SG&A expenses being spread over lower net sales.

In 2009, the Company recorded a non-cash charge totaling $37.5 million in the Specialty Chemicals segment for the impairment of goodwill related to the Advanced Organics, UPC and Photomasks businesses. (The charge is net of a $4.1 million adjustment to the estimated goodwill impairment charge of $8.8 million taken in the fourth quarter of 2008 related to the UPC reporting unit as a result of the Company finalizing its impairment analysis in the first quarter of 2009.) See Note 7 to the Consolidated Financial Statements in this Form 10-K for further discussion of the goodwill impairment charges.

The Company recognized a $4.7 million gain in 2009 on the termination of its retiree medical plan. As a result of the termination, the accumulated postretirement benefit obligation has been eliminated. The gain is included as a reduction of Corporate expenses.

The change in operating profit (loss) for 2009 compared with 2008 was due to the factors discussed above, primarily changes in cobalt price, reduced volumes and goodwill impairment charges, partially offset by cost reductions. The following table identifies, by segment, the components of change in operating profit (loss) for 2009 compared with 2008:


(In millions)

2008 Operating Profit	$	177.6
Increase (decrease) in 2009 from:
Advanced Materials		(150.2	)
Specialty Chemicals		(38.2	)
Corporate		10.2
Intersegment items		(0.4	)

2009 Operating Loss	$	(1.0	)

Other income (expense), net for 2009 was expense of $0.1 million compared with expense of $5.3 million in 2008. The following table summarizes the components of Other income (expense), net:


	Year Ended December 31,
	2009			2008			Change
(In thousands)

Interest expense	$	(689	)	$	(1,597	)	$	908
Interest income		928			1,920			(992	)
Foreign exchange gain (loss)		(21	)		(3,744	)		3,723
Other expense, net		(292	)		(1,913	)		1,621

	$	(74	)	$	(5,334	)	$	5,260

The change in income (loss) from continuing operations before income tax expense for 2009 compared with 2008 was due to the factors discussed above, primarily the impact of the decline in the cobalt reference price, the negative impact on demand caused by the deterioration of the global economy, the goodwill and intangible asset impairment charges and the restructuring charge.

Income tax expense in 2009 was $20.9 million on pre-tax loss of $1.1 million, resulting in a negative tax rate, compared to income tax expense in 2008 of $16.1 million on pre-tax income of $172.3 million, or 9.3%. During 2009, the Company recorded discrete tax expense items totaling $10.2 million, which included $9.2 million related to GTL in the DRC, (of which the Company’s share is 55%). Also in 2009, the Company recorded goodwill and intangible asset impairment charges totaling $39.1 million, which are not deductible for tax purposes. Adjusting the pretax loss for the impairment charges and excluding the special tax items, the Company’s effective income tax rate would have been 28.2% for 2009. This effective tax rate is lower than the U.S. statutory rate due primarily to income earned in foreign tax jurisdictions with lower statutory tax rates than the U.S. (primarily Finland), and a tax holiday in Malaysia, offset by income earned in foreign tax jurisdictions with higher statutory rates than the US, principally the DRC. During 2008, the Company completed an analysis of foreign tax credit positions and recorded a $46.6 million tax benefit related to an election to take foreign tax credits on prior year U.S. tax returns. Excluding the tax benefit related to the foreign tax credits, the Company’s effective income tax rate would have been 36.4% for 2008. In 2008, the effective tax rate, excluding the foreign tax credit noted above, was higher than the U.S. statutory rate due to several factors: the non-deductible goodwill impairment charge, the cost of repatriating foreign earnings and the ability to recognize tax benefits for only a portion of U.S. losses.

Income from discontinued operations in 2009 of $1.5 million was primarily due to the reversal of a $2.0 million tax contingency accrual partially offset by translation adjustments of retained liabilities of businesses sold denominated in a foreign currency.

Net (income) loss attributable to noncontrolling interest relates to the Company’s 55%-owned smelter joint venture in the DRC. Since the joint venture is consolidated, the noncontrolling interest is included in income from continuing operations. Net loss attributable to noncontrolling interest of $2.6 million in 2009 compared with net income attributable to noncontrolling interest of $21.3 million in 2008. The change was due to the unfavorable impact of lower cobalt prices, decreased deliveries and increased tax expense in 2009 compared with 2008.

Income (loss) from continuing operations attributable to OM Group, Inc. was a loss of $19.4 million, or $0.64 per diluted share in 2009, compared with income of $134.9 million, or $4.45 per diluted share in 2008, due primarily to the aforementioned factors.

Net income (loss) attributable to OM Group, Inc. was a loss of $17.9 million, or $0.59 per diluted share, in 2009, compared with income of $135.0 million, or $4.45 per diluted share, in 2008. The decrease was due primarily to the aforementioned factors.

2008 Compared with 2007

The following table identifies, by segment, the components of change in net sales in 2008 compared with 2007:


(In millions)

2007 Net Sales	$	1,021.5
Increase in 2008 from:
Advanced Materials		470.5
Specialty Chemicals		242.8
Intersegment items		2.0

2008 Net Sales	$	1,736.8

Net sales increased to $1,736.8 million in 2008 from $1,021.5 million in 2007. The $715.3 million increase was due to a number of factors. Higher product selling prices in the Advanced Materials segment, which resulted principally from an increase in the average cobalt reference price in 2008 compared with 2007, contributed $263.9 million to the overall increase. In the Specialty Chemicals segment, the 2007 Acquisitions contributed $264.0 million in 2008. The remaining increase in net sales was primarily due to a $148.6 million increase from the resale of cobalt metal; increased volumes in the Advanced Materials segment, which contributed $60.2 million; and favorable pricing in the Specialty Chemicals segment, which contributed $41.6 million. These increases were partially offset by

decreased volumes ($57.9 million) in the Specialty Chemicals segment primarily due to decreased demand, especially in the fourth quarter of 2008.

Gross profit increased to $352.5 million in 2008, compared with $313.2 million in 2007. The $39.3 million increase in gross profit was due to a number of factors. The 2007 Acquisitions contributed $62.9 million in gross profit in 2008. Also impacting the Specialty Chemicals segment was improved pricing ($10.0 million) partially offset by unfavorable volume ($19.5 million) and inventory charges ($7.0 million) to reduce the carrying value of certain inventory to market value. In the Advanced Materials segment, improved volume ($26.4 million) and price ($9.1 million) were offset by inventory charges ($20.7 million) to reduce the carrying value of certain inventory to market value, an unfavorable currency impact ($11.4 million) and increased distribution/manufacturing and non-cobalt raw material costs ($11.3 million). The decrease in gross profit as a percentage of sales (20.3% in 2008 versus 30.7% in 2007) was primarily due to the effect of the rapid decline in the cobalt reference price during the second half of 2008 (including the $20.7 million inventory adjustment), which resulted in lower gross profit from the sale of finished goods manufactured using higher cost cobalt raw materials purchased prior to and during the price decline.

Cobalt prices declined significantly during the second half of 2008. Cobalt price plays an important role in determining the profitability of the Company due to the length of the cobalt supply chain. In a rising price environment, the Company benefits through higher selling prices relative to raw material costs, both of which are dependent upon the prevailing cobalt price at the time. Conversely, a falling price environment challenges the Company as product selling prices could fall below inventory carrying costs. During 2008, cobalt prices fluctuated significantly. The reference price of low grade cobalt listed in the trade publication, Metal Bulletin, rose from $40.00 at the beginning of 2008 to near $50.00 by the end of the first quarter. During the second half of the year, the reference price decreased from $40.75 at June 30, 2008 to an average of $32.54 per pound in the third quarter of 2008, an average of $20.81 per pound in the fourth quarter of 2008, ending the year at $10.50 per pound.

In the fourth quarter of 2008, the Company recorded a non-cash charge totaling $8.8 million in the Specialty Chemicals segment for the impairment of goodwill related to the Ultra Pure Chemicals business. The charge reduced a portion of the goodwill recorded in connection with the 2007 REM acquisition.

SG&A increased to $166.1 million in 2008, compared with $117.0 million in 2007. The $49.1 million increase was primarily due to $46.5 million of REM and Borchers SG&A expenses, including amortization expense of $6.3 million on acquired intangibles. SG&A was also impacted by increased administrative expenses ($8.0 million) and the unfavorable impact of the weaker U.S. dollar ($2.0 million). The increase in administrative expenses was primarily due to increased information technology and travel costs associated with the 2007 Acquisitions integration and Enterprise Resource Planning (“ERP”) system implementation ($5.0 million) in Specialty Chemicals. These increases were partially offset by a $4.6 million decrease in expenses related to the environmental remediation liability for the Company’s closed Newark, New Jersey site. In addition, SG&A expenses in 2007 included $3.2 million for legal fees incurred by Specialty Chemicals for a lawsuit the Company filed related to the use by a third-party of proprietary information. The lawsuit was settled in the third quarter of 2007. SG&A was also impacted by a $1.5 million increase in corporate expenses in 2008 compared with 2007, primarily due to an increase in professional services fees and employee incentive and share-based compensation expense.

The following table identifies, by segment, the components of change in operating profit for 2008 compared with 2007:


(In millions)

2007 Operating Profit	$	196.2
Increase (decrease) in 2008 from:
Advanced Materials		(9.1	)
Specialty Chemicals		(7.0	)
Corporate		(1.7	)
Intersegment items		(0.8	)

2008 Operating Profit	$	177.6

The decrease in operating profit for 2008, compared with operating profit in 2007, was due to the factors discussed above.

Other income (expense), net for 2008 was $5.3 million of expense compared with income of $2.0 million in 2007. The following table summarizes the components of Other income (expense), net:


	Year Ended December 31,
(In thousands)	2008			2007			Change

Interest expense	$	(1,597	)	$	(7,820	)	$	6,223
Loss on redemption of Notes		—			(21,733	)		21,733
Interest income		1,920			19,396			(17,476	)
Interest income on Notes receivable from joint venture partner		—			4,526			(4,526	)
Foreign exchange gain (loss)		(3,744	)		8,100			(11,844	)
Other expense, net		(1,913	)		(449	)		(1,464	)

	$	(5,334	)	$	2,020		$	(7,354	)

The $6.2 million decrease in interest expense and the Loss on redemption of Notes in 2007 were primarily due to the redemption, on March 7, 2007, of $400 million of 9.25% Senior Subordinated Notes due 2011 (the “Notes”). The decrease in interest income and the foreign exchange loss in 2008 both relate to the higher average cash balances earning interest throughout 2007, before $337 million of existing cash was used in the fourth quarter of 2007 to fund the 2007 Acquisitions. Interest income in 2007 also includes $4.5 million related to the notes receivable from the 25% minority shareholder in the joint venture in the DRC (See Note 1 to the Consolidated Financial Statements in this Form 10-K). In addition, certain cash balances were held in foreign currencies during 2007, generating foreign exchange gains due primarily to the strengthening of the euro against the U.S. dollar during that period. See additional discussion below under “Liquidity and Capital Resources.”

Income tax expense in 2008 was $16.1 million on pre-tax income of $172.3 million, or 9.3%, compared with income tax expense in 2007 of $76.3 million on pre-tax income of $198.3 million, or 38.5%. During 2008, the Company completed an analysis of foreign tax credit positions and recorded a $46.6 million tax benefit related to an election to take foreign tax credits on prior year U.S. tax returns. The benefit related to the foreign tax credits was $1.54 per diluted share in 2008. As originally filed, such returns claimed these amounts as deductions rather than foreign tax credits because the Company was in a net operating loss carryover position in the U.S. during those years. However, due to income taxes paid in the U.S. in connection with the 2007 repatriation of foreign earnings, the Company is able to utilize these foreign tax credits previously taken as deductions. The $46.6 million tax benefit includes interest income of $0.6 million, a $0.6 million reduction of a penalty related to underpayment of 2007 estimated taxes and is net of a valuation allowance of $1.5 million on deferred tax assets as to which the Company believes it is more likely than not it will be unable to realize as a result of its election to claim the foreign tax credits. Excluding the tax benefit related to the foreign tax credits, the Company’s effective income tax rate would have been 36.4% for 2008. In 2008, the effective tax rate, excluding the discrete item noted above, was higher than the U.S. statutory rate due to several factors: the non-deductible goodwill impairment charge, the cost of repatriating foreign earnings and the ability to recognize tax benefits for only a portion of U.S. losses. Income tax expense in 2007 includes $45.7 million of expense for the repatriation of foreign earnings in the first quarter of 2007, partially offset by a $7.6 million income tax benefit related to the $21.7 million loss on redemption of the Notes. Excluding these discrete items, the effective income tax rate would have been 17.3% in 2007. Excluding the discrete items discussed above, the effective income tax rate was lower than the U.S. statutory rate in 2007 due primarily to income earned in foreign tax jurisdictions with lower statutory tax rates than the U.S. (primarily Finland), a tax holiday in Malaysia, and the recognition of tax benefits for U.S. losses.

Net income attributable to noncontrolling interest of $21.3 million in 2008 compared with net income attributable to noncontrolling interest of $10.4 million in 2007. The increase was primarily due to higher average cobalt prices and increased deliveries in 2008 compared with 2007.

Income from continuing operations attributable to OM Group, Inc. was $134.9 million, or $4.48 per diluted share in 2008 compared with $111.5 million, or $8.15 per diluted share in 2007, due primarily to the aforementioned factors.

Income from discontinued operations for 2007 was primarily related to the operations of the Nickel business. Total income from discontinued operations for 2007 also included the $72.3 million gain on the sale of the Nickel business.

Net income attributable to OM Group, Inc. was $135.0 million, or $4.45 per diluted share, in 2008 compared with $246.9 million, or $8.15 per diluted share, in 2007, due primarily to the aforementioned factors.

Segment Results and Corporate Expenses

Advanced Materials

For the year ended December 31,


(Millions of dollars)	2009		2008		2007

Net sales	$	472.4	$	1,192.4	$	721.9

Operating profit	$	53.3	$	203.5	$	212.6

The following table reflects the volumes in the Advanced Materials segment:

2009

2008

2007

Volumes

Sales volume — metric tons*

27,073

31,450

25,432

Cobalt refining volume — metric tons

8,962

9,639

9,158


*		Sales volume includes cobalt metal resale and copper by-product sales.

The following table summarizes the percentage of sales dollars by end market for the year ended December 31,


	2009			2008			2007

Battery Materials		49	%		46	%		43	%
Chemical		14	%		12	%		14	%
Powder Metallurgy		7	%		11	%		12	%
Ceramics		4	%		4	%		6	%
Other*		26	%		27	%		25	%


*		Other includes cobalt metal resale and copper by-product sales.

The following table summarizes the percentage of sales dollars by region for the year ended December 31,


	2009			2008			2007

Americas		9	%		9	%		14	%
Asia		55	%		49	%		51	%
Europe		36	%		42	%		35	%

The following table summarizes the average quarterly reference price per pound of low grade cobalt (as published in Metal Bulletin magazine):


	2009		2008		2007

First Quarter	$	13.37	$	46.19	$	25.82
Second Quarter	$	14.44	$	45.93	$	28.01
Third Quarter	$	17.30	$	32.54	$	25.84
Fourth Quarter	$	18.35	$	20.81	$	32.68
Full Year	$	15.90	$	36.58	$	27.99

The following table summarizes the average quarterly London Metal Exchange (“LME”) price per pound of copper:


	2009		2008		2007

First Quarter	$	1.56	$	3.52	$	2.69
Second Quarter	$	2.12	$	3.83	$	3.47
Third Quarter	$	2.65	$	3.49	$	3.50
Fourth Quarter	$	3.01	$	1.80	$	3.28
Full Year	$	2.34	$	3.16	$	3.52

2009 Compared with 2008

Net Sales

The following table identifies the components of change in net sales:


(In millions)

2008 Net Sales	$	1,192.4
Increase (decrease) in 2009 from:
Selling price		(398.7	)
Cobalt metal resale		(169.0	)
Volume		(122.0	)
Copper (price and volume)		(28.6	)
Other		(1.7	)

2009 Net Sales	$	472.4

The net sales decreases in 2009 were due primarily to decreased product selling prices that resulted from a decrease in the average cobalt reference price. Cobalt metal resale was also negatively impacted by the decrease in the cobalt price. Weak worldwide economic conditions drove decreases in volume, which impacted all end markets including cobalt metal resale. Copper by-product sales were lower due to the lower average copper price and decreased volume in 2009 compared with 2008.

Operating Profit

The following table identifies the components of change in operating profit:


(In millions)

2008 Operating Profit	$	203.5
Increase (decrease) in 2009 from:
2008 Lower of cost or market inventory charge		20.7
Price (including cobalt metal resale)		(156.9	)
Volume (including cobalt metal resale)		(51.9	)
Copper by-product (price and volume)		(7.2	)
Other by-product (price and volume)		(5.7	)
Process-based material costs		15.2
2008 Loss on cobalt forward purchase contract		2.7
Foreign currency		5.3
Reductions in manufacturing and distribution expenses		23.7
Reductions in SG&A expenses		8.0
Other		(4.1	)

2009 Operating Profit	$	53.3

The decrease in operating profit in 2009 compared to 2008 was primarily due to unfavorable cobalt pricing as 2008 benefited from higher product selling prices due to the high average reference price for cobalt during 2008 and the favorable effect of a rising cobalt price environment during the first half of 2008, which resulted in the sale at higher selling prices of products manufactured using lower cost cobalt raw materials. This set of circumstances did not exist during 2009, which included a lower and more stable price environment. Operating profit was also impacted by decreased volume as the deterioration of the global economy resulted in weak demand in all end markets. However, on a sequential basis, operating profit increased from $11.4 million in the first half of 2009 to $41.9 million in the second half of 2009, due to increased demand across all end markets and the favorable effect of a rising cobalt price environment. The decrease in profit associated with copper by-product sales in 2009 compared to 2008 was due to both lower price and decreased volume associated with differences in raw material mix. These items were partially offset by decreased manufacturing and distribution and SG&A expenses, lower process-based material costs and a favorable currency impact. Manufacturing and distribution and SG&A expenses decreased primarily due to overall reduced spending in response to the weak global economic conditions including reductions in discretionary spending, headcount reductions, and decreased employee incentive compensation. The favorable currency impact was primarily the result of the stronger U.S. Dollar against the Euro in 2009 compared to 2008.

2008 Compared with 2007

Net Sales

Net sales increased to $1,192.4 million in 2008 from $721.9 million in 2007. As discussed under “Consolidated Operating Results for 2009, 2008, and 2007”) above, the net sales increase in 2008 was due primarily to increased product selling prices resulting from an increase in the average cobalt reference price, increased cobalt metal resale and increased volume. In 2008, copper by-product sales contributed an additional $11.4 million to net sales, primarily due to increased volume. The increase in cobalt metal resale in 2008 compared with 2007 reflects increased volume and the increase in the average cobalt reference price. Increased volume resulted primarily from sales of metal received under the five-year supply agreement with Norilsk. This agreement was entered into in the first quarter of 2007; however, the Company did not receive regular deliveries of cobalt metal until the second half of 2007.

In connection with the sale of the Nickel business to Norilsk, the Company entered into two-year agency and distribution agreements for certain specialty nickel salts products. Under these agreements, the Company now acts as a distributor of these products on behalf of Norilsk and records the related commission revenue on a net basis. Prior to March 1, 2007, the Company was the primary obligor for sales of certain specialty nickel salts products and recorded the sales revenue on a gross basis. This change resulted in a $15.9 million decrease in net sales in 2008 compared with 2007.

Operating Profit

The $9.1 million decrease in operating profit in 2008 compared with 2007 was due to inventory charges ($20.7 million) to reduce the carrying value of certain inventory to market value, an unfavorable currency impact ($13.7 million), increased manufacturing and non-cobalt raw material costs ($11.3 million) and a $2.2 million increase in SG&A due to an increase in administrative expenses. These decreases were partially offset by improved volume ($26.4 million) (including metal resale and excluding copper by-product and specialty nickel salts), favorable pricing ($9.1 million) and increased copper by-product sales ($2.0 million).

Specialty Chemicals Segment

For the year ended December 31,


(Millions of dollars)	2009			2008		2007

Net sales	$	401.8		$	546.7	$	303.9

Operating profit (loss)	$	(27.0	)	$	11.2	$	18.2

The following table summarizes the percentage of sales dollars by end market for the year ended December 31,


	2009			2008			2007

Semiconductor		27	%		24	%		3	%
Coatings		18	%		18	%		20	%
Tire		11	%		14	%		23	%
Printed Circuit Boards		20	%		17	%		2	%
Memory Disk		10	%		10	%		26	%
Chemical		9	%		11	%		17	%
General Metal Finishing		2	%		2	%		4	%
Other		3	%		4	%		5	%

The following table summarizes the percentage of sales dollars by region for the year ended December 31,


	2009			2008			2007

Americas		28	%		29	%		32	%
Asia		44	%		39	%		43	%
Europe		28	%		32	%		25	%

The following table reflects the volumes in the Specialty Chemicals segment for the year ended December 31,

2009

2008

2007

Volumes

Advanced Organics sales volume — metric tons*

21,787

28,956

30,272

Electronic Chemicals sales volume — gallons (thousands)**

8,994

11,270

7,278

Ultra Pure Chemicals sales volume — gallons (thousands)

4,564

5,152

n/a

Photomasks — number of masks

27,065

27,834

n/a


*		2007 sales volumes include volume related to Borchers as of the acquisition date, October 1, 2007.

**		2007 sales volumes do not include volume related to the REM PCB business, which was acquired on December 31, 2007.

Net Sales

The following table identifies the components of change in net sales:


(In millions)

2008 Net Sales	$	546.7
Increase (decrease) in 2009 from:
Volume		(107.8	)
Selling price/mix		(24.1	)
Foreign currency		(14.3	)
Other		1.3

2009 Net Sales	$	401.8

The $144.9 million decrease in net sales in 2009 compared to 2008 was primarily due to decreased volume. Volumes were down across all end markets due to customers’ inventory de-stocking, primarily during the first half of 2009, and weak demand as a result of the global economic conditions. Unfavorable selling prices, sales mix and the stronger U.S. dollar also negatively impacted net sales.

Operating Profit

The following table identifies the components of change in operating profit:


(In millions)

2008 Operating Profit			$	11.2
2008 Goodwill impairment				8.8
2008 Intangible asset impairment charge				0.2
2008 Lower of cost or market inventory charge				7.0
Increase (decrease) in 2009 from:
Volume	(36.8	)
Price/Mix	0.7
Reductions in manufacturing and distribution expenses	12.6
Reductions in selling, general and administrative expenses	17.6
Foreign currency	4.4
Other	(0.9	)

				(2.4	)
2009 Goodwill impairment, net				(37.5	)
2009 Intangible asset impairment charges				(1.6	)
2009 Restructuring charges				(12.7	)

2009 Operating Loss			$	(27.0	)

The $38.2 million decrease in operating profit (loss) in 2009 compared to 2008 included non-cash charges for the impairment of goodwill related to the UPC, Photomasks and Advanced Organics businesses and non-cash intangible asset impairment charges ($1.6 million in 2009 compared to $0.2 million in 2008). See Note 7 to the Consolidated Financial Statements in this Form 10-K for further discussion of the goodwill and intangible asset impairment charges. In addition, the Company recorded restructuring charges totaling $12.7 million in 2009. See Note 8 to the Consolidated Financial Statements in this Form 10-K for further discussion of the restructuring charge. The decrease in sales volume that drove the decrease in net sales discussed above also impacted operating loss in 2009. These unfavorable items were significantly offset by decreased manufacturing and distribution and SG&A expenses as a result of a reduction in discretionary spending, headcount reductions, and decreased employee incentive compensation.

2008 Compared with 2007

Net Sales

Net sales increased to $546.7 million in 2008 from $303.9 million in 2007. The 2007 acquisitions of REM and Borchers contributed $264.0 million in 2008. Excluding the acquisitions, improved pricing resulted in an additional $41.6 million in net sales in 2008 compared with 2007, which was more than offset by decreased volume ($57.9 million) in both Advanced Organics and Electronic Chemicals and an unfavorable currency impact ($5.3 million). Favorable pricing in Advanced Organics was partially offset by unfavorable pricing in Electronic Chemicals, primarily due to a decline in the price of nickel.

Operating Profit

Operating profit in 2008 decreased to $11.2 million from $18.2 million in 2007. In connection with the REM acquisition, the Company allocated a portion of the total purchase price to inventory to reflect manufacturing profit in inventory at the date of the acquisition. The inventory step-up to fair value was recognized as a charge to cost of products sold in 2008, as the inventory was sold in the normal course of business. The businesses acquired in 2007 contributed $16.4 million to operating profit, including the inventory fair value step-up expense of $1.7 million, in 2008. Excluding those acquisitions, operating profit was impacted by decreased volume ($19.5 million); a non-cash charge totaling $8.8 million for the impairment of goodwill related to the UPC business; inventory charges

($7.0 million) to reduce the carrying value of certain inventory to market value at December 31, 2008, primarily due to the rapid decline in the cobalt reference price at the end of 2008; an increase in certain administrative expenses ($5.0 million) primarily due to ERP system implementation, increased information technology and travel costs associated with the integration of REM and Borchers; higher distribution costs ($1.4 million); and a $0.9 million charge for a distributor termination. These amounts were partially offset by favorable pricing ($10.0 million) and a $4.6 million decrease in expenses related to the environmental remediation liability for the Company’s closed Newark, New Jersey site. In addition, 2007 included $3.5 million in legal fees for a lawsuit the Company filed related to the use by a third-party of proprietary information.

Corporate Expenses

Corporate expenses consist of corporate functions and activities not specifically allocated to the Advanced Materials or Specialty Chemicals segments, including legal, finance, human resources and strategic development activities, as well as share-based compensation.

2009 Compared with 2008

Corporate expenses were $27.3 million in 2009 compared with $37.5 million in 2008. Corporate expense in 2009 is net of a $4.7 million gain for the termination of the Company’s retiree medical plan. Also contributing to the $10.2 million decrease in corporate expenses from 2008 is a decrease in employee incentive and share-based compensation expense in 2009 compared with 2008. This decrease was primarily due to a significant reduction in anticipated annual incentive compensation (including no payout under the annual incentive plan), a reduction in the number of time-based restricted shares outstanding, and a reduction in expense related to performance-based incentive compensation as the probability of achievement/vesting decreased. These items were partially offset by $1.3 million in transaction costs related to the acquisition of EaglePicher Technologies that were expensed in 2009.

2008 Compared with 2007

Corporate expenses were $37.5 million in 2008 compared with $35.8 million in 2007. The increase in corporate expenses in 2008 was primarily due to an increase in employee incentive and share-based compensation expense and increased professional services fees. The increase in employee incentive and share-based compensation was primarily due to higher headcount in 2008, as a result of the REM and Borchers acquisitions. Increased professional services fees were primarily for fees associated with income tax projects, including the analysis of foreign tax credit positions which resulted in a $46.6 million tax benefit in 2008 and the remediation in 2008 of the 2007 material weakness in the income tax financial statement closing process.

Liquidity and Capital Resources

Cash Flow Summary

The Company’s cash flows from operating, investing and financing activities for 2009, 2008 and 2007, as reflected in the Statements of Consolidated Cash Flows, are summarized and discussed in the following tables (in millions) and related narrative:


	2009			2008			change

Net cash provided by (used for):
Operating activities	$	165.5		$	172.1		$	(6.6	)
Investing activities		(30.5	)		(17.9	)		(12.6	)
Financing activities		(26.7	)		(6.7	)		(20.0	)
Discontinued operations-net cash used for operating activities		(0.4	)		—			(0.4	)
Effect of exchange rate changes on cash		2.7			(2.9	)		5.6

Net change in cash and cash equivalents	$	110.6		$	144.6		$	(34.0	)

The decrease in net cash flows from operating activities was primarily due to the $22.0 million loss from continuing operations in 2009 compared to $156.2 million of income from continuing operations in 2008, partially offset by the following factors:


•	the change in net working capital (defined as inventory plus accounts receivable less accounts payable) which contributed positive cash flows of $73.6 million in 2009 compared to $0.9 million in 2008;

•	the impact of the $56.8 million change in refundable, prepaid and accrued income taxes. The 2008 refundable, prepaid and accrued income taxes included the impact of the tax benefit related to the recording of the tax benefit related to an election to take foreign tax credits on prior year U.S. tax returns of $46.6 million, which is expected to be received in 2010; and

•	a $33.6 million change in cash flows associated with advances to suppliers.

Net cash used for investing activities is due primarily to capital expenditures of $25.7 million and $30.7 million in the 2009 and 2008 period, respectively. Net cash used for investing activities in the 2008 period also includes proceeds from settlement of cobalt forward purchase contracts ($10.7 million); proceeds from loans to consolidated joint venture partners ($10.3 million); and cash payments made in 2008 for professional fees incurred in connection with the REM and Borchers acquisitions.

Cash used for financing activities in 2009 is primarily repayment of all of the Company’s outstanding debt of $26.1 million. Cash used for financing activities in 2008 included $24.5 million net borrowings under the revolving credit agreement, partially offset by a $26.2 million distribution to the DRC smelter joint venture partners.


	2008			2007			change

Net cash provided by (used for):
Operating activities	$	172.1		$	41.0		$	131.1
Investing activities		(17.9	)		135.2			(153.1	)
Financing activities		(6.7	)		(406.7	)		400.0
Effect of exchange rate changes on cash		(2.9	)		1.4			(4.3	)
Discontinued operations-net cash provided by operating activities		—			48.5			(48.5	)
Discontinued operations-net cash used for investing activities		—			(1.5	)		1.5

Net change in cash and cash equivalents	$	144.6		$	(182.1	)	$	326.7

The increase in net cash flows from operating activities was primarily driven by three factors: higher income from continuing operations, higher non-cash charges in 2008, and a reduction in net working capital (accounts receivable plus inventories minus accounts payable). Income from continuing operations increased by $23.4 million in 2008 compared with 2007. Significant non-cash charges — consisting of depreciation and amortization, deferred tax benefits, 2008 inventory charges, and goodwill impairment, bad debt expense and the 2007 Loss on redemption of Notes — were $96.1 million in 2008 compared with $39.7 million in 2007. Bad debt expense increased in 2008 compared with 2007 primarily due to the REM and Borchers acquisitions and the impact of the deteriorating global economy. Net working capital (as defined above) reductions contributed positive cash flows of $0.9 million in 2008 compared with negative cash flows of $111.9 million in 2007. In 2008, accounts receivable and inventories (excluding the inventory charges included in non-cash items) declined versus the beginning of the year, due primarily to the declining price of cobalt in the second half of 2008 and the resulting impact on net sales and inventory costs. Accounts payable balances declined for the same reason. In 2007, the opposite effect occurred, when rising cobalt prices primarily drove higher working capital needs in 2007. Partially offsetting these positive operating cash flow factors was the negative impact of an increase in refundable and prepaid income taxes and a decrease in accrued income taxes.

Net cash used in investing activities in 2008 includes capital expenditures of $30.7 million (see below for further discussion); proceeds from settlement of cobalt forward purchase contracts ($10.7 million); proceeds from loans to consolidated joint venture partners ($10.3 million); and cash payments made in 2008 for professional fees incurred in connection with the REM and Borchers acquisitions. The amount in 2007 includes $490.0 million of net

proceeds related to the sale of the Nickel business partially offset by the cash outflow for the REM and Borchers acquisitions ($337.0 million, net of cash acquired). Net cash provided by investing activities in 2007 also includes $7.6 million of proceeds from the repayment of a loan made to a former non-consolidated Nickel joint venture partner.

Net cash used in financing activities in 2008 includes $26.2 million for payments made by the Company’s consolidated joint venture to the joint venture partners, partially offset by net borrowings under the Company’s revolving line of credit of $25 million. Net cash used in financing activities in 2007 includes the $418.5 million payment to redeem the Notes, partially offset by $11.3 million of proceeds from stock option exercises.

Debt and Other Financing Activities

The Company has a Revolving Credit Agreement (the “Revolver”) with availability of up to $100.0 million, including up to the equivalent of $25.0 million in Euros or other foreign currencies. The Revolver includes an “accordion” feature under which the Company may increase the availability by $50.0 million to a maximum of $150.0 million subject to certain conditions and discretionary approvals of the lenders. At December 31, 2009, the Company was in compliance with such conditions but would need to obtain incremental credit commitments by new and/or existing lenders under the existing terms and conditions of the Revolver to access the accordion feature. To date the Company has not sought to borrow under the accordion feature. Obligations under the Revolver are guaranteed by each of the Company’s U.S. subsidiaries and are secured by a lien on the assets of the Company and such subsidiaries. The Revolver contains certain covenants, including financial covenants, that require the Company to (i) maintain a minimum net worth and (ii) not exceed a certain debt-to-adjusted-earnings ratio. As of December 31, 2009, the Company was in compliance with all of the covenants under the Revolver. Minimum net worth is defined as an amount equal to the sum of $826.1 million plus 75% of consolidated net income for each quarter ending after March 1, 2007 for which consolidated net income is positive. Minimum net worth was $1,070.3 million at December 31, 2009. Consolidated net worth, defined as total OM Group, Inc. stockholders’ equity, was $1,131.3 million at December 31, 2009. The Company is required to maintain a debt to adjusted earnings ratio of consolidated net debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) of no more than 3.5 times. Consolidated net debt is defined as consolidated total debt less cash and cash equivalents. At December 31, 2009, the Company had no consolidated net debt. The Revolver includes a cross default provision whereby an event of default under other debt obligations, as defined, will be considered an event of default under the Revolver. The Company has the option to specify that interest be calculated based either on a London interbank offered rate (“LIBOR”) plus a calculated margin amount, or on a base rate. The applicable margin for the LIBOR rate ranges from 0.50% to 1.00%. The Revolver also requires the payment of a fee of 0.125% to 0.25% per annum on the unused commitment. The margin and unused commitment fees are subject to quarterly adjustment based on a certain debt-to-adjusted-earnings ratio. The Revolver provides for interest-only payments during its term, with principal due at maturity on December 20, 2010. During the second quarter of 2009, the Company repaid the outstanding revolver balance of $25.0 million with available cash on hand. The outstanding Revolver balance was $0 and $25.0 million at December 31, 2009 and 2008, respectively.

During 2008, the Company’s Finnish subsidiary, OMG Kokkola Chemicals Oy (“OMG Kokkola”), entered into a € 25 million credit facility agreement (the “Credit Facility”). Under the Credit Facility, subject to the lender’s discretion, OMG Kokkola can draw short-term loans, ranging from one to nine months in duration, in U.S. dollars at LIBOR plus a margin of 0.55%. The Credit Facility has an indefinite term, and either party can immediately terminate the Credit Facility after providing notice to the other party. The Company agreed to unconditionally guarantee all of the obligations of OMG Kokkola under the Credit Facility. There were no borrowings outstanding under the Credit Facility at December 31, 2009 or 2008.

During the second quarter of 2009, the Company repaid the remaining $1.1 million balance of a term loan with available cash on hand. The balance of the term loan was $1.1 million at December 31, 2008.

During the first quarter of 2010, the Company borrowed $94.0 million under the Revolver in connection with the EaglePicher Technologies acquisition, which will be repaid or refinanced prior to the Revolver’s maturity on December 20, 2010.

The Company believes that cash flow from operations, together with its strong cash position and the availability of funds to the Company under the Revolver and to OMG Kokkola under the Credit Facility, will be sufficient to meet working capital needs and planned capital expenditures during the remainder of 2010. In addition, the Company believes it will be able to generate funds needed for potential future acquisitions from these sources and, if required, from additional borrowings or accessing capital markets.

The Company did not pay cash dividends in 2009, 2008 or 2007. The Company intends to continue to retain earnings for use in the operation and expansion of the business and therefore does not anticipate paying cash dividends in 2010.

Capital Expenditures

Capital expenditures in 2009 were $25.7 million, were funded through cash flows from operations, and were primarily related to ongoing projects to maintain current operating levels. The Company expects to incur capital spending of approximately $35 to $40 million in 2010, including EaglePicher Technologies, for projects to expand capacity; to maintain and improve throughput; for compliance with environmental, health and safety regulations; and for other fixed asset additions at existing facilities. The Company expects to fund 2010 capital expenditures through cash generated from operations and cash on hand at December 31, 2009.

Contractual Obligations

The Company has entered into contracts with various third parties in the normal course of business that will require future payments. The following table summarizes the Company’s contractual cash obligations and their expected maturities at December 31, 2009 (in thousands).


	Payments due by period
	2010		2011		2012		2013		2014		Thereafter		Total

Purchase and other obligations(1)	$	278,342	$	253,460	$	56,243	$	4,981	$	1,319	$	1,313	$	595,658
Debt obligations		—		—		—		—		—		—		—
Interest payments		—		—		—		—		—		—		—
Operating lease obligations		6,547		4,550		3,990		2,548		2,012		9,137		28,784
Uncertain tax positions		6,627		—		—		—		—		9,106		15,733

Total	$	291,516	$	258,010	$	60,233	$	7,529	$	3,331	$	19,556	$	640,175


(1)		For 2010 through 2014, purchase obligations include raw material contractual obligations reflecting estimated future payments based on committed tons of material per the applicable contract multiplied by the reference price of each metal. The price used in the computation is the average daily price for the last week of December 2009 for each respective metal. Commitments made under these contracts represent future purchases in line with expected usage.

Pension funding can vary significantly each year due to changes in legislation and the Company’s significant assumptions. As a result, pension funding has not been included in the table above. The Company expects to contribute approximately $0.8 million related to its pension plans in 2010. Pension benefit payments are made from assets of the pension plan. The Company also has an unfunded obligation to its former chief executive officer in settlement of an unfunded supplemental executive retirement plan, for which the Company expects to make annual benefit payments of approximately $0.7 million.

Future cash flows for uncertain tax positions reflect the recorded liability, including interest and penalties, as of December 31, 2009. Amounts where the Company can not reasonably estimate the year of settlement are reflected in the Thereafter column.

Off Balance Sheet Arrangements

The Company has not entered into any off balance sheet financing arrangements, other than operating leases, which are disclosed in the contractual obligations table above and in Note 19 to the Consolidated Financial Statements included in Item 8 of this Form 10-K.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the Company’s management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements. In preparing these financial statements, management has made their best estimates and judgments of certain amounts included in the financial statements related to the critical accounting policies described below. The application of these critical accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of the Company’s results of operations to similar businesses.

Revenue Recognition — Revenues are recognized when the revenue is realized or realizable, and has been earned, in accordance with the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements.” The majority of the Company’s sales are related to sales of product. Revenue for product sales is recognized when persuasive evidence of an arrangement exists, unaffiliated customers take title and assume risk of loss, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Revenue recognition generally occurs upon shipment of product or usage of consignment inventory. Freight costs and any directly related associated costs of transporting finished product to customers are recorded as Cost of products sold.

Inventories — The Company’s inventories are stated at the lower of cost or market and valued using the first-in, first-out (“FIFO”) method. The Company evaluates the need for an LCM adjustment to inventories based on the end-of-the-reporting period selling prices of its finished products. In periods of raw material metal price declines or declines in the selling prices of the Company’s finished products, inventory carrying values may exceed the amount the Company could realize on sale, resulting in a lower of cost or market charge.

For cobalt metal re-sale inventory and inventory for which sales prices are highly correlated to cobalt prices (primarily in the Advanced Materials segment), volatile cobalt prices can have a significant impact on the LCM calculation. Fluctuations in the price of cobalt have been significant in the past and may be significant in the future. When evaluating whether such cobalt-based inventory is stated at the lower of cost or market, the Company generally considers cobalt reference prices at the end of the period. However, to the extent cobalt prices increase subsequent to the balance sheet date but before issuance of the financial statements, the Company considers these price movements in its LCM evaluation and determination of net realizable value (“NRV”). To the extent such price increases have an impact on the NRV of the Company’s inventory as of the balance sheet date, the Company will use the higher prices in its calculation so as not to recognize a loss when an actual loss will not be realized.

Goodwill and Other Intangible Assets — The Company had goodwill of $234.2 million and $268.7 million at December 31, 2009 and 2008, respectively. The Company is required to test goodwill and indefinite-lived intangible assets for impairment annually and more often if indicators of impairment exist. The goodwill impairment test is a two-step process. During the first step, the Company estimates the fair value of the reporting unit and compares that amount to the carrying value of that reporting unit. Under the “Intangibles — Goodwill and Other” topic of the Accounting Standards Codification (“ASC”), reporting units are defined as an operating segment or one level below an operating segment (i.e. component level). The Company tests goodwill at the component level. The Company’s reporting units are Advanced Materials, Electronic Chemicals, Advanced Organics, UPC and Photomasks.

technique (“DCF model”). The Company selected the DCF model as it believes it is comparable to what would be used by market participants to estimate its fair value. The impairment test incorporates the Company’s estimates of future cash flows, allocations of certain assets, liabilities and cash flows among reporting units, future growth rates, terminal value amounts and the applicable weighted-average cost of capital (the “WACC”) used to discount those estimated cash flows. These estimates are based on management’s judgment.

The estimates and projections used in the estimate of fair value are consistent with the Company’s current budget and long-range plans, including anticipated changes in market conditions, industry trends, growth rates, and planned capital expenditures, among other considerations. The terminal value estimates the value of the ongoing cash flows after the discrete forecast period using a nominal long-term growth rate of 3.5 percent based on long-term inflation projections. The WACC is derived using a Capital Asset Pricing Model (“CAPM”). The risk-free rate in the CAPM is based on 20-year U.S. Treasury Bonds, the beta is determined based on an analysis of comparable public companies, the market risk premium is derived from historical risk premiums and the size premium is based on the size of the Company. The risk-free rate was adjusted for the risks associated with the operations of the reporting units. As a proxy for the cost of debt, the Company uses the Baa borrowing rate, an estimated effective tax rate, and applies an estimated debt to total invested capital ratio using market participant assumptions to arrive at an after-tax cost of debt. Changes to these estimates and projections could result in a significantly different estimate of the fair value of the reporting units which could result in an impairment of goodwill.

The Company conducts its annual goodwill impairment test as of October 1. During the fourth quarter of 2008, indicators of potential impairment caused the Company to conduct an additional impairment test as of December 31, 2008 in connection with the preparation of its annual financial statements for the year ended on that date. Those indicators included the fact that the Company’s stock has been trading below net book value per share since the end of the second quarter of 2008; operating losses in the fourth quarter of 2008 and revisions to the 2009 plan; and an increase in the respective WACC calculations due to significant deterioration in the capital markets in the fourth quarter of 2008.

The Company reviewed and updated as deemed necessary all of the assumptions used in its DCF model during the fourth quarter of 2008. The estimates and judgments that most significantly affect the fair value calculation are future operating cash flow assumptions, future cobalt price assumptions and the WACC used in the DCF model. The results of the testing as of December 31, 2008 confirmed that the carrying value of the UPC reporting unit exceeded its estimated fair value. As such, the Company conducted a preliminary step-two analysis in order to determine the amount of the goodwill impairment and, as a result of that analysis, the Company recorded an estimated goodwill impairment charge of $8.8 million. The Company finalized the step-two analysis during the first quarter of 2009 and concluded the goodwill impairment charge for UPC was $4.7 million; therefore, the Company recorded a $4.1 million adjustment in the first quarter of 2009 to reverse a portion of the 2008 charge.

During the first quarter of 2009, additional impairment indicators caused the Company to conduct an interim impairment test for its Advanced Organics reporting unit. Those indicators included operating losses in excess of forecast in the first quarter of 2009 and revisions made to the 2009 forecast and outlook beyond 2009 as a result of the decline in the Company’s business outlook primarily due to further deterioration in certain end markets. In accordance with the “Intangibles — Goodwill and Other” topic of the ASC, the Company completed step one of the impairment analysis and concluded that, as of March 31, 2009, the carrying value of its Advanced Organics reporting unit exceeded its estimated fair value. As such, the Company undertook a preliminary step-two analysis in order to determine the amount of the goodwill impairment. In the first quarter of 2009, the Company recorded an estimated goodwill impairment charge of $6.8 million to write off all of the goodwill related to the Advanced Organics reporting unit. The Company finalized step two of the impairment analysis in the second quarter of 2009 and determined no adjustment to the $6.8 million charge was necessary.

respect to the probability of future cash flows from opportunities related to a license agreement associated with UPC. The license agreement was an existing asset of UPC when it was acquired from Rockwood Specialties Group, Inc. in 2007. Based on the uncertain impact the current state of the economy may have on both the timing and execution of activities from this license agreement, the Company has concluded that no estimated future cash flows should be included in the valuation of the UPC reporting unit. The Company continues to own the license agreement and therefore would participate in any future market opportunities should they occur.

The Company concluded that operating losses in certain reporting units for the first six months of 2009 and the revisions to estimated future cash flows and growth rates were potential indicators of impairment and an interim goodwill impairment test was performed as of June 30, 2009. In accordance with the “Intangibles — Goodwill and Other” topic of the ASC, the Company completed step-one of the impairment analysis and concluded that, as of June 30, 2009, the carrying values of its UPC and Photomasks reporting units exceeded their estimated fair values. As such, the Company undertook a preliminary step-two analysis in order to determine the amount of the goodwill impairment. In the second quarter of 2009, the Company recorded an estimated goodwill impairment charge of $35.0 million to write off $21.0 million of goodwill related to the UPC reporting unit and $14.0 million of goodwill related to the Photomasks reporting unit. The Company finalized the step-two analysis during the third quarter of 2009 and concluded the goodwill impairment charge was $34.9 million ($15.8 million for UPC and $19.1 million for Photomasks); therefore, the Company recorded a net $0.1 million adjustment in the third quarter of 2009 to reverse a portion of the charge taken in the second quarter of 2009.

The primary factors contributing to the $41.6 million goodwill impairment charges in 2009 were lower assumptions for revenue and volume growth in 2009 and beyond and the associated impact on operating cash flow from these reduced projections, and the change in the Company’s assumption with respect to the probability of future cash flows from opportunities related to the UPC license agreement. The Company reviewed and updated as deemed necessary all of the assumptions used in its DCF model during the 2008 annual and 2009 interim impairment testing. The estimates and judgments that most significantly affect the fair value calculation are future operating cash flow assumptions and the WACC used in the DCF model. The Company believes the assumptions used in the annual and 2009 interim impairment testing were consistent with the risk inherent in the business models of the reporting units at the time the impairment tests were performed.

The results of the annual impairment testing as of the October 1, 2009 testing date showed the carrying value of the UPC reporting unit exceeded its estimated fair value. The Company completed the step-two analysis for UPC and concluded no goodwill impairment charge was required as the implied fair value of goodwill exceeds its carrying amount. The estimated fair value of the remaining reporting units (Advanced Materials, Electronic Chemicals and Photomasks) exceeded their carrying values, therefore no impairment loss was required to be recognized. In order to evaluate the sensitivity of the fair value calculations on the goodwill impairment testing, the Company applied a hypothetical 5% decrease to the estimated fair value and separately applied a hypothetical increase of 100 basis points to the WACC and determined that there would still be no impairment of goodwill for the Advanced Materials, Electronic Chemicals or Photomasks reporting units. For the UPC reporting unit, the Company applied a hypothetical 5% decrease to the estimated fair value and separately applied a hypothetical increase of 100 basis points to the WACC and determined that goodwill would be impaired by approximately $2.4 million and $4.4 million, respectively. Although the Company believes the assumptions, judgments and estimates used are reasonable and appropriate, different assumptions, judgments and estimates could materially affect the goodwill test and, potentially, the Company’s results of operations and financial position.

Other Intangible Assets — Intangible assets consist of (i) definite-lived assets subject to amortization and (ii) indefinite-lived intangible assets not subject to amortization. Definite-lived intangible assets consist principally of customer relationships, developed technology and capitalized software and are being amortized using the straight-line method. Indefinite-lived intangible assets consist of trade names. The Company evaluates the carrying value of definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The definite-lived intangible asset would be considered impaired if the future net undiscounted cash flows generated by the asset are less than its carrying value. The Company evaluates the carrying value of indefinite-lived intangible assets for impairment annually as of October 1 and between annual evaluations if changes in circumstances or the occurrence of certain events indicate potential impairment. If the carrying value of an indefinite-lived intangible asset exceeds its estimated fair value, an impairment loss is recognized.

During 2009, the Company determined that indefinite-lived trade names in its Photomasks and Electronic Chemicals reporting units and a license agreement in its UPC reporting unit were impaired due to downward revisions in estimates of future revenue and cash flows. As a result, the Company recorded an impairment loss of $1.6 million in 2009 in SG&A. The Company utilizes a “relief from royalty” methodology in estimating fair values for indefinite-lived trade names. The methodology estimates the fair value of each trade name by determining the present value of the royalty payments that are avoided as a result of owning the trade name and includes judgmental assumptions about sales growth that are consistent with the assumptions used to determine the fair value of reporting units in the Company’s goodwill testing. Although the Company believes the assumptions, judgments and estimates used are reasonable and appropriate, different assumptions, judgments and estimates could materially affect the intangible asset impairment test and, potentially the Company’s results of operations and financial position if additional impairment charges were required to be recorded. At December 31, 2009, the Company has definite-lived intangible assets of $71.4 million and indefinite-lived intangible assets of $7.8 million.

Long-Lived Assets — Long-lived assets are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company generally invests in long-lived assets to secure raw material feedstocks, produce new products, or increase production capacity or capability. Because market conditions may change, future cash flows may be difficult to forecast. Furthermore, the assets and related businesses may be in different stages of development. If the Company determined that the future undiscounted cash flows from these investments were not expected to exceed the carrying value of the investments, the Company would record an impairment charge. However, determining future cash flows is subject to estimates and different estimates could yield different results. Additionally, other changes in the estimates and assumptions, including the discount rate and expected long-term growth rate, which drive the valuation techniques employed to estimate the future cash flows of the these investments, could change and, therefore, impact the analysis of impairment in the future.

Income Taxes — Tax law requires certain items to be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as expenses that are not deductible for tax purposes, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities. The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or tax returns. Deferred income taxes are not provided for undistributed earnings of foreign consolidated subsidiaries, to the extent such earnings are determined to be reinvested for an indefinite period of time. Deferred income taxes are provided on income from foreign subsidiaries which have not been reinvested abroad permanently, as upon remittance to the United States, such earnings are taxable.

The Company has significant operations outside the United States, where most of its pre-tax earnings are derived, and in jurisdictions where the statutory tax rate is different than in the United States statutory tax rate. The Company’s tax assets, liabilities, and tax expense are supported by historical earnings and losses and the Company’s best estimates and assumptions of its global cash requirements, planned dividend repatriations, and expectations of future earnings. When the Company determines, based on all available evidence, that it is more likely than not that deferred tax assets will not be realized, a valuation allowance is established.

The Company is subject to income taxes in both the United States and numerous foreign jurisdictions and is subject to audits within these jurisdictions. As a result, in the ordinary course of business there is inherent uncertainty in quantifying income tax positions. The Company assesses its income tax positions and records accruals for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. These accruals are adjusted, if necessary, upon the completion of tax audits or changes in tax law or administrative practice.

Since significant judgment is required to assess the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns, the ultimate resolution of these events could result in adjustments to the Company’s financial statements and such adjustments could be material. The Company believes the current assumptions, judgments and other considerations used to estimate the current year accrued and deferred

tax positions are appropriate. However, if the actual outcome of future tax consequences differs from these estimates and assumptions due to changes or future events, the resulting change to the provision for income taxes could have a material impact on the Company’s results of operations and financial position.

Share-Based Compensation — The computation of the expense associated with share-based compensation requires the use of a valuation model. The Company currently uses a Black-Scholes option pricing model to calculate the fair value of its stock options. The Black-Scholes model requires the use of subjective assumptions, including estimating the expected term of stock options and expected stock price volatility. Changes in the assumptions to reflect future stock price volatility and actual forfeiture experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of share-based awards. The fair value of share-based compensation awards less estimated forfeitures is amortized over the vesting period.

The fair value of time-based and performance-based restricted stock grants is calculated based upon the market value of an unrestricted share of the Company’s common stock at the date of grant. The performance-based restricted stock vests solely upon the Company’s achievement of specific measurable criteria over a three-year performance period. A recipient of performance-based restricted stock may earn a total award ranging from 0% to 100% of the initial grant. No payout will occur unless the Company equals or exceeds certain threshold performance objectives. The amount of compensation expense recognized is based upon current performance projections for the three-year period and the percentage of the requisite service that has been rendered.

Recently Issued Accounting Standards

Accounting Guidance adopted in 2009:

In June 2009, the Financial Accounting Standards Board (“FASB”) issued guidance on the ASC and the Hierarchy of Generally Accepted Accounting Principles (“GAAP”)”, which established that the ASC is the single source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the Securities and Exchange Commission (“SEC”), which are sources of authoritative GAAP for SEC registrants. This guidance was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted the provisions of this guidance on July 1, 2009 and has updated its references to specific GAAP literature to reflect the codification.

In August 2009, the FASB issued guidance on “Measuring Liabilities at Fair Value.” This update provides amendments to “Fair Value Measurements and Disclosure” for the fair value measurement of liabilities and provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. This guidance also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. It also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The Company adopted this guidance in 2009, and such adoption did not have a material effect on the Company’s consolidated financial statements.

In September 2006, the FASB issued guidance on “Fair Value Measurements.” This guidance clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements but does not require any new fair value measurements. This guidance only applies to accounting pronouncements that already require or permit fair value measures, except for standards that relate to share-based payments. As of January 1, 2008, the Company adopted the provisions of this guidance with respect to financial assets and liabilities that are measured at fair value within the financial statements. As of January 1, 2009, the Company adopted this guidance for all nonfinancial assets and nonfinancial liabilities measured at fair value on a non-recurring basis. Examples of nonfinancial assets include goodwill, intangibles, and other long-lived assets. The adoption did not have a material impact on the Company’s results of operations or financial position but did change the disclosures related to nonfinancial assets and nonfinancial liabilities measured at fair value on a non-recurring basis. See Note 12 to the Consolidated Financial Statements in this Form 10-K.

In December 2007, the FASB issued guidance on FASB ASC Topic 810, “Consolidations,” (pre-codification SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”) which requires (i) that noncontrolling (minority) interests be reported as a component of shareholders’ equity, (ii) that net income attributable to the parent and to the noncontrolling interest be separately identified in the consolidated statement of operations, (iii) that changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity transactions, (iv) that any retained noncontrolling equity investment upon the deconsolidation of a subsidiary be initially measured at fair value, and (v) that sufficient disclosures are provided that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. The Company adopted this guidance on January 1, 2009. The adoption did not have any impact on the Company’s results of operations or financial position but did change the financial statement presentation related to noncontrolling (minority) interests. The financial statement presentation requirement has been applied retrospectively for all periods presented. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. The adoption resulted in a $47.4 million reclassification of noncontrolling minority interests from long-term liabilities to equity on the December 31, 2008 Consolidated Balance Sheet and Statement of Consolidated Total Equity and a $52.3 million reclassification on the December 31, 2007 Statement of Consolidated Total Equity.

In December 2007, the FASB issued guidance on FASB ASC Topic 805, “Business Combinations (pre-codification SFAS No. 141(R), “Business Combinations”).” This guidance changes how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. This guidance establishes principles and requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. This guidance requires restructuring and acquisition-related costs to be recognized separately from the acquisition and establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. The Company adopted this guidance on January 1, 2009. This standard was applied prospectively to business combinations consummated on or after January 1, 2009, including the Company’s acquisition of EaglePicher Technologies LLC on January 29, 2010. See Note 21. As a result of the Company’s adoption of the new guidance, transaction costs related to the acquisition of EaglePicher Technologies of $1.3 million, or $0.04 per diluted share, were expensed in the accompanying Consolidated Statement of Operations for the year ended December 31, 2009.

In March, 2008, the FASB issued guidance on disclosures about derivative instruments and hedging activities that enhances required disclosures regarding derivatives and hedging activities, including how: (i) an entity uses derivative instruments, (ii) derivative instruments and related hedged items are accounted for and (iii) derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The Company adopted this guidance on January 1, 2009. The adoption did not have any impact on the Company’s results of operations or financial position but did change the disclosures related to derivative instruments held by the Company. See Note 11 to the Consolidated Financial Statements in this Form 10-K.

In December 2008, the FASB issued guidance on, “Employers’ Disclosures about Postretirement Benefit Plan Assets,” effective for fiscal years ending after December 15, 2009. The Company adopted this guidance in the fourth quarter of 2009. This guidance requires an employer to disclose investment policies and strategies, categories, fair value measurements, and significant concentration of risk among its pension or other postretirement benefit plan assets. The adoption did not have any impact on the Company’s results of operations or financial position but did change the disclosures related to pension assets held by the Company.

Accounting Guidance Not Yet Adopted

In June 2009, the FASB issued guidance on “Consolidation of Variable Interest Entities” to require an analysis to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity. This guidance requires an ongoing reassessment and eliminates the quantitative approach previously required for determining whether an entity is the primary beneficiary. This guidance is effective for annual periods beginning after November 15, 2009. The Company has not determined the effect, if any, the adoption of this guidance will have on its results of operations or financial position.

Effects of Foreign Currency

The Company has manufacturing and other facilities in North America, Europe, Africa and Asia-Pacific, and markets its products worldwide. Although a significant portion of the Company’s raw material purchases and product sales are based on the U.S. dollar, prices of certain raw materials, non-U.S. operating expenses and income taxes are denominated in local currencies. As such, the results of operations are subject to the variability that arises from exchange rate movements (particularly the Euro). In addition, fluctuations in exchange rates may affect product demand and profitability in U.S. dollars of products provided by the Company in foreign markets in cases where payments for its products are made in local currency. Accordingly, fluctuations in currency prices affect the Company’s operating results.

The Company has entered into foreign currency forward contracts to mitigate the variability in cash flows due to changes in the Euro/U.S. dollar exchange rate.

Environmental Matters

The European Union’s REACH legislation establishes a new system to register and evaluate chemicals manufactured in, or imported to, the European Union and will require additional testing, documentation and risk assessments for the chemical industry. Due to the ongoing development and understanding of facts and remedial options and due to the possibility of unanticipated regulatory developments, the amount and timing of future environmental expenditures could vary significantly. Although it is difficult to quantify the potential impact of compliance with or liability under environmental protection laws, based on presently available information, the Company believes that its ultimate aggregate cost of environmental remediation as well as liability under environmental protection laws will not result in a material adverse effect upon its financial condition or results of operations.

See Item I of this Annual Report on Form 10-K for further discussion of these matters.

Cautionary Statement for “Safe Harbor” Purposes under the Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. This report contains statements that the Company believes may be “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are not historical facts and generally can be identified by use of statements that include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee” or other words or phrases of similar import. Similarly, statements that describe the Company’s objectives, plans or goals also are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that are difficult to predict, may be beyond the Company’s control and could cause actual results to differ materially from those currently anticipated. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Significant factors affecting these expectations are set forth under Item 1A — Risk Factors in this Annual Report on Form 10-K.


Item 7A.	Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk

The Company, as a result of its global operating and financing activities, is exposed to changes in commodity prices, interest rates and foreign currency exchange rates which may adversely affect its results of operations and financial position. In seeking to minimize the risks and/or costs associated with such activities, the Company manages exposures to changes in commodity prices, interest rates and foreign currency exchange rates through its regular operating and financing activities, which include the use of derivative instruments.

Commodity Price Risk

The primary raw material used by the Advanced Materials segment is unrefined cobalt. Unrefined cobalt is obtained from three basic sources: primary cobalt mining, as a by-product of another metal — typically copper or nickel, and from recycled material. Cobalt raw materials include ore, concentrates, slag, scrap and metallic feed. The availability of unrefined cobalt is dependent on global market conditions, cobalt prices and the prices of copper and nickel. Also, political and civil instability in supplier countries, variability in supply and worldwide demand, including demand in developing countries such as China, have affected and will likely continue to affect the supply and market price of raw materials. The cost of the Company’s raw materials fluctuates due to changes in the cobalt reference price, actual or perceived changes in supply and demand of raw materials, and changes in availability from suppliers Fluctuations in the price of cobalt have been significant historically and the Company believes that cobalt price fluctuations are likely to continue in the future. The Company attempts to mitigate increases in raw material prices by passing through such increases to its customers in the prices of its products and by entering into sales contracts that contain variable pricing that adjusts based on changes in the price of cobalt. During periods of rapidly changing metal prices, however, there may be price lags that can impact the short-term profitability and cash flow from operations of the Company both positively and negatively. Reductions in the price of raw materials or declines in the selling prices of the Company’s finished goods can result in the Company’s inventory carrying value being written down to a lower market value, as occurred in the fourth quarter of 2008.

The Company enters into derivative instruments and hedging activities to manage commodity price risk. The Company, from time to time, employs derivative instruments in connection with certain purchases and sales of inventory in order to establish a fixed margin and mitigate the risk of price volatility. Some customers request fixed pricing and the Company may use a derivative to mitigate price risk. The Company makes or receives payments based on the difference between a fixed price (as specified in each individual contract) and the market price of the commodity being hedged. These payments will offset the change in prices of the underlying sales or purchases and effectively fix the price of the hedged commodity at the contracted rate for the contracted volume. While this hedging may limit the Company’s ability to participate in gains from favorable commodity price fluctuations, it eliminates the risk of loss from adverse commodity price fluctuations.

Interest Rate Risk

The Company is exposed to interest rate risk primarily through its borrowing activities. If needed, the Company predominantly utilizes U.S. dollar-denominated borrowings to fund its working capital and investment needs. There is an inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and business financing requirements (see Note 10 to the consolidated financial statements contained in Item 8 of this Annual Report).

From time to time, the Company enters into derivative instruments and hedging activities to manage, where possible and economically efficient, interest rate risk related to borrowings. The Company had no outstanding interest rate derivatives during 2009.

Credit Risk

By using derivative instruments to hedge exposures to changes in commodity prices and interest rates, the Company exposes itself to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and the Company does not possess credit risk. To mitigate credit risk, it is the Company’s policy to execute such instruments with creditworthy banks and not enter into derivative instruments for speculative purposes. There were no counterparty defaults during the years ended December 31, 2009, 2008 and 2007.

Market Risk

By using derivative instruments to hedge exposures to changes in commodity prices and interest rates, the Company exposes itself to market risk. Market risk is the change in value of a derivative instrument that results from a change

in commodity prices or interest rates. The market risk associated with commodity prices and interests is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

Foreign Currency Exchange Rate Risk

In addition to the United States, the Company has manufacturing and other facilities in Africa, Canada, Europe and Asia-Pacific, and markets its products worldwide. Although a significant portion of the Company’s raw material purchases and product sales are based on the U.S. dollar, prices of certain raw materials, non-U.S. operating expenses and income taxes are denominated in local currencies. As such, the results of operations are subject to the variability that arises from exchange rate movements (particularly the Euro). In addition, fluctuations in exchange rates may affect product demand and profitability in U.S. dollars of products provided by the Company in foreign markets in cases where payments for its products are made in local currency. Accordingly, fluctuations in currency prices affect the Company’s operating results. The primary currencies for which we have foreign currency rate exposure are the European Union Euro, British Pound Sterling, Japanese Yen, Taiwanese Dollar and the Congolese Franc.

The functional currency for the Company’s Finnish operating subsidiary is the U.S. dollar since a majority of its purchases and sales are denominated in U.S. dollars. Accordingly, foreign currency exchange gains and losses related to transactions of this subsidiary denominated in other currencies (principally the Euro) are included in the Statements of Consolidated Operations. While a majority of the subsidiary’s raw material purchases are in U.S. dollars, it also has some Euro-denominated expenses. Beginning in 2009, the Company entered into foreign currency forward contracts to mitigate a portion of the earnings volatility in those Euro-denominated cash flows due to changes in the Euro/U.S. dollar exchange rate. The Company had Euro forward contracts with notional values that totaled 1.5 million Euros at December 31, 2009. The Company designated these derivatives as cash flow hedges of its forecasted foreign currency denominated expense.


Item 8.	Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of OM Group, Inc.

We have audited the accompanying consolidated balance sheets of OM Group, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related statements of consolidated operations, comprehensive income (loss), total equity, and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule listed in the index at Item 15. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of OM Group, Inc. and subsidiaries at December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth herein.

As discussed in Notes 2 and 14 to the consolidated financial statements, as of December 31, 2008, the Company adopted the measurement date provisions of guidance originally issued in Statement of Financial Reporting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (codified in FASB ASC Topic 715, Compensation — Retirement Benefits); as of January 1, 2009, the Company adopted the originally issued Statement of Financial Reporting Standards No. 141(R), “Business Combinations” (codified in FASB ASC Topic 805, Business Combinations) and as of January 1, 2009, the Company retrospectively adopted the originally issued Statement of Financial Reporting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (codified in FASB ASC Topic 810, Consolidation).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), OM Group, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2010 expressed an unqualified opinion thereon.

Cleveland, Ohio

February 25, 2010

/s/ Ernst & Young LLP

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of OM Group, Inc.

We have audited OM Group, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). OM Group, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing on page 98. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, OM Group, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) the consolidated balance sheets of OM Group, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related statements of consolidated operations, comprehensive income (loss), total equity, and cash flows for each of the three years in the period ended December 31, 2009 of OM Group, Inc. and subsidiaries and our report dated February 25, 2010 expressed an unqualified opinion thereon.

Cleveland, Ohio

February 25, 2010

/s/ Ernst & Young LLP

OM Group, Inc. and Subsidiaries

Consolidated Balance Sheets


	December 31,			December 31,
(In thousands, except share data)	2009			2008

ASSETS
Current assets
Cash and cash equivalents	$	355,383		$	244,785
Accounts receivable, less allowance of $6,884 in 2009 and $7,877 in 2008		123,641			130,217
Inventories		287,096			306,128
Refundable and prepaid income taxes		44,474			55,059
Other current assets		32,394			59,227

Total current assets		842,988			795,416
Property, plant and equipment, net		227,115			245,202
Goodwill		234,189			268,677
Intangible assets		79,229			84,824
Notes receivable from joint venture partner, less allowance of $5,200 in 2009 and 2008		13,915			13,915
Other non-current assets		46,700			26,393

Total assets	$	1,444,136		$	1,434,427


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	—		$	80
Accounts payable		139,173			89,470
Accrued income taxes		7,522			17,677
Accrued employee costs		18,168			31,168
Other current liabilities		24,099			21,074

Total current liabilities		188,962			159,469
Long-term debt		—			26,064
Deferred income taxes		27,453			26,764
Uncertain tax positions		15,733			6,123
Other non-current liabilities		35,856			37,929
Stockholders’ equity:
Preferred stock, $.01 par value:
Authorized 2,000,000 shares, no shares issued or outstanding		—			—
Common stock, $.01 par value:
Authorized 90,000,000 shares; 30,435,569 shares issued in 2009 and 30,317,403 shares issued in 2008		304			303
Capital in excess of par value		569,487			563,454
Retained earnings		584,508			602,365
Treasury stock (166,672 shares in 2009 and 136,328 shares in 2008, at cost)		(6,025	)		(5,490	)
Accumulated other comprehensive income (loss)		(16,969	)		(29,983	)

Total OM Group, Inc. stockholders’ equity		1,131,305			1,130,649
Noncontrolling interest		44,827			47,429

Total equity		1,176,132			1,178,078

Total liabilities and equity	$	1,444,136		$	1,434,427

See accompanying notes to consolidated financial statements.

OM Group, Inc. and Subsidiaries

Statements of Consolidated Operations


	Year Ended December 31
(In thousands, except per share data)	2009			2008			2007

Net sales	$	871,669		$	1,736,849		$	1,021,501
Cost of products sold (excluding restructuring charges)		693,832			1,384,301			708,257
Restructuring charges		12,054			—			—

Gross profit		165,783			352,548			313,244
Selling, general and administrative expenses		133,302			166,126			117,009
Goodwill impairment, net		37,504			8,800			—
Restructuring charges		654			—			—
Gain on termination of retiree medical plan		(4,693	)		—			—

Operating profit (loss)		(984	)		177,622			196,235
Other income (expense):
Interest expense		(689	)		(1,597	)		(7,820	)
Loss on redemption of Notes		—			—			(21,733	)
Interest income		928			1,920			19,396
Interest income on Notes receivable from joint venture partner		—			—			4,526
Foreign exchange gain (loss)		(21	)		(3,744	)		8,100
Other expense, net		(292	)		(1,913	)		(449	)

		(74	)		(5,334	)		2,020

Income (loss) from continuing operations before income tax expense		(1,058	)		172,288			198,255
Income tax expense		(20,899	)		(16,076	)		(76,311	)

Income (loss) from continuing operations, net of tax		(21,957	)		156,212			121,944
Income from discontinued operations, net of tax		1,496			92			63,057
Gain on sale of discontinued operations, net of tax		—			—			72,270

Total income from discontinued operations, net of tax		1,496			92			135,327

Consolidated net income (loss)		(20,461	)		156,304			257,271
Net (income) loss attributable to noncontrolling interest		2,604			(21,301	)		(10,405	)

Net income (loss) attributable to OM Group, Inc. common shareholders	$	(17,857	)	$	135,003		$	246,866

Earnings per common share — basic:
Income (loss) from continuing operations attributable to OM Group, Inc. common shareholders	$	(0.64	)	$	4.48		$	3.73
Income from discontinued operations attributable to OM Group, Inc. common shareholders		0.05			—			4.52

Net income (loss) attributable to OM Group, Inc. common shareholders	$	(0.59	)	$	4.48		$	8.25

Earnings per common share — assuming dilution:
Income (loss) from continuing operations attributable to OM Group, Inc. common shareholders	$	(0.64	)	$	4.45		$	3.68
Income from discontinued operations attributable to OM Group, Inc. common shareholders		0.05			—			4.47

Net income (loss) attributable to OM Group, Inc. common shareholders	$	(0.59	)	$	4.45		$	8.15

Weighted average shares outstanding
Basic		30,244			30,124			29,937
Assuming dilution		30,244			30,358			30,276
Amounts attributable to OM Group, Inc. common shareholders:
Income (loss) from continuing operations, net of tax	$	(19,353	)	$	134,911		$	111,539
Income from discontinued operations, net of tax		1,496			92			135,327

Net income (loss)	$	(17,857	)	$	135,003		$	246,866

See accompanying notes to consolidated financial statements.

OM Group, Inc. and Subsidiaries

Statements of Consolidated Comprehensive Income (Loss)


	Year Ended December 31
	2009			2008			2007
(In thousands)

Consolidated net income (loss)	$	(20,461	)	$	156,304		$	257,271
Foreign currency translation adjustments		12,741			(36,109	)		(11,014	)
Reclassification of hedging activities into earnings, net of tax		615			—			(9,824	)
Unrealized loss on cash flow hedges, net of tax		(591	)
Reversal of accumulated unrecognized gain on retiree medical plan		(137	)		—			—
Pension and post-retirement obligation		386			(1,539	)		(390	)

Net change in accumulated other comprehensive income (loss)		13,014			(37,648	)		(21,228	)

Comprehensive income (loss)		(7,447	)		118,656			236,043
Comprehensive (income) loss attributable to noncontrolling interest		2,606			(21,303	)		(10,432	)

Comprehensive income (loss) attributable to OM Group, Inc.	$	(4,841	)	$	97,353		$	225,611

See accompanying notes to consolidated financial statements.

OM Group, Inc. and Subsidiaries

Statements of Consolidated Cash Flows


	Year Ended December 31
(In thousands)	2009			2008			2007

Operating activities
Consolidated net income (loss)	$	(20,461	)	$	156,304		$	257,271
Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities:
Total income from discontinued operations		(1,496	)		(92	)		(135,327	)
Gain on termination of retiree medical plan		(4,693	)		—			—
Loss on redemption of Notes		—			—			21,733
Depreciation and amortization		53,765			56,116			33,229
Share-based compensation expense		6,026			7,621			7,364
Excess tax benefit on exercise/vesting of share awards		—			(28	)		(1,744	)
Foreign exchange (gain) loss		21			3,744			(8,100	)
Gain on cobalt forward purchase contracts		—			(4,002	)		(6,735	)
Interest income receivable from joint venture partner		—			3,776			(3,776	)
Deferred income tax provision (benefit)		(7,471	)		(894	)		(15,756	)
Lower of cost or market inventory charge		—			27,728			—
Goodwill impairment charges, net		37,504			8,800			—
Restructuring charges		12,708			—			—
Other non-cash items		801			4,536			431
Changes in operating assets and liabilities, excluding the effect of business acquisitions
Accounts receivable		6,739			48,641			(38,364	)
Inventories		17,142			76,985			(165,694	)
Advances to suppliers		21,507			(12,131	)		(11,553	)
Accounts payable		49,703			(124,712	)		92,161
Refundable, prepaid and accrued income taxes		(7,675	)		(64,455	)		17,455
Other, net		1,326			(15,813	)		(1,591	)

Net cash provided by operating activities		165,446			172,124			41,004
Investing activities
Expenditures for property, plant and equipment		(25,686	)		(30,712	)		(19,357	)
Proceeds from settlement of cobalt forward purchase contracts		—			10,736			—
Net proceeds from the sale of the Nickel business		—			—			490,036
Proceeds from loans to consolidated joint venture partner		—			10,264			—
Proceeds from loans to non-consolidated joint ventures		—			—			7,568
Acquisitions		—			(5,799	)		(336,976	)
Other, net		(4,797	)		(2,423	)		(6,022	)

Net cash provided by (used for) investing activities		(30,483	)		(17,934	)		135,249
Financing activities
Payments of long-term debt and revolving line of credit		(26,141	)		(45,513	)		(400,000	)
Proceeds from the revolving line of credit		—			70,000			—
Premium for redemption of notes		—			—			(18,500	)
Payment of loan from consolidated joint venture partner		—			(2,657	)
Payment related to surrendered shares		(535	)		(3,251	)		—
Distribution to joint venture partners		—			(26,184	)		(1,350	)
Proceeds from exercise of stock options		11			874			11,344
Excess tax benefit on exercise of share awards		—			28			1,744

Net cash used for financing activities		(26,665	)		(6,703	)		(406,762	)
Effect of exchange rate changes on cash		2,697			(2,889	)		1,440

Cash and cash equivalents
Increase (decrease) from continuing operations		110,995			144,598			(229,069	)
Discontinued operations — net cash provided by (used for) operating activities		(397	)		—			48,508
Discontinued operations — net cash used for investing activities		—			—			(1,540	)
Balance at the beginning of the year		244,785			100,187			282,288

Balance at the end of the year	$	355,383		$	244,785		$	100,187

See accompanying notes to consolidated financial statements

OM Group, Inc. and Subsidiaries

Statements of Consolidated Total Equity


	Year Ended December 31
(In thousands)	2009			2008			2007

Common Stock — Shares Outstanding, net of Treasury Shares
Beginning balance		30,181			30,061			29,740
Shares issued under share-based compensation plans		88			120			321

		30,269			30,181			30,061

Common Stock — Dollars
Beginning balance	$	303		$	301		$	297
Shares issued under share-based compensation plans		1			2			4

		304			303			301

Capital in Excess of Par Value
Beginning balance		563,454			554,933			533,818
Shares issued under share-based compensation plans		10			872			11,340
(Tax deficiency) excess tax benefit on the exercise/vesting of share awards		(3	)		28			1,744
Share-based compensation — employees		5,756			7,279			7,929
Share-based compensation — non-employee directors		270			342			102

		569,487			563,454			554,933

Retained Earnings
Beginning balance, as originally reported		602,365			467,726			221,310
Adoption of SFAS No. 158 in 2008		—			(171	)		—
Adoption of EITF No. 06-10 in 2008		—			(193	)		—
Adoption of FIN No. 48 in 2007		—			—			(450	)

Beginning balance, as adjusted		602,365			467,362			220,860
Net income (loss) attributable to OM Group, Inc.		(17,857	)		135,003			246,866

		584,508			602,365			467,726

Treasury Stock
Beginning balance		(5,490	)		(2,239	)		(2,239	)
Reacquired shares		(535	)		(3,251	)		—

		(6,025	)		(5,490	)		(2,239	)

Accumulated Other Comprehensive Income (Loss)
Beginning balance		(29,983	)		7,665			28,893
Foreign currency translation		12,741			(36,109	)		(11,014	)
Reclassification of hedging activities into earnings, net of tax expense of $216 in 2009 and $3,452 in 2007.		615			—			(9,824	)
Unrealized loss on cash flow hedges, net of tax benefit of $208		(591	)		—			—
Reversal of accumulated unrecognized gain on retiree medical plan		(137	)		—			—
Pension and post-retirement obligation		386			(1,599	)		(390	)
Change in measurement date for pension and post-retirement obligations		—			60			—

		(16,969	)		(29,983	)		7,665

Total OM Group Inc. Stockholders’ Equity		1,131,305			1,130,649			1,028,386

Noncontrolling interest
Beginning balance		47,429			52,314			43,286
Net income (loss) attributable to the noncontrolling interest		(2,604	)		21,301			10,405
Distributions to joint venture partners		—			(26,184	)		(1,350	)
Foreign currency translation		(2	)		2			27

		44,827			47,429			52,314

Total Equity	$	1,176,132		$	1,178,078		$	1,080,700

See accompanying notes to consolidated financial statements

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries

(In thousands, except as noted and share and per share amounts)


Note 1 —	Significant Accounting Policies

Principles of Consolidation — The consolidated financial statements include the accounts of OM Group, Inc. (the “Company”) and its consolidated subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The Company has a 55% interest in a joint venture (“GTL”) that has a smelter in the Democratic Republic of Congo (the “DRC”). The joint venture is consolidated because the Company has a controlling interest in the joint venture. Noncontrolling interest is recorded for the remaining 45% interest. The equity method of accounting is applied to non-consolidated entities in which the Company can exercise significant influence over the entity with respect to its operations and major decisions. The book value of investments carried on the equity method and cost method were immaterial at December 31, 2009 and 2008.

Unless otherwise indicated, all disclosures and amounts in the Notes to Consolidated Financial Statements relate to the Company’s continuing operations.

Use of Estimates — The preparation of financial statements, in conformity with U.S. generally accepted accounting principles, requires management to make estimates and assumptions in certain circumstances that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from these estimates.

Cash Equivalents — All highly liquid investments with a maturity of three months or less, when purchased, are considered to be cash equivalents.

Revenue Recognition — The Company recognizes revenue when persuasive evidence of an arrangement exists, unaffiliated customers take title and assume risk of loss, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Revenue recognition generally occurs upon shipment of product or usage of inventory consigned to customers.

The Company collects and remits taxes assessed by different governmental authorities that are both imposed on and concurrent with revenue producing transactions between the Company and its customers. These taxes may include sales, use and value-added taxes. The Company reports the collection of these taxes on a net basis (excluded from revenues).

All amounts in a sales transaction billed to a customer related to shipping and handling are reported as revenues.

Cost of Products Sold — Cost of sales is comprised of raw material costs, direct production, maintenance, utility costs, depreciation, other overhead costs and shipping and handling costs.

Restructuring — The Company accounts for contractual terminations in accordance with the “Compensation — Nonretirement Postemployment Benefits” topic of the ASC, which requires recording an accrual when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable. The Company accounts for one-time termination benefits, contract terminations, asset write-offs, and/or costs to terminate lease obligations in accordance with the “Exit or Disposal Cost Obligations” topic of the ASC, which addresses financial accounting and reporting for costs associated with restructuring activities. The Company establishes a liability for a cost associated with an exit or disposal activity, including one-time termination benefits, lease termination obligations and other related costs, when the liability is incurred rather than at the date the Company commits to an exit plan. Lease termination costs include remaining payments due under existing lease agreements after the cease-use date and any lease cancellation fees. The Company reassesses the expected cost to complete the exit or disposal activities at the end of each reporting period and adjusts the remaining estimated liabilities, if necessary.

Allowance for Doubtful Accounts — The Company has recorded an allowance for doubtful accounts to reduce accounts receivable to their estimated net realizable value. The allowance is based upon an analysis of historical bad debts, a review of the aging of accounts receivable and the current creditworthiness of customers. Accounts are

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

written off against the allowance when it becomes evident that collections will not occur. Bad debt expense is included in selling, general and administrative expenses and amounted to $0.3 million, $4.3 million and $0.5 million in 2009, 2008 and 2007, respectively.

Inventories — Inventories are stated at the lower of cost or market and valued using the first-in, first-out (“FIFO”) method. Inventory costs include raw materials, labor and manufacturing overhead. The cost of the Company’s raw materials fluctuates due to actual or perceived changes in supply and demand of raw materials, changes in cobalt market prices and changes in availability from suppliers. Changes in the cobalt price can have a significant impact on inventory valuation. The Company evaluates the need for a lower of cost or market (“LCM”) adjustment to inventories based on the end-of-the-reporting period selling prices of its finished products. In periods of raw material price declines or declines in the selling prices of the Company’s finished products, inventory carrying values may exceed the amount the Company could realize on sale, resulting in a lower of cost or market charge.

Receivables from Joint Venture Partners and Noncontrolling Interests — The Company has a 55% interest in a joint venture that has a smelter in the DRC. The remaining 45% interest is owned by two partners at 25% and 20%, respectively.

In years prior to 2007, the Company refinanced the capital contribution for the 25% minority shareholder in its joint venture in the DRC. At December 31, 2009 and 2008, the notes receivable from this partner were $13.9 million, net of a $5.2 million valuation allowance. In January 2008, the Company and the joint venture partner agreed to modify the terms of the notes receivable. The modified terms include a new interest rate of LIBOR (2.0% at December 31, 2009) and a revised repayment date for the entire balance on December 31, 2010, which may be extended at the Company’s option.

Prior to December 31, 2007, the Company had a full valuation allowance against the interest receivable under the notes receivable. During 2008 and 2007, the Company received $3.8 million and $0.8 million, respectively, which was recorded as interest income. During 2008 and 2007, the Company agreed to forgive $0.8 million and $4.0 million of interest due, respectively. Due to the uncertainty of collection, the Company continues to record a full allowance against unpaid interest receivable under the notes receivable.

Under the terms of the notes receivable, a portion (80%) of the partner’s share of any dividends from the joint venture and any other cash flow distributions (“secondary considerations”) paid by the joint venture, if any, first serve to reduce the Company’s receivables before any amounts are remitted to the joint venture partner. The receivables are secured by 80% of the partner’s interest in the joint venture (book value of $23.7 million at December 31, 2009).

The Company currently anticipates that repayment of the receivables, net of the reserve, will be made from the partner’s share of dividends and returns of capital from the joint venture.

Property, Plant and Equipment — Property, plant and equipment is recorded at historical cost less accumulated depreciation. Depreciation of plant and equipment is provided by the straight-line method over the useful lives of 5 to 25 years for land improvements, 5 to 40 years for buildings and improvements and 3 to 20 years for equipment and furniture and fixtures. Leasehold improvements are depreciated over the shorter of the estimated useful life or the term of the lease.

The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred, if a reasonable estimate of fair value can be made. The related asset retirement costs are capitalized as a part of the carrying amount of the long-lived asset and amortized over the asset’s useful life.

Internal Use Software — The Company capitalizes costs associated with the development and installation of internal use software in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 350-40, “Intangibles — Goodwill and Other: Internal Use Software.” Accordingly, internal use software costs are expensed or capitalized depending on whether they are incurred in the preliminary

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

project stage, application development stage or post-implementation stage. Amounts capitalized are amortized over the estimated useful lives of the software.

Long-lived Assets other than Goodwill — Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Events or circumstances that would result in an impairment review primarily include operating losses, a significant change in the use of an asset, or the planned disposal or sale of the asset. The asset would be considered impaired when the future net undiscounted cash flows generated by the asset are less than its carrying value. An impairment loss would be recognized based on the amount by which the carrying value of the asset exceeds its estimated fair value.

Goodwill and Intangible Assets — In accordance with the “Intangibles — Goodwill and Other” topic of the ASC, the Company evaluates the carrying value of goodwill and indefinite-lived intangible assets for impairment annually as of October 1 and between annual evaluations if changes in circumstances or the occurrence of certain events indicate potential impairment. If the carrying value of goodwill or an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized.

Intangible assets consist of (i) definite-lived assets subject to amortization and (ii) indefinite-lived intangible assets not subject to amortization. Definite-lived intangible assets consist principally of customer relationships, developed technology, capitalized software and license agreements and are being amortized using the straight-line method. Indefinite-lived intangible assets consist of trade names.

Retained Liabilities of Businesses Sold — Retained liabilities of businesses sold include obligations of the Company related to its former Precious Metals Group (“PMG”), which was sold on July 31, 2003. Under terms of the sale agreement, the Company will reimburse the buyer of this business for certain items that become due and payable by the buyer subsequent to the sale date. Such items are principally comprised of taxes payable related to periods during which the Company owned PMG. As of December 31, 2009 the net liability was $6.8 million, of which $2.9 million was included in current liabilities and $5.4 million was included in Other non-current liabilities and corresponding receivables related to indemnifications of the liabilities of $1.5 million, was recorded in Other non-current assets. The liability at December 31, 2008 was $7.8 million, of which $2.8 million was included in current liabilities and $5.0 million was included in Other non-current liabilities.

Research and Development — Research and development costs are charged to expense when incurred, are included in selling, general and administrative expenses and amounted to $9.2 million, $10.8 million, and $8.2 million in 2009, 2008, and 2007, respectively.

Repairs and Maintenance — The Company expenses repairs and maintenance costs, including periodic maintenance shutdowns at its manufacturing facilities, when incurred.

Accounting for Leases — Lease expense is recorded on a straight-line basis. The noncancellable lease term used to calculate the amount of the straight-line expense is generally determined to be the initial lease term, including any optional renewal terms that are reasonably assured.

Income Taxes — Deferred income taxes are provided to recognize the effect of temporary differences between financial and tax reporting. Deferred income taxes are not provided for undistributed earnings of certain foreign consolidated subsidiaries, to the extent such earnings are determined to be reinvested for an indefinite period of time.

Foreign Currency Translation — The functional currency for the Company’s Finnish subsidiary and related DRC operations is the U.S. dollar since a majority of their purchases and sales are denominated in U.S. dollars. Accordingly, foreign currency exchange gains and losses related to assets, liabilities and transactions denominated in other currencies (principally the Euro) are included in the Statements of Consolidated Operations.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

The functional currency for the Company’s other operating subsidiaries outside of the United States is the applicable local currency. For those operations, financial statements are translated into U.S. dollars at year-end exchange rates as to assets and liabilities and weighted average exchange rates as to revenues and expenses. The resulting translation adjustments are recorded as a component of Accumulated other comprehensive income (loss) in stockholders’ equity.

Derivative Instruments — The Company enters into derivative instruments and hedging activities to manage, where possible and economically efficient, commodity price risk, foreign currency exchange rate risk and interest rate risk related to borrowings. It is the Company’s policy to execute such instruments with creditworthy banks and not enter into derivative instruments for speculative purposes. All derivatives are reflected at their fair value and recorded in other current assets and other current liabilities as of December 31, 2009 and 2008. The accounting for the fair value of a derivative depends upon whether it has been designated as a hedge and on the type of hedging relationship. To qualify for designation in a hedging relationship, specific criteria must be met and appropriate documentation prepared. Changes in the fair values of derivatives not designated in a hedging relationship are recognized in earnings.

The Company, from time to time, employs derivative instruments in connection with purchases and sales of inventory in order to establish a fixed margin and mitigate the risk of price volatility. Some customers request fixed pricing and the Company may use a derivative to mitigate price risk. While this hedging may limit the Company’s ability to participate in gains from favorable commodity price fluctuations, it eliminates the risk of loss from adverse commodity price fluctuations.

Periodically, the Company enters into certain derivative instruments designated as cash flow hedges. For these hedges, the effective portion of the gain or loss from the financial instrument is initially reported as a component of Accumulated other comprehensive income (loss) in stockholders’ equity and subsequently reclassified into earnings in the same line as the hedged item in the same period or periods during which the hedged item affects earnings.

Beginning in 2008, the Company entered into certain cobalt forward purchase contracts designated as fair value hedges. For fair value hedges, changes in the fair value of the derivative instrument are offset against the change in fair value of the hedged item through earnings.


Note 2 —	Recently Issued Accounting Guidance

Accounting Guidance adopted in 2009:

In June 2009, the Financial Accounting Standards Board (“FASB”) issued guidance on the “FASB Accounting Standards Codification (“ASC”) and the Hierarchy of Generally Accepted Accounting Principles (“GAAP”)”, which established that the ASC is the single source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the Securities and Exchange Commission (“SEC”), which are sources of authoritative GAAP for SEC registrants. This guidance was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted the provisions of this guidance on July 1, 2009 and has updated its references throughout the financial statements to specific GAAP literature to reflect the codification.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

price of the asset are required are Level 1 fair value measurements. The Company adopted this guidance in 2009, and such adoption did not have a material effect on the Company’s consolidated financial statements.

In December 2007, the FASB issued guidance on FASB ASC Topic 805, “Business Combinations (pre-codification SFAS No. 141(R), “Business Combinations”).” This guidance changes how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. This guidance establishes principles and requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. This guidance requires restructuring and acquisition-related costs to be recognized separately from the acquisition and establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. The Company adopted this guidance on January 1, 2009. This standard was applied prospectively to business combinations consummated on or after January 1, 2009, including the Company’s acquisition of EaglePicher Technologies LLC on January 29, 2010. See Note 21. As a result of the Company’s adoption of the new guidance, transaction costs related to the acquisition of EaglePicher Technologies of $1.3 million, or $0.04 per diluted share were expensed in the accompanying Consolidated Statement of Operations for the year ended December 31, 2009.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

results of operations or financial position but did change the disclosures related to derivative instruments held by the Company. See Note 11.

Accounting Guidance Not Yet Adopted


Note 3 —	Inventories

Inventories consist of the following as of December 31,


	2009		2008

Raw materials and supplies	$	150,113	$	168,060
Work-in-process		15,952		14,797
Finished goods		121,031		123,271

	$	287,096	$	306,128

The 2008 amount includes the effect of a $27.7 million charge to reduce the carrying value of certain inventories to market value, which was lower than cost at December 31, 2008, due primarily to the declining price of cobalt in the second half of 2008.


Note 4 —	Property, Plant and Equipment, net

Property, plant and equipment, net consists of the following as of December 31,


	2009		2008

Land and improvements	$	12,839	$	9,180
Buildings and improvements		142,472		140,082
Machinery and equipment		446,282		431,893
Furniture and fixtures		12,361		12,118

Property, plant and equipment, at cost		613,954		593,273
Less accumulated depreciation		386,839		348,071

	$	227,115	$	245,202

Total depreciation expense on property, plant and equipment was $43.2 million in 2009, $45.6 million in 2008 and $31.5 million in 2007.


Note 5 —	Investments

During 2008, the Company invested $0.7 million in CrisolteQ Oy (“CrisolteQ”), a private Finnish Company, through the purchase of common stock and a convertible loan. The Company accounts for its investment in

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

CrisolteQ under the equity method. CrisolteQ is developing and commercializing new metal recycling technology for spent catalyst materials.

During 2007, the Company invested $2.0 million in Quantumsphere, Inc. (“QSI”) through the purchase of 615,385 shares of common stock and warrants to purchase an additional 307,692 shares of common stock. The Company allocated $1.6 million to the common stock and $0.4 million to the warrants. The Company accounts for its investment in QSI under the cost method. The Company and QSI have agreed to co-develop new, proprietary applications for the high-growth, high-margin clean-energy and portable power sectors. In addition, the Company has the right to market and distribute certain QSI products.


Note 6 —	Acquisitions

On December 31, 2007, the Company completed the acquisition of the Electronics businesses (“REM”) of Rockwood Specialties Group, Inc. for $321.5 million in cash, including professional fees of $5.1 million associated with this transaction. The REM businesses, which had combined sales of approximately $200 million in 2007 and employ approximately 700 people, include its Printed Circuit Board (“PCB”) business, Ultra-Pure Chemicals (“UPC”) business, and Photomasks business. The businesses supply customers with chemicals used in the manufacture of semiconductors and printed circuit boards as well as photo-imaging masks primarily for semiconductor and photovoltaic manufacturers and have locations in the United States, England, Scotland, France, Taiwan, Singapore and China. The acquisition of REM provides new products and expanded distribution channels for the Company’s Electronic Chemicals business unit. The REM businesses are included in the Specialty Chemicals segment.

The purchase price exceeded the fair value of acquired net assets and, accordingly, $164.0 million was allocated to goodwill. Goodwill is not deductible for tax purposes.

The following table summarizes the final purchase price allocation:


Cash	$	15,754
Accounts receivable		47,919
Inventories		20,527
Other current assets		7,925
Property, plant and equipment		63,127
Intangibles		82,318
Other assets		269
Goodwill		164,224

Total assets acquired		402,063

Accounts payable		24,322
Other current liabilities		11,980
Other liabilities		28,512

Total liabilities assumed		64,814

Net assets acquired		337,249

Cash acquired		15,754

Purchase price, net of cash acquired	$	321,495

During 2008, the Company finalized the purchase price allocation. The changes since the initial allocation to inventories, property, plant and equipment, and intangibles reflect adjustments to the fair values based on market-

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

based valuations. The change in liabilities is primarily related to the adjustment of deferred tax liabilities as a result of the adjustments to inventories, property, plant and equipment and intangibles.

On October 1, 2007, the Company completed the acquisition of Borchers GmbH (“Borchers”), a European-based specialty coatings additive supplier, with locations in France and Germany, for approximately $20.7 million, net of cash acquired. Borchers had sales of approximately $42 million in the first nine months of 2007. The Company incurred fees of approximately $1.4 million associated with this transaction. The impact of the Borchers acquisition was not deemed to be material to the results of operations or financial position of the Company. Borchers is included in Advanced Organics in the Company’s Specialty Chemicals segment.

The results of operations of each acquisition have been included in the results of the Company from the respective dates of acquisition.


Note 7 —	Goodwill and Other Intangible Assets

Goodwill is tested for impairment on an annual basis and more often if indicators of impairment exist. The goodwill impairment test is a two-step process. During the first step, the Company estimates the fair value of the reporting unit (with goodwill) and compares that amount to the carrying value of that reporting unit. If the estimated fair value of the reporting unit is less than its carrying value, the “Intangibles — Goodwill and Other” topic of the ASC requires a second step to determine the implied fair value of goodwill of the reporting unit, and a comparison of that amount to the carrying value of the goodwill of the reporting unit. This second step includes valuing all of the tangible and intangible assets and liabilities of the reporting unit as if they had been acquired in a business combination.

Under the “Intangibles — Goodwill and Other” topic of the ASC, reporting units are defined as an operating segment or one level below an operating segment (i.e. component level or reporting unit). The Company tests goodwill at the component level. The Company’s reporting units are Advanced Materials, Electronic Chemicals, Advanced Organics, Ultra Pure Chemicals (“UPC”) and Photomasks. The Company is organized into two segments: Advanced Materials and Specialty Chemicals. The Specialty Chemicals segment is comprised of Electronic Chemicals, Advanced Organics, UPC and Photomasks.

To test goodwill for impairment, the Company is required to estimate the fair value of each of its reporting units. Since quoted market prices in an active market are not available for the Company’s reporting units, the Company uses other valuation techniques. The Company has developed a model to estimate the fair value of the reporting units utilizing a discounted cash flow valuation technique (“DCF model”). The Company selected the DCF model as it believes it is comparable to what would be used by market participants to estimate its fair value. The impairment test incorporates the Company’s estimates of future cash flows; allocations of certain assets, liabilities and cash flows among reporting units; future growth rates; terminal value amounts; and the applicable weighted-average cost of capital (the “WACC”) used to discount those estimated cash flows. These estimates are based on management’s judgment. The estimates and projections used in the estimate of fair value are consistent with the Company’s forecast and long-range plans.

The Company conducts its annual goodwill impairment test as of October 1. However, during the fourth quarter of 2008, indicators of potential impairment caused the Company to conduct an interim impairment test as of December 31, 2008. Those indicators included the fact that the Company’s stock traded below net book value per share since the end of the second quarter of 2008, operating losses in the fourth quarter of 2008 and revisions made to the 2009 plan, and significant deterioration in the capital markets in the fourth quarter of 2008 that resulted in an increase to the respective WACC calculations.

The results of the testing as of December 31, 2008 confirmed the carrying value of the UPC reporting unit exceeded its estimated fair value. In the fourth quarter of 2008, the Company recorded an estimated goodwill impairment charge of $8.8 million (of a total of $32.8 million of goodwill related to the UPC reporting unit). The Company

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

finalized the step-two analysis during the first quarter of 2009 and concluded the goodwill impairment charge for UPC was $4.7 million; therefore, the Company recorded a $4.1 million adjustment in the first quarter of 2009 to reverse a portion of the 2008 charge.

During the second quarter of 2009, the Company again revised its 2009 forecast and outlook beyond 2009 to reflect the continued economic downturn and, consequently, the Company’s assumptions regarding growth and recovery trends in the markets it serves. Also during the second quarter of 2009, the Company updated its assumption with respect to the probability of future cash flows from opportunities related to a license agreement associated with UPC. The license agreement was an existing asset of UPC when it was acquired from Rockwood Specialties Group, Inc. in 2007. Based on the uncertain impact the economy may have on both the timing and execution of activities from this license agreement, the Company concluded that no estimated future cash flows from the license agreement should be included in the valuation of the UPC reporting unit. The Company continues to own the license agreement and therefore would participate in any future market opportunities should they occur.

The primary factors contributing to the $41.6 million goodwill impairment charges in 2009 were lower assumptions for revenue and volume growth in 2009 and beyond and the associated impact on operating cash flow from these reduced projections, and the change in the Company’s assumption with respect to the probability of future cash flows from opportunities related to the UPC license agreement. The Company reviewed and updated as deemed necessary all of the assumptions used in its DCF model during the 2008 and 2009 impairment testing. The estimates and judgments that most significantly affect the fair value calculation are future operating cash flow assumptions and the WACC used in the DCF model. The Company believes the assumptions used in the 2008 and 2009 impairment testing were consistent with the risk inherent in the business models of the reporting units at the time the impairment tests were performed.

The results of the annual impairment testing as of the October 1, 2009 testing date confirmed the carrying value of the UPC reporting unit exceeded its estimated fair value. The Company completed the step-two analysis for UPC and concluded no goodwill impairment charge was required as the implied fair value of goodwill exceeds its carrying amount. The estimated fair value of the remaining reporting units (Advanced Materials, Electronic Chemicals and Photomasks) exceeded their carrying values, therefore no impairment loss was required to be recognized.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

The change in the carrying amount of goodwill is as follows:


	Advanced		Specialty
	Materials		Chemicals			Consolidated

Balance at January 1, 2008	$	103,326	$	218,846		$	322,172
Final purchase price adjustments — REM		—		(15,731	)		(15,731	)
Final purchase price adjustments — Borchers		—		1,062			1,062
Income tax adjustment (valuation allowance)(a)		—		(11,500	)		(11,500	)
Goodwill impairment charge		—		(8,800	)		(8,800	)
Foreign currency translation adjustments		—		(18,526	)		(18,526	)

Balance at December 31, 2008		103,326		165,351			268,677
2008 goodwill impairment charge adjustment		—		4,139			4,139
Goodwill impairment charge		—		(41,643	)		(41,643	)
Foreign currency translation adjustments		—		3,016			3,016

Balance at December 31, 2009	$	103,326	$	130,863		$	234,189


(a)		The acquired deferred tax liabilities of the U.S. REM entities reduced the amount of the deferred tax valuation allowance against the Company’s deferred tax assets which would have otherwise been required at the date of acquisition. As a result, the valuation allowance was reduced, with a corresponding reduction in goodwill.

At December 31, 2009, the carrying amount of goodwill and accumulated goodwill impairment charges by reporting unit is as follows:


			Accumulated
			Goodwill
	Carrying		Impairment
	Amount		Charges

Advanced Materials	$	103,326	$	—
Advanced Organics		—		6,768
Electronic Chemicals		114,991		—
Ultra Pure Chemicals		12,828		20,459
Photomasks		3,044		19,077

	$	234,189	$	46,304

The Company did not recognize any goodwill impairment charges prior to 2008.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

A summary of intangible assets follows:


						Foreign
	Gross Carrying		Accumulated			Currency
	Amount		Amortization			Translation			Impairment			Net Balance

Intangible assets not subject to amortization:
Tradenames	$	8,185	$	—		$	252		$	(667	)	$	7,770

Intangible assets subject to amortization:
Customer relationships		67,723		(15,767	)		1,362			—			53,318
Developed technology		12,369		(1,577	)		153			—			10,945
Capitalized software		12,788		(7,665	)		(70	)		(179	)		4,874
License agreements		3,370		(482	)		(46	)		(883	)		1,959
Other intangibles		918		(220	)		(335	)		—			363

		97,168		(25,711	)		1,064			(1,062	)		71,459

Balance at December 31, 2009	$	105,353	$	(25,711	)	$	1,316		$	(1,729	)	$	79,229

Intangible assets not subject to amortization:
Tradenames	$	8,398	$	—		$	(13	)	$	(200	)	$	8,185

Intangible assets subject to amortization:
Customer relationships		67,723		(9,840	)		(19	)		—			57,864
Developed technology		12,369		(851	)		(11	)		—			11,507
Capitalized software		10,491		(4,217	)		(215	)		—			6,059
License agreements		870		—			—			—			870
Other intangibles		3,021		(2,384	)		(298	)		—			339

		94,474		(17,292	)		(543	)		—			76,639

Balance at December 31, 2008	$	102,872	$	(17,292	)	$	(556	)	$	(200	)	$	84,824

The weighted average amortization period is as follows (in years):


Customer relationships			10
Technology			16
Capitalized software			2
License agreements			4
Other intangibles			3

Intangible assets consist of (i) definite-lived assets subject to amortization and (ii) indefinite-lived intangible assets not subject to amortization. All intangible assets subject to amortization are amortized on a straight-line basis over the estimated useful lives.

Indefinite-lived intangible assets are tested annually for impairment and between annual evaluations if changes in circumstances or the occurrence of certain events indicate potential impairment. During 2009, the Company determined that the license agreement in the UPC reporting unit and certain indefinite-lived trade names in its Photomasks and UPC reporting units were impaired due to downward revisions in estimates of future revenue and

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

cash flows. As a result, selling, general and administrative expenses for 2009 includes an impairment charge of $0.9 million for the license agreement and $0.7 million related to the indefinite-lived trade names. In performing its annual intangible asset impairment testing as of October 1, 2008, the Company determined that certain indefinite-lived trade names in its Photomasks reporting unit were impaired due to downward revisions in estimates of future revenue. As a result, selling, general and administrative expenses for 2008 includes an impairment charge of $0.2 million related to the indefinite-lived trade names.

Amortization expense related to intangible assets, including capitalized software, for the years ended December 31, 2009, 2008 and 2007 was $10.5 million, $10.5 million and $1.7 million, respectively. The increase in amortization expense in 2009 and 2008 was due to the amortization of intangible assets associated with the acquisition of the REM businesses and Borchers in 2007.

During 2005, the Company initiated a multi-year Enterprise Resource Planning project that is being implemented to achieve increased efficiency and effectiveness in its supply chain, financial processes and management reporting. Implementation of the system began during 2007, at which time the Company began amortizing costs capitalized during the application development stage, which are included above in capitalized software. Amortization of capitalized software was $3.4 million, $3.0 million and $1.3 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Estimated annual pretax amortization expense for intangible assets is as follows:


2010	$	9,333
2011	$	7,745
2012	$	7,362
2013	$	6,646
2014	$	6,329


Note 8 —	Restructuring

During 2009, the Company announced, and began to implement, a restructuring plan for the carboxylate portion of the Advanced Organics business within the Specialty Chemicals segment to better align the cost structure and asset base to industry conditions resulting from weak customer demand and overcapacity. The restructuring plan includes exiting of the Manchester, England manufacturing facility and workforce reductions at the Company’s Belleville, Ontario, Canada; Kokkola, Finland; Franklin, Pennsylvania and Westlake, Ohio locations. The restructuring plan includes the elimination of 100 employee positions, including two in Westlake, five in Belleville, six in Franklin, 15 in Kokkola and 72 in Manchester. The Company eliminated 17 positions in 2009. The remaining positions will be eliminated during 2010 and the first half of 2011. The majority of position eliminations are expected to be completed by mid-2010. The restructuring plan does not involve the discontinuation of any material product lines or other functions.

During 2009, the Company recorded restructuring charges totaling $12.7 million in the Statement of Consolidated Operations. The charges resulted from the following activities:


•	Employee severance and health care continuation of $5.0 million;

•	An asset impairment charge of $5.5 million relating to property, plant and equipment;

•	An inventory impairment charge attributable to the restructuring of $1.9 million; and

•	Other charges, including intangible asset impairment, of $0.3 million.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

In addition to the charges described above, the Company will continue to incur severance, decommissioning and demolition costs, lease termination costs and other exit costs that will be expensed as incurred. The Company has incurred and expects to incur the following restructuring charges:


			Additional Charges		Total
	Charges Incurred in		Expected to		Charges Expected
	2009		be Incurred		to be Incurred

Cash charges
Workforce reductions	$	4,967	$	2,461	$	7,428
Decommissioning, demolition and lease termination charges		25		2,438		2,463

		4,992		4,899		9,891
Non-cash charges
Fixed asset impairment		5,536		—		5,536
Inventory impairment		1,890		—		1,890
Other charges		290		—		290

		7,716		—		7,716
Total charges	$	12,708	$	4,899	$	17,607

The following table presents the activity and balances related to the restructuring program for 2009:


				Fixed Asset and
	Workforce			Inventory
	Reductions			Impairments			Other Charges			Total

Balance at December 31, 2008	$	—		$	—		$	—		$	—
Charge		4,967			7,426			315			12,708
Foreign currency translation adjustment		(68	)		—			—			(68	)
Cash payments		(40	)		—			—			(40	)
Non-cash charges		—			(7,426	)		(290	)		(7,716	)

Balance at December 31, 2009	$	4,859		$	—		$	25		$	4,884

The restructuring accrual represents future cash payments and is recorded on the Consolidated Balance Sheet ($4.0 million is included Other current liabilities and $0.9 million is included in Other non-current liabilities). Workforce reduction payments, primarily severance, are expected to be completed by the end of 2011, with the majority of payments occurring in the second half of 2010 and the first half of 2011.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued


Note 9 —	Discontinued Operations and Disposition of the Nickel Business

Income from discontinued operations is related to the Company’s former Nickel business that was sold in 2007 and the Company’s former copper powders business, SCM Metal Products, Inc. (“SCM”), and PMG, which were both sold in 2003. Income from discontinued operations consisted of the following for the years ended December 31:


	2009		2008		2007

Net sales	$	—	$	—	$	193,091
Income from discontinued operations before income taxes	$	1,981	$	92	$	82,699
Income tax expense		485		—		19,642

Income from discontinued operations		1,496		92		63,057
Gain on sale of discontinued operations		—		—		76,991
Income tax expense		—		—		(4,721	)

Total income from discontinued operations, net of tax	$	1,496	$	92	$	135,327

Income from discontinued operations in 2009 includes the reversal of a $2.0 million tax contingency accrual related to PMG.

Income from discontinued operations in 2007 is primarily the results of the Nickel business. The Company received net cash proceeds of $490.0 million related to the sale, completed on March 1, 2007. Discontinued operations in 2007 also includes income of $1.8 million related to SCM and PMG.

Note 10 — Debt

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

Company repaid the outstanding revolver balance of $25.0 million with available cash on hand. The outstanding Revolver balance was $0 and $25.0 million at December 31, 2009 and 2008, respectively.

The Company incurred fees and expenses of approximately $0.4 million in 2005 related to the Revolver. These fees and expenses were deferred and are being amortized to interest expense.

Debt consists of the following as of December 31:


	2009		2008

Revolving credit agreement	$	—	$	25,000
Notes payable — bank		—		1,144

		—		26,144
Less: Short-term debt		—		—
Less: Current portion of long-term debt		—		80

Total long-term debt	$	—	$	26,064

Interest paid on long-term debt was $0.4 million, $1.0 million, and $8.5 million for 2009, 2008, and 2007, respectively. Interest expense has not been allocated to discontinued operations. No interest was capitalized in 2009, 2008, or 2007.

On March 7, 2007, the Company redeemed the entire $400.0 million of its outstanding 9.25% Senior Subordinated Notes due 2011 (the “Notes”) at a redemption price of 104.625% of the principal amount, or $418.5 million, plus accrued interest of $8.4 million. The loss on redemption of the Notes was $21.7 million, and consisted of the premium of $18.5 million plus related deferred financing costs of $5.7 million less a deferred net gain on terminated interest rate swaps of $2.5 million.

Note 11 — Derivative Instruments

The Company enters into derivative instruments and hedging activities to manage, where possible and economically efficient, commodity price risk, foreign currency exchange rate risk and interest rate risk related to borrowings. It is the Company’s policy to execute such instruments with creditworthy counterparties and not enter into derivative instruments for speculative purposes. All derivatives are reflected on the balance sheet at fair value and recorded in other current assets and other current liabilities in the Consolidated Balance Sheets. The accounting for the fair value of a derivative depends upon whether it has been designated as a hedge and on the type of hedging relationship. Changes in the fair value of derivative instruments are recognized immediately in earnings, unless the derivative is designated as a hedge and qualifies for hedge accounting. Under hedge accounting, recognition of derivative gains and losses can be matched in the same period with that of the hedged exposure and thereby minimize earnings volatility. To qualify for designation in a hedging relationship, specific criteria must be met and appropriate documentation prepared.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

For a fair value hedge, the change in fair value of the hedging instrument and the change in fair value of the hedged item attributable to the risk being hedged are both recognized currently in earnings. For a cash flow hedge, the effective portion of the change in fair value of a hedging instrument is initially recognized in Accumulated other comprehensive income (loss) (“AOCI(L)”) in stockholders’ equity and subsequently reclassified to earnings when the hedged item affects income. The ineffective portion of the change in fair value of a cash flow hedge is recognized immediately in earnings. For a net investment hedge, the effective portion of the change in fair value of the hedging instrument is reported in AOCI(L) as part of the cumulative translation adjustment, while the ineffective portion is recognized immediately in earnings. The Company does not enter into net investment hedges.

Commodity Price Risk

Derivative instruments employed by the Company to manage commodity price risk include cash flow and fair value hedges as well as some contracts that are not designated as accounting hedges.

Cash Flow Hedges

From time to time, the Company enters into copper forward sales contracts that are designated as cash flow hedges. At December 31, 2009, the notional quantity of open contracts designated as cash flow hedges in accordance with the “Derivatives and Hedging” topic of the ASC was 1.3 million pounds. The Company had no cash flow hedges at December 31, 2008. The outstanding contracts as of December 31, 2009 had maturities ranging up to 2 months. As of December 31, 2009, AOCI(L) includes a cumulative loss of $0.2 million, net of tax, related to these contracts, all of which is expected to be reclassified to earnings during the first quarter of 2010.

Fair Value Hedges

From time to time, the Company enters into certain cobalt forward purchase contracts designated as fair value hedges. At December 31, 2008, the notional quantity of open contracts designated as fair value hedges in accordance with the “Derivatives and Hedging” topic of the ASC was 0.3 million pounds. The Company had no fair value hedges at December 31, 2009.

Other Forward Contracts

During 2007, the Company entered into cobalt forward purchase contracts to establish a fixed margin and mitigate the risk of price volatility related to the sales during the second quarter of 2008 of cobalt-containing finished products that were priced based on a formula that included a fixed cobalt price component. These forward purchase contracts were not designated as hedging instruments under the “Derivatives and Hedging” topic of the ASC. Accordingly, these contracts were adjusted to fair value as of the end of each reporting period, with the gain or loss recorded in cost of products sold. The Company had no forward contracts at December 31, 2009 or 2008.

Foreign Currency Exchange Rate Risk

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

While a majority of the subsidiary’s raw material purchases are in U.S. dollars, it also has some Euro-denominated expenses. Beginning in 2009, the Company entered into foreign currency forward contracts to mitigate a portion of the earnings volatility in those Euro-denominated cash flows due to changes in the Euro/U.S. dollar exchange rate. The Company had Euro forward contracts with notional values that totaled 1.5 million Euros at December 31, 2009. The Company designated these derivatives as cash flow hedges of its forecasted foreign currency denominated expense. The outstanding contracts as of December 31, 2009 had maturities ranging up to two months. As of December 31, 2009, AOCI(L) includes a cumulative gain of $0.2 million, net of tax, related to these contracts, all of which is expected to be reclassified to earnings during the first quarter of 2010. In the first quarter of 2010, the Company entered into Euro forward contracts with notional values that totaled 40.7 million Euros with maturities through December 31, 2010.

The following table summarizes the fair value of derivative instruments designated as hedging instruments in accordance with the “Derivatives and Hedging” topic of the ASC as recorded in the Consolidated Balance Sheets:

Derivative Assets

December 31, 2009

December 31,2008

Balance sheet

Balance sheet Location

Fair Value

location

Fair Value

Euro forward contracts

Other current assets

258

n/a

—

Commodity contracts

n/a

—

Other current assets

143

Total

258

143

Derivative Liabilities

December 31, 2009

December 31, 2008

Balance sheet

Balance Sheet Location

Fair value

Location

Fair Value

Commodity contracts

Other current liabilities

226

Other current liabilities

200

Total

226

200

The following table summarizes the effect of derivative instruments as recorded in the Statement of Consolidated Operations:

Derivatives in Fair Value Hedging Relationships

Amount of Gain (Loss) on Derivative

Location of Gain (Loss)

Recognized in Income for the Year

on Derivative

Ended December 31,

Recognized in Income

2009

2008

2007

Commodity contracts

Cost of products sold

227

(6,753

)

—

Location of Gain (Loss)

Hedged Items in Fair

on Related Hedged

Amount of Gain (Loss) on Related Hedged Item

Value Hedging

Item Recognized in

Recognized in Income for the year ended December 31,

Relationships

Income

2009

2008

2007

Commodity contracts

Firm commitment

Cost of products sold

(227

)

6,753

—

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued


	Derivatives in Cash Flow Hedging Relationships
	Amount of Gain (Loss) on Derivative Recognized in AOCI(L)
	(Effective Portion) for the Year Ended
	2009			2008		2007

Euro forward contracts	$	1,252		$	—	$	—
Commodity contracts		(1,843	)		624		504

Total	$	(591	)	$	624	$	504


	Location of Gain
	(Loss) Reclassified		Amount of Gain (Loss) Reclassified from
	from AOCI(L) into		AOCI(L) into Income (Effective Portion)
	Income (Effective		for the year ended
	Portion)		2009			2008		2007

Euro forward contracts		Cost of products sold	$	1,061		$	—	$	—
Commodity contracts		Net sales		(1,676	)		624		504

Total			$	(615	)	$	624	$	504


	Derivatives Not Designated as Hedging Instruments
		Amount of Gain Recognized in
	Location of Gain	Income on Derivative for the
	Recognized in	Year Ended
	Income on Derivative	2009		2008		2007

Commodity contracts	Cost of products sold	$	—	$	4,002	$	6,735

Total		$	—	$	4,002	$	6,735

Note 12 — Fair Value Disclosures

The following table shows the Company’s assets and liabilities accounted for at fair value on a recurring basis:

Fair Value Measurements at Reporting Date Using

Quoted Prices in

Active Markets for

Significant Other

Significant

December 31,

Identical Assets

Observable Inputs

Unobservable Inputs

Description

2009

(Level 1)

(Level 2)

(Level 3)

Assets:

Foreign currency forward contracts

258

—

258

—

Total

258

—

258

—

Liabilities:

Commodity contracts

226

—

226

—

Total

226

—

226

—

See Note 14 for fair value disclosure related to pension assets.

The Company uses significant other observable inputs to value derivative instruments used to hedge foreign currency and copper price volatility; therefore, they are classified within Level 2 of the valuation hierarchy.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

Cobalt forward purchase contracts are classified as Level 3, as their valuation is based on the expected future cash flows discounted to present value. Future cash flows are estimated using a theoretical forward price as quoted forward prices are not available. The following table provides a reconciliation of derivatives measured at fair value on a recurring basis which used Level 3 inputs:


	Fair Value
	Measurements
	Using
	Significant
	Unobservable
	Inputs
	(Level 3)
	Derivatives

January 1, 2008	$	6,735
Realized or unrealized gains (losses) included in earnings		(2,752	)
Purchases, issuances, and settlements		(4,040	)
Transfers in and/or out of Level 3		—

December 31, 2008		(57	)
Realized or unrealized gains (losses) included in earnings		227
Purchases, issuances, and settlements		(170	)
Transfers in and/or out of Level 3		—

December 31, 2009	$	—

Non-recurring fair value measurements

In September 2009, the Company announced a restructuring plan related to its Advanced Organics business. See Note 8. As a result, the Company reviewed its long-lived assets associated with the Manchester, England facility for impairment and recorded a $5.7 million impairment charge. The fair value measurements were calculated using significant unobservable inputs (combination of the cost and market approach).

In accordance with the provisions of the “Intangibles — Goodwill and Other” topic of the ASC, goodwill of the UPC reporting unit was written down to its implied fair value of $28.3 million after completing step two in 2009. The resulting $4.1 million adjustment to the estimated goodwill impairment charge of $8.8 million recorded in 2008 was included in earnings of 2009. During 2009, the Company recorded an additional $15.8 million goodwill impairment charge related to the UPC reporting unit to write down goodwill with a carrying value of $28.5 million to its implied fair value of $12.7 million. In addition, the Company recorded an impairment charge of $19.1 million related to the Photomasks reporting unit to write down goodwill with a carrying value of $22.3 million to its implied fair value of $3.2 million. Goodwill related to the Advanced Organics reporting unit with a carrying amount of $6.8 million was written down to its implied fair value of $0, resulting in an impairment charge of $6.8 million in 2009. The Company utilizes a discounted cash flow analysis to estimate the fair value of the reporting units utilizing unobservable inputs. The fair value measurement of the reporting unit under the step-one analysis and the step-two analysis in their entirety are classified as Level 3 inputs.

During 2009 the Company also wrote down to fair value indefinite-lived trade name intangible assets in its Photomasks and Electronic Chemicals reporting units and a license agreement in its UPC reporting unit due to downward revisions in estimates of future revenue and cash flows. The impaired indefinite-lived trade name intangible assets were determined to have a fair value of $4.0 million resulting in a charge of $0.7 million, and the license agreement was determined to have no value resulting in a charge of $0.9 million. Both charges were included in earnings for 2009. The Company utilizes a “relief from royalty” methodology in estimating fair values for indefinite-lived trade names. The methodology estimates the fair value of each trade name by determining the present value of the royalty payments that are avoided as a result of owning the trade name and includes judgmental

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

assumptions about sales growth that are consistent with the assumptions used to determine the fair value of reporting units in the Company’s goodwill testing. The fair value measurements were calculated using unobservable inputs (discounted cash flow analyses), classified as Level 3, requiring significant management judgment due to the absence of quoted market prices or observable inputs for assets of a similar nature.

The Company also holds financial instruments consisting of cash, accounts receivable, and accounts payable. The carrying amounts of cash, accounts receivable and accounts payable approximate fair value due to the short-term maturities of these instruments. Derivative instruments are recorded at fair value as indicated in Note 11. Fair values for investments held at cost are not readily available, but are estimated to approximate fair value. Cost method investments are evaluated for impairment quarterly. The Company has a $2.0 million investment in Quantumsphere, Inc. (“QSI”) accounted for under the cost method. The Company and QSI have agreed to co-develop new, proprietary applications for the high-growth, high-margin clean-energy and portable power sectors. In addition, the Company has the right to market and distribute certain QSI products.

Accounts receivable potentially subjects the Company to a concentration of credit risk. The Company maintains significant accounts receivable balances with several large customers. At December 31, 2009 the accounts receivable balance from our largest customer represented 3% of the Company’s net accounts receivable. Generally, the Company does not obtain security from its customers in support of accounts receivable.

Sales to Nichia Chemical Corporation represented approximately 16%, 22%, and 23% of net sales in 2009, 2008 and 2007, respectively. No other customer individually represented more than 10% of net sales for any period presented. Sales to the top five customers represented approximately 26% of net sales in 2009. The loss of one or more of these customers could have a material adverse effect on the Company’s business, results of operations or financial position.

Note 13 — Income Taxes

Income (loss) from continuing operations before income tax expense consists of the following:


	Year Ended December 31
	2009			2008			2007

United States	$	(43,099	)	$	(41,813	)	$	(50,638	)
Outside the United States		42,041			214,101			248,893

	$	(1,058	)	$	172,288		$	198,255

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

Income tax expense is summarized as follows:


	Year Ended December 31
	2009			2008			2007

Current tax provision (benefit):
United States:
Federal	$	7,122		$	(44,927	)	$	51,195
State and local		144			167			80
Outside the United States		21,104			61,730			40,792

Total current		28,370			16,970			92,067

Deferred tax provision (benefit):
United States		(6,949	)		5,437			(18,997	)
Outside the United States		(522	)		(6,331	)		3,241

Total deferred		(7,471	)		(894	)		(15,756	)

	$	20,899		$	16,076		$	76,311

A reconciliation of income taxes computed using the United States statutory rate to income taxes computed using the Company’s effective income tax rate is as follows:


	Year Ended December 31
	2009			2008			2007

Income (loss) from continuing operations before income tax expense	$	(1,058	)	$	172,288		$	198,255

Income taxes at the United States statutory rate (35)%	$	(370	)	$	60,301		$	69,389
Increase (decrease) in taxes resulting from:
Effective tax rate differential on income (loss) outside of the United States		5,260			(17,673	)		(38,845	)
Repatriation of foreign earnings		2,537			10,284			45,709
Goodwill impairment		11,853			2,200			—
Malaysian tax holiday		(3,946	)		(4,962	)		(6,975	)
U.S. losses with no tax benefit		—			4,611			—
Valuation allowance		1,025			1,808			4,103
Liability for uncertain tax positions		8,160			2,317			240
Foreign tax credits on amended prior year tax returns		(5,985	)		(46,636	)		—
Other, net		2,365			3,826			2,690

Income tax expense	$	20,899		$	16,076		$	76,311

Effective income tax rate		(a	)		9.3	%		38.5	%


(a)		not meaningful

During 2009, the Company completed an analysis of foreign tax credit positions and recorded a $5.8 million tax benefit related to an election to take foreign tax credits on prior year U.S. tax returns. As originally filed, such returns claimed these amounts as deductions rather than foreign tax credits because the Company was in a net operating loss

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

carryforward position in the U.S. during those years. However, due to income taxes paid in the U.S. in connection with the 2009 repatriation of foreign earnings, the Company is able to utilize these foreign tax credits previously taken as deductions. The benefit related to the foreign tax credits was $0.19 per diluted share in 2009.

During 2008, the Company completed an analysis of foreign tax credit positions and recorded a $46.6 million tax benefit related to an election to take foreign tax credits on prior year U.S. tax returns. As originally filed, such returns claimed these amounts as deductions rather than foreign tax credits because the Company was in a net operating loss carryforward position in the U.S. during those years. However, due to income taxes paid in the U.S. in connection with the 2007 repatriation of foreign earnings, the Company is able to utilize these foreign tax credits previously taken as deductions. The benefit related to the foreign tax credits was $1.54 per diluted share in 2008. The $46.6 million tax benefit is net of a valuation allowance of $1.5 million on deferred tax assets because it is more likely than not that those deferred tax assets will not be realized as a result of the Company’s election to claim the foreign tax credits. Excluding the tax benefit related to the foreign tax credits, the Company’s effective income tax rate would have been 36.4% for 2008.

Prior to December 31, 2006, the Company had recorded a valuation allowance against its U.S. net deferred tax assets, primarily related to net operating loss carryforwards, because it was more likely than not that those deferred tax assets would not be realized. However, due primarily to the redemption of the Notes in March 2007, the Company decided to repatriate the undistributed earnings of certain subsidiaries during the first quarter of 2007. Previously, the Company had planned to permanently reinvest such undistributed earnings overseas. As a result of the plan to repatriate, the Company recorded a deferred tax liability and reversed a portion of the valuation allowance in 2006. During 2007, the Company repatriated $528.5 million and recorded an additional tax liability of $45.7 million. The additional $45.7 million tax liability recorded in 2007 was due to the repatriation of the proceeds from the sale of the Nickel business and other cash amounts, which in the aggregate were in excess of undistributed earnings overseas at December 31, 2006.

With few exceptions, the Company intends to repatriate only future earnings and therefore has not provided additional United States income taxes on approximately $177.4 million of undistributed earnings of consolidated foreign subsidiaries. Such earnings could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation. The Company’s intent is for such earnings to be permanently reinvested by the foreign subsidiaries. It is not practicable to estimate the amount of unrecognized withholding taxes and tax liability on such earnings.

In connection with an investment incentive arrangement, the Company has a “tax holiday” from income taxes in Malaysia. This arrangement, which expires on December 31, 2011, reduced income tax expense by $3.9 million, $5.0 million and $7.0 million for 2009, 2008, and 2007 respectively. The benefit of the tax holiday on net income per diluted share was approximately $0.13, $0.16, and $0.23 in 2009, 2008, and 2007, respectively.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2003. The Internal Revenue Service has notified the Company that it will examine the 2007 U.S. federal income tax return. This examination is expected to be completed in 2010. The General Tax Office of the DRC Ministry of Finance has examined GTL’s 2008 DRC income tax return and has issued an assessment with respect to amounts due by GTL in excess of amounts already paid. At December 31, 2009, after deduction of a credit that can be applied against the assessment, the remaining balance of the claim due is $0.9 million. GTL disagrees with certain determinations and plans to contest the majority of the assessment. While there can be no assurances with respect to the final outcome of this process, the Company believes that, based on the information currently available to it, the final assessment will not have a material adverse effect upon its financial condition, results of operations, or cash flows.

Income tax payments were $23.9 million, $77.4 million and $75.1 million in 2009, 2008, and 2007, respectively.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

Significant components of the Company’s deferred income taxes are as follows:


	December 31
	2009			2008

Current asset — operating accruals	$	11,328		$	14,961
Current liability — earnings repatriation		(611	)		(893	)
Current liability — prepaid expenses		(5,683	)		(11,158	)
Non-current asset — employee benefit and other accruals		14,133			17,189
Non-current asset — domestic credit carryforwards		8,257			—
Non-current asset — foreign operating loss and credit carryforwards		2,753			2,385
Non-current asset — state operating loss carryforwards		7,711			11,870
Non-current liability — accelerated depreciation		(27,282	)		(31,701	)
Valuation allowance		(24,141	)		(23,037	)

Net deferred tax liability	$	(13,535	)	$	(20,384	)

Deferred income taxes are recorded in the Consolidated Balance Sheets in the following accounts:


	December 31
	2009			2008

Other current assets	$	6,519		$	6,299
Other non-current assets		8,077			85
Other current liabilities		(678	)		(4	)
Deferred income taxes — non-current liabilities		(27,453	)		(26,764	)

	$	(13,535	)	$	(20,384	)

The Company has a U.S. net deferred tax asset of $0.2 million which is expected to be recovered based on temporary differences that will reverse in 2010-2011. At December 31, 2009 and 2008, the Company has U.S state net operating loss carry forwards representing a potential future tax benefit of $7.7 million. These carryforwards expire at various dates from 2010 through 2028. The Company has recorded a valuation allowance against the U.S state net operating loss carryforwards. The Company has foreign net operating loss carryforwards of $12.6 million, representing a potential future tax benefit of $2.8 million in various jurisdictions, some of which expire in 2012 and some of which have no expiration. Although a significant portion of these losses will carryforward indefinitely, the Company has established a $2.7 million valuation allowance against the foreign net operating loss carryforwards as the Company believes that the majority of these assets will not be realized.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

A reconciliation of the beginning and ending amount of uncertain tax positions is as follows:


Balance at January 1, 2007	$	2,045
Additions for tax positions related to the current year		7,976
Additions for tax positions of prior years		379
Reductions for tax positions of prior years		(78	)

Balance at December 31, 2007		10,322
Additions for tax positions related to the current year		662
Additions for tax positions of prior years		4,177
Reductions for tax positions of prior years		(8,649	)
Foreign currency translation		(157	)

Balance at December 31, 2008	$	6,355
Additions for tax positions related to the current year		2,519
Additions for tax positions of prior years		9,812
Reductions for tax positions of prior years		(1,520	)
Reductions for lapses of statute of limitations		(618	)
Foreign currency translation		96

Balance at December 31, 2009	$	16,644

If recognized, all uncertain tax positions would affect the effective tax rate. At December 31, 2009, there are no uncertain tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The increase in uncertain tax positions in 2009 results primarily from transfer pricing matters. The decrease in uncertain tax positions in 2008 results primarily from a reduction in the liability related to foreign tax credits, partially offset by matters relating to transfer pricing and research and development tax credits.

The Company recognizes interest accrued related to uncertain tax positions and penalties as a component of income tax expense. During 2009, the Company recognized approximately $0.5 million in interest and penalties, all of which is accrued at December 31, 2009. During 2008, the Company recognized approximately $0.1 million in interest and penalties, all of which is accrued at December 31, 2008. During 2007, the Company recognized approximately $0.7 million in interest and penalties.

At December 31, 2009, the liability for uncertain tax positions includes $6.6 million for which it is reasonably possible that the uncertain tax position will decrease within the next twelve months. These uncertain tax positions relate to transfer pricing and may decrease upon completion of examination by taxing authorities.

Note 14 — Pension and Other Post-Retirement Benefit Plans

The Company sponsors a defined contribution plan covering substantially all eligible U.S. employees. Under this plan, the Company matches 100% of participants’ contributions up to the first three percent of contributions, and 50% on the next 2% of participants’ contributions. Contributions are directed by the employee into various investment options. This defined contribution plan does not have any direct ownership of the Company’s common stock. From January 1, 2008 through June 30, 2009, the Company contributed 3.5% of employee compensation unconditionally. Prior to 2008, the Company sponsored a defined contribution plan covering all eligible U.S. employees under which Company contributions were determined by the board of directors annually and were computed based upon participant compensation. The Company maintains additional defined contribution

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

plans in certain locations outside the United States. Aggregate defined contribution plan expenses were $4.4 million, $3.8 million and $2.7 million in 2009, 2008 and 2007, respectively.

The Company has a funded, non-contributory, defined benefit pension plan for certain retired employees in the United States related to the Company’s divested SCM business. Pension benefits are paid to plan participants directly from pension plan assets. Certain non-U.S. employees are covered under other defined benefit plans. These non-U.S. plans are not significant and relate to liabilities of the acquired Borchers entities and one acquired REM location. The Company also has an unfunded obligation to its former chief executive officer in settlement of an unfunded supplemental executive retirement plan (“SERP”). The Company also sponsors a non-contributory, nonqualified supplemental executive retirement plan for certain employees to restore benefit levels to employees whose benefits have been limited by the defined contribution plan due to IRS limitations.

During 2008, as required by FASB ASC Topic 715, “Compensation — Retirement Benefits” (pre-codification SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)”), the Company changed the measurement date of its pension and postretirement benefit plans from October 31 to December 31, 2008, the date of its statement of financial position. As a result, an adjustment to beginning retained earnings of $0.2 million was recorded in 2008 and is reflected in the Statement of Consolidated Total Equity.

Actuarial assumptions used in the calculation of the Company’s pension plan’s are as follows:


	2009	2008

U.S. Plans
Weighted-average discount rate	5.50%	5.50%
Expected return on pension plan assets	7.00%	7.00%
Projected health care cost trend rate	n/a	8.00%
Ultimate health care cost trend rate	n/a	5.00%
Year ultimate health care trend rate is achieved	n/a	2012
Non U.S. Plans
Weighted-average discount rate	5.25% - 6.25%	5.0% - 6.25%
Expected return on pension plan assets	5.0% - 6.0%	5.0% - 6.0%

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

Set forth below is a detail of the net periodic pension and other post-retirement benefit expense for the defined benefit plans for the years ended December 31:


	Pension Benefits
	U.S. Plans
	2009			2008			2007

Interest cost	$	1,307		$	1,295		$	1,317
Amortization of unrecognized net loss		390			273			302
Expected return on plan assets		(711	)		(857	)		(788	)

Net periodic benefit cost		986			711			831

Net (gain) loss arising during the year		(473	)		3,966			(408	)
Net (gain) loss recognized during the year		(390	)		(273	)		(302	)
Change in measurement date		—			(46	)		—

Total recognized in other comprehensive income		(863	)		3,647			(710	)

Total recognized in net periodic benefit cost and other comprehensive income	$	123		$	4,358		$	121


	Pension Benefits
	Non-U.S. Plans
	2009			2008			2007

Service cost	$	173		$	130		$	4
Interest cost		122			120			8
Expected return on plan assets		(17	)		(17	)		(2	)

Net periodic benefit cost		278			233			10

Net (gain) loss arising during the year		375			(325	)		9
Net (gain) loss recognized during the year		7			—			—
Amortization of prior service credit		89			—			—
Exchange rate gain (loss)		6			17			—

Total recognized in other comprehensive income		477			(308	)		9

Total recognized in net periodic benefit cost and other comprehensive income	$	755		$	(75	)	$	19

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

The following table sets forth the changes in the benefit obligation and the plan assets during the year and reconciles the funded status of the defined benefit plans with the amounts recognized in the Consolidated Balance Sheets at December 31:


	Pension Benefits
	U.S. Plans						Non-U.S. Plans
	2009			2008			2009			2008

Change in benefit obligation
Projected benefit obligation at beginning of year	$	(23,670	)	$	(24,472	)	$	(2,086	)	$	(1,937	)
Change in measurement date		—			(141	)		—			(43	)
Service cost		—			—			(173	)		(130	)
Interest cost		(1,307	)		(1,295	)		(122	)		(120	)
Actuarial loss (gain)		(893	)		516			(365	)		364
Benefits paid		1,137			1,050			71			165
Acquisition		—			—			—			(505	)
Plan amendments		—			—			(89	)		—
Transfers out of the plan		—			—			32			—
Foreign currency exchange rate changes		—			—			(81	)		120
SERP payments related to former CEO		672			672			—			—

Projected benefit obligation at end of year		(24,061	)		(23,670	)		(2,813	)		(2,086	)

Change in plan assets
Fair value of plan assets at beginning of year		8,845			12,686			293			330
Change in measurement date		—			143			—			3
Actual return on plan assets		2,076			(3,624	)		7			(23	)
Employer contributions		229			690			71			165
Foreign currency exchange rate changes		—			—			9			(17	)
Benefits paid		(1,137	)		(1,050	)		(71	)		(165	)

Fair value of plan assets at end of year		10,013			8,845			309			293

Funded status — plan assets less than benefit obligations		(14,048	)		(14,825	)		(2,504	)		(1,793	)

Recognized in accumulated other comprehensive income:
Net actuarial (gain) loss		11,528			12,391			177			(299	)

Amounts not yet recognized as a component of net postretirement benefit cost	$	11,528		$	12,391		$	177		$	(299	)

Amounts recorded in the balance sheet consist of:
Accrued benefit liability — current	$	(704	)	$	(704	)	$	(49	)	$	—
Accrued benefit liability — long-term		(13,344	)		(14,121	)		(2,455	)		(1,793	)
Accumulated other comprehensive loss		11,528			12,391			177			(299	)

Net amount recognized	$	(2,520	)	$	(2,434	)	$	(2,327	)	$	(2,092	)

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

The accumulated benefit obligation at December 31, 2009 and 2008 equals the projected benefit obligation at December 31, 2009 and 2008 for the U.S. plans as those defined benefit plans are frozen and no additional benefits are being accrued. The accumulated benefit obligation at December 31, 2009 and 2008 approximates the projected benefit obligation at December 31, 2008 and 2007 for the non-U.S. plans. The non-U.S. defined benefit plans are active and additional benefits are being accrued.

The Company’s policy is to make contributions to fund these plans within the range allowed by applicable regulations. Expected contributions are dependent on many variables, including the variability of the market value of the assets as compared to the obligation and other market or regulatory conditions. Accordingly, actual funding may differ significantly from current estimates.

The Company expects to contribute $0.8 million to its pension plans in 2010.

Future pension benefit payments expected to be paid are as follows:


	Pension
Expected Benefit Payments	U.S. Plans		Non-U.S. Plans

2010	$	1,762	$	111
2011	$	1,777	$	133
2012	$	1,811	$	138
2013	$	1,787	$	74
2014	$	1,790	$	107
2015-2019	$	9,064	$	798

The amounts in accumulated other comprehensive income (loss) that are expected to be recognized as components of net periodic benefit cost during 2010 are as follows:


	Pension

Net actuarial loss	$	339
Prior service cost		6

Total	$	345

The Company employs a total return investment approach for the defined benefit pension plan assets. The Company’s investment objective for defined benefit plan assets is to meet the plan’s benefit obligations, without undue exposure to risk. The investment strategy focuses on asset class diversification, liquidity to meet benefit payments and an appropriate balance of long-term investment return and risk. The Investment Committee oversees the investment allocation process, which includes the selection and evaluation of the investment manager, the determination of investment objectives and risk guidelines, and the monitoring of actual investment performance. In determining the expected long-term rate of return on defined benefit pension plan assets, management considers the historical rates of return over a period of time that is consistent with the long-term nature of the underlying obligations of these plans, the nature of investments and an expectation of future investment strategies.

Beginning in 2009, the Company began to utilize the services of an independent third-party investment manager to oversee the management of U.S. pension plan assets. The Company’s investment strategy is to invest plan assets in a diversified portfolio of no less than 20% and no more than 60% in domestic and international equity securities with the remainder of assets invested in fixed income securities and corporate and government bonds with the objective of preserving principal while generating growth in plan assets at a reasonable level of risk. The investment manager

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

is allowed to exercise investment discretion, subject to limitations established by the Company. The Company’s U.S. pension plan weighted-average asset allocations and target allocation by asset category are as follows:


	December 31, 2009
	Actual Allocation%

Equity securities		28	%
Corporate bonds		29	%
Government bonds		12	%
Other fixed income		18	%
Foreign assets		8	%
Cash		5	%

Total assets		100	%


	December 31, 2008
	Target Allocation			Actual Allocation

Equity securities		50	%		60	%
Debt securities		50	%		39	%
Cash		—			1	%

Total assets		100	%		100	%

The fair value measurements of defined benefit pension plan assets by category at December 31, 2009 are as follows:


			Quoted Prices in		Significant
			Active Markets		Other		Significant
	December 31,		for Identical		Observable		Unobservable
Category	2009		Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)

Equity securities	$	2,822	$	2,822		—		—
Corporate bonds		2,924		2,924		—		—
Government bonds		1,181		1,181		—		—
Other fixed income		1,745		1,745		—		—
Foreign assets		824		824		—		—
Insurance contracts		66		—		66		—
Cash		760		760		—		—

Total	$	10,322	$	10,256	$	66	$	—

Equity securities are invested broadly in U.S. companies in various industries. Foreign assets consist of equity securities of non-U.S. companies in various industries as well as foreign mutual funds.

The defined benefit pension plans do not have any direct ownership of OMG common stock.

In June 2009, the Company announced a plan to terminate its unfunded postretirement medical and life insurance plan. As a result of such action, benefits available to eligible employees and retirees ceased on August 31, 2009. The Company recognized a $4.7 million gain on the termination in 2009. The $4.7 million gain, which is included in Corporate for segment reporting, is net of reversal of unrecognized actuarial gain of $0.1 million.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

Set forth below is a detail of the net periodic other post-retirement benefit expense for the years ended December 31:


	Other Post-retirement Benefits
	U.S. Plans
	2009			2008			2007

Service cost	$	25		$	112		$	82
Interest cost		162			324			264
Gain on termination of plan		(4,693	)		—			—
Net amortization		—			86			40

Net periodic benefit cost		(4,506	)		522			386

Net (gain) loss arising during the year		—			(1,700	)		1,131
Net (gain) loss recognized during the year		137			(46	)		—
Amortization of prior service credit		—			(40	)		(40	)
Change in measurement date		—			(14	)		—

Total recognized in other comprehensive income		137			(1,800	)		1,091

Total recognized in net periodic benefit cost and other comprehensive income	$	(4,369	)	$	(1,278	)	$	1,477

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

The following table sets forth the changes in the benefit obligation during the year and reconciles the funded status of the defined benefit plans with the amounts recognized in the Consolidated Balance Sheets at December 31:


	Other Post-retirement Benefits
	U.S. Plans
	2009			2008

Change in benefit obligation
Projected benefit obligation at beginning of year	$	(4,506	)	$	(6,080	)
Change in measurement date		—			(73	)
Service cost		(25	)		(112	)
Interest cost		(162	)		(324	)
Actuarial loss (gain)		—			1,700
Termination of plan		4,693			—
Benefits paid		—			383

Projected benefit obligation at end of year		—			(4,506	)

Funded status — plan assets less than benefit obligations	$	—		$	(4,506	)

Recognized in accumulated other comprehensive income:
Net actuarial gain		—			(351	)
Prior service cost		—			214

Amounts not yet recognized as a component of net postretirement benefit cost	$	—		$	(137	)

Amounts recorded in the balance sheet consist of:
Accrued benefit liability — current	$	—		$	(344	)
Accrued benefit liability — non-current		—			(4,162	)
Accumulated other comprehensive loss		—			(137	)

Net amount recognized	$	—		$	(4,633	)

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

Note 15 — Accumulated Other Comprehensive Income (Loss)


				Unrealized
				Gains and						Accumulated
	Foreign			Losses on Cash			Pension and			Other
	Currency			Flow Hedging			Post-Retirement			Comprehensive
	Translation			Derivatives			Obligation			Income (Loss)

Balance at January 1, 2007	$	29,094		$	9,824		$	(10,025	)	$	28,893
Reclassification adjustments		—			(875	)		—			(875	)
Current period credit (charge)		4,465			3,340			(390	)		7,415
Disposal of Nickel business		(15,479	)		(12,289	)		—			(27,768	)

Balance at December 31, 2007		18,080			—			(10,415	)		7,665
Change in measurement date		—			—			60			60
Current period credit (charge)		(36,109	)		—			(1,599	)		(37,708	)

Balance at December 31, 2008		(18,029	)		—			(11,954	)		(29,983	)
Reversal of accumulated unrecognized gain on retiree medical plan		—			—			(137	)		(137	)
Reclassification adjustments		—			615			—			615
Current period credit (charge)		12,741			(591	)		386			12,536

Balance at December 31, 2009	$	(5,288	)	$	24		$	(11,705	)	$	(16,969	)

Note 16 — Earnings Per Share

The following table sets forth the computation of basic and dilutive income (loss) per common share from continuing operations attributable to OM Group, Inc. common shareholders for the years ended December 31:


	2009			2008		2007
	(in thousands, except per share amounts)

Income (loss) from continuing operations attributable to OM Group, Inc. common shareholders	$	(19,353	)	$	134,911	$	111,539
Weighted average shares outstanding — basic		30,244			30,124		29,937
Dilutive effect of stock options and restricted stock		—			234		339

Weighted average shares outstanding — assuming dilution		30,244			30,358		30,276
Earnings per common share:
Income (loss) from continuing operations attributable to OM Group, Inc. common shareholders — basic	$	(0.64	)	$	4.48	$	3.73

Income (loss) from continuing operations attributable to OM Group, Inc. common shareholders — assuming dilution	$	(0.64	)	$	4.45	$	3.68

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

The following table sets forth the computation of basic and diluted net income (loss) per common share attributable to OM Group, Inc. common shareholders for the years ended December 31:


	2009			2008		2007
	(in thousands, except per share amounts)

Net income (loss) attributable to OM Group, Inc. common shareholders	$	(17,857	)	$	135,003	$	246,866
Weighted average shares outstanding — basic		30,244			30,124		29,937
Dilutive effect of stock options and restricted stock		—			234		339

Weighted average shares outstanding — assuming dilution		30,244			30,358		30,276
Earnings per common share:
Net income (loss) attributable to OM Group, Inc. common shareholders — basic	$	(0.59	)	$	4.48	$	8.25

Net income (loss) attributable to OM Group, Inc. common shareholders — assuming dilution	$	(0.59	)	$	4.45	$	8.15

The Company uses the treasury stock method to calculate the effect of outstanding share-based compensation awards, which requires the Company to compute total employee proceeds as the sum of (a) the amount the employee must pay upon exercise of the award, (b) the amount of unearned share-based compensation costs attributed to future services and (c) the amount of tax benefits, if any, that would be credited to additional paid-in capital assuming exercise of the award. Shares under share-based compensation awards for which the total employee proceeds exceed the average market price over the applicable period have an antidilutive effect on earnings per share, and accordingly, are excluded from the calculation of diluted earnings per share.

As the Company had a loss from continuing operations for the year ended December 31, 2009, the effect of including dilutive securities in the earnings per share calculation would have been antidilutive. Accordingly, all shares under share-based compensation awards were excluded from the calculation of loss from continuing operations attributable to OM Group, Inc. common shareholders assuming dilution and net loss attributable to OM Group, Inc. common shareholders assuming dilution for the year ended December 31, 2009. For the year ended December 31, 2008, share-based compensation awards for 0.8 million shares were excluded from the diluted earnings per share calculation because they were antidilutive.

Note 17 — Share-Based Compensation

On May 8, 2007, the stockholders of the Company approved the 2007 Incentive Compensation Plan (the “2007 Plan”). The 2007 Plan superseded and replaced the 1998 Long-Term Incentive Compensation Plan (the “1998 Plan”) and the 2002 Stock Incentive Plan (the “2002 Plan”). The 1998 Plan and 2002 Plan terminated upon stockholder approval of the 2007 Plan, such that no further grants may be made under either the 1998 Plan or the 2002 Plan. The terminations did not affect awards already outstanding under the 1998 Plan or the 2002 Plan, which consist of options and restricted stock awards. All options outstanding under each of the 1998 Plan and the 2002 Plan have ten-year terms and have an exercise price of not less than the per share fair market value, measured by the average of the high and low price of the Company’s common stock on the NYSE, on the date of grant.

Under the 2007 Plan, the Company may grant stock options, stock appreciation rights, restricted stock awards and phantom stock and restricted stock unit awards to selected employees and non-employee directors. The 2007 Plan also provides for the issuance of common stock to non-employee directors as all or part of their annual compensation for serving as directors, as may be determined by the board of directors. The total number of shares of common stock available for awards under the 2007 Plan (including any annual stock issuances made to non-employee directors) is 3,000,000. The 2007 Plan provides that no more than 1,500,000 shares of common stock may be the subject of awards that are not stock options or stock appreciation rights. In addition, no more than 250,000 shares of common stock may be awarded to any one person in any calendar year, whether in the form of stock options, restricted stock

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

or another form of award. The 2007 Plan provides that all options granted must have an exercise price of not less than the per share fair market value on the date of grant and that no option may have a term of more than ten years. The Company satisfies stock option exercises and restricted stock awards through the issuance of authorized but unissued shares or treasury shares.

The Statements of Consolidated Operations include share-based compensation expense for option grants and restricted stock awards granted to employees as a component of Selling, general and administrative expenses of $5.8 million, $7.3 million and $7.2 million in 2009, 2008 and 2007, respectively. The income tax benefit recognized in the income statement for share based compensation expense was $1.8 million for 2007. No tax benefit was realized during 2008 and 2009 as a result of the valuation allowance against the deferred tax assets. In connection with the sale of the Nickel business, the Company entered into agreements with certain employees that provided for the acceleration of vesting of all unvested stock options and time-based and performance-based restricted stock previously granted to those employees. The Statements of Consolidated Operations include share-based compensation expense as a component of discontinued operations of $0.7 million in 2007. There is no unrecognized compensation expense related to the Nickel business.

At December 31, 2009, there was $3.5 million of unrecognized compensation expense related to nonvested share-based awards. That cost is expected to be recognized as follows: $2.5 million in 2010, $0.9 million in 2011 and $0.1 million in 2012 as a component of Selling, general and administrative expenses. Unearned compensation expense is recognized over the vesting period for the particular grant. Total unrecognized compensation cost will be adjusted for future changes in actual and estimated forfeitures and fluctuations in the fair value of restricted stock unit awards.

Beginning in 2007, non-employee directors of the Company are paid a portion of their annual retainer in unrestricted shares of common stock. For purposes of determining the number of shares of common stock to be issued, the 2007 Plan provides that shares are to be valued at the average of the high and low sale price of the Company’s common stock on the NYSE on the last trading date of the quarter. Pursuant to this plan, the Company issued 11,256 shares in 2009, 7,316 shares in 2008 and 1,919 shares in 2007 to non-employee directors.

Stock Options

Options granted generally vest in equal increments over a three-year period from the grant date. Upon any change in control of the Company, as defined in the applicable plan, or upon death, disability or retirement, the stock options become 100% vested and exercisable. The Company accounts for options that vest over more than one year as one award and recognizes expense related to those awards on a straight-line basis over the vesting period. During 2009, 2008 and 2007 the Company granted stock options to purchase 188,003, 168,175 and 184,750 shares of common stock, respectively. Included in the 2009 grants are stock options to purchase 7,703 shares of common stock with a vesting period of one year, which were granted to the Company’s Chief Executive Officer (“CEO”) in connection with payment of his 2008 high-performance bonus.

The fair value of options was estimated at the date of grant using a Black-Scholes options pricing model with the following weighted-average assumptions:


	2009			2008			2007

Risk-free interest rate		2.1	%		2.6	%		4.7	%
Dividend yield		—			—			—
Volatility factor of Company common stock		0.59			0.47			0.47
Weighted-average expected option term (years)		6.0			6.0			6.0
Weighted-average grant-date fair value	$	11.23		$	27.72		$	26.24

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

The risk-free interest rate assumption is based upon the U.S. Treasury yield curve appropriate for the term of the options being valued. The dividend yield assumption is zero, as the Company intends to continue to retain earnings for use in the operations of the business and does not anticipate paying dividends in the foreseeable future. Expected volatilities are based on historical volatility of the Company’s common stock. The expected term of options granted is determined using the simplified method allowed by Staff Accounting Bulletin (“SAB”) No. 110 as historical data was not sufficient to provide a reasonable estimate. Under this approach, the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term.

The following table sets forth the number of option shares and weighted-average grant-date fair value:


			Weighted-Average
			Fair Value at
	Shares		Grant Date

Non-vested at December 31, 2007		364,343	$	18.46
Granted during 2008		168,175	$	27.72
Vested during 2008		215,977	$	15.42
Forfeited during 2008		9,252	$	25.62

Non-vested at December 31, 2008		307,289	$	26.10
Granted during 2009		188,003	$	11.23
Vested during 2009		135,446	$	24.45
Forfeited during 2009		22,034	$	16.62

Non-vested at December 31, 2009		337,812	$	18.96

A summary of the Company’s stock option activity for 2009 is as follows:

Weighted

Average

Remaining

Aggregate

Exercise

Contractual

Intrinsic

Shares

Price

Term

Value

Outstanding at January 1, 2009

890,589

38.86

Granted

188,003

20.12

Exercised

(550

)

20.12

Expired unexercised

(20,066

)

51.03

Forfeited

(22,034

)

32.17

Outstanding at December 31, 2009

1,035,942

35.37

6.68

4,270

Vested or expected to vest at December 31, 2009

1,015,507

35.23

6.65

4,186

Exercisable at December 31, 2009

698,130

34.49

5.82

2,274

The fair value of options that vested during 2009, 2008 and 2007 was $3.3 million, $3.3 million and $3.1 million, respectively. The intrinsic value of options exercised during 2008 and 2007 was $0.4 million and $6.4 million, respectively. The intrinsic value of an option represents the amount by which the market value of the stock exceeds the exercise price of the option.

In connection with the exercise of stock options previously granted, the Company received cash payments of $0.9 million in 2008 and $11.3 million in 2007. The Company does not settle stock options for cash.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

Restricted Stock — Performance-Based Awards

During 2009, 2008 and 2007, the Company awarded 87,250, 60,200 and 86,854 shares, respectively, of performance-based restricted stock that vest subject to the Company’s financial performance. The number of shares of restricted stock that ultimately vest is based upon the Company’s achievement of specific measurable performance criteria. A recipient of performance-based restricted stock may earn a total award ranging from 0% to 100% of the initial grant, with target being 50% of the initial grant. The shares awarded during 2009 will vest upon the satisfaction of established performance criteria based on average consolidated EBITDA Margin (defined as operating profit plus depreciation and amortization expense divided by revenue) measured against a predetermined peer group, and average return on net assets, in each case over the three-year performance period ending December 31, 2011. The shares awarded during 2008 will vest upon the satisfaction of established performance criteria based on consolidated operating profit and average return on net assets, in each case over the three-year performance period ending December 31, 2010.

The performance period for the 86,854 shares awarded during 2007 ended on December 31, 2009. A total of 80,600 of the shares awarded during 2007 vest based upon the level of satisfaction of established performance criteria based on the Company’s consolidated operating profit and average return on net assets, in each case over the three-year performance period ended December 31, 2009. The shares will vest upon the determination by the Compensation Committee that the performance objectives relating to the shares were satisfied and that the shares were earned. Based upon the level of satisfaction of the performance objectives, 74,930 of the 80,600 of performance-based shares are expected to vest and be issued in the first quarter of 2010. The remaining 6,254 shares issued in 2007 are not expected to vest as the Company did not meet an established earnings target during any one of the years in the three-year period ended December 31, 2009.

The performance period for the shares of restricted stock awarded during 2006 ended on December 31, 2008. During 2009, a total of 86,610 shares vested upon the determination by the Compensation Committee that the performance objectives relating to the shares were satisfied, and the shares were earned at the maximum (100%) level. Upon vesting, employees surrendered 24,654 shares of common stock to the Company to pay required minimum withholding taxes applicable to the vesting of restricted stock. The surrendered shares are held by the Company as treasury stock.

The value of the performance-based restricted stock awards was based upon the market price of an unrestricted share of the Company’s common stock at the date of grant. The Company recognizes expense related to performance-based restricted stock ratably over the requisite performance period based upon the number of shares that are anticipated to vest. The number of shares anticipated to vest is evaluated quarterly and compensation expense is adjusted accordingly. Upon any change in control of the Company, as defined in the plan, or upon retirement, the shares become 100% vested at the target level. In the event of death or disability, a pro rata number of shares shall remain eligible for vesting at the end of the performance period.

In connection with the sale of the Nickel business, the Company entered into an agreement with an employee that provided for the acceleration of vesting at the “target” performance level for unvested performance-based restricted stock previously granted to that employee. As a result, during 2007, 3,825 shares of performance-based restricted stock vested and 3,825 shares of performance-based restricted stock were forfeited.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

A summary of the Company’s performance-based restricted stock awards for 2009 is as follows:


				Weighted
				Average
				Grant Date
	Shares			Fair Value

Non-vested at January 1, 2009		226,814		$	41.03
Granted		87,250			18.87
Vested		(86,610	)		28.61
Forfeited		(5,875	)		27.36

Non-vested at December 31, 2009		221,579		$	37.52
Expected to vest as of December 31, 2009		76,200

Restricted Stock Units — Performance-Based Awards

During 2009, the Company awarded 22,480 performance-based restricted stock units to employees outside the U.S. that vest subject to the Company’s financial performance for the three-year performance period ending December 31, 2011. These awards will be settled in cash based on the value of the Company’s common stock at the vesting date. Since the awards will be settled in cash, they are recorded as a liability award in accordance with the “Stock Compensation” topic of the ASC. Accordingly, the Company records these awards as a component of other non-current liabilities on the Consolidated Balance Sheets. The fair value of the awards, which determines the measurement of the liability on the balance sheet, is remeasured at each reporting period until the award is settled.

Fluctuations in the fair value of the liability awards are recorded as increases or decreases to compensation expense. Over the life of these awards, the cumulative amount of compensation expense recognized will match the actual cash paid. The number of restricted stock units that ultimately vest is based upon the Company’s achievement of the same performance criteria as the 2009 performance-based restricted stock awards described above.

The Company recognizes expense related to performance-based restricted stock units ratably over the requisite performance period based upon the number of units that are anticipated to vest. The number of units anticipated to vest is evaluated quarterly and compensation expense is adjusted accordingly. Upon any change in control of the Company, as defined in the applicable plan, or upon retirement, the units become 100% vested at the target level. In the event of death or disability, a pro rata number of units remain eligible for vesting at the end of the performance period.

A summary of the Company’s performance-based restricted stock unit awards for 2009 is as follows:


	Units

Non-vested at January 1, 2009		—
Granted		22,480
Forfeited		(3,100	)

Non-vested at December 31, 2009		19,380

Expected to vest at December 31, 2009		—

Restricted Stock — Time-Based Awards

During 2009, 2008 and 2007, the Company awarded 24,850, 17,675 and 24,360 shares, respectively, of time-based restricted stock that vest three years from the date of grant, subject to the recipient remaining employed by the Company on that date. In addition, during 2009, the Company awarded 4,127 shares of time-based restricted stock with a vesting period of one year to its CEO in connection with payment of his 2008 high-performance bonus. The value of the restricted stock awarded in 2009, 2008 and 2007, based upon the market price of an unrestricted share of

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

the Company’s common stock at the date of grant, was $0.6 million, $1.0 million and $1.2 million, respectively. Compensation expense is being recognized ratably over the vesting period. Upon any change in control of the Company, as defined in the plan, or upon retirement, the shares become 100% vested. A pro rata number of shares will vest in the event of death or disability prior to the stated vesting date.

In connection with the sale of the Nickel business, the Company entered into an agreement with an employee that provided for the acceleration of vesting for unvested time-based restricted stock previously granted. As a result, during 2007, 2,100 shares of unvested time-based restricted stock vested.

A summary of the Company’s time-based restricted stock awards for 2009 is as follows:


				Weighted
				Average
				Grant Date
	Shares			Fair Value

Non-vested at January 1, 2009		60,235		$	45.63
Granted		28,977		$	20.12
Vested		(19,750	)	$	29.16
Forfeitures		(3,800	)	$	29.77

Non-vested at December 31, 2009		65,662		$	40.25
Expected to vest as of December 31, 2009		64,874

A total of 19,750 shares of time-based restricted stock awarded during 2006 vested during 2009. During 2009, employees surrendered 5,690 shares of common stock to the Company upon vesting to pay required minimum withholding taxes applicable to the vesting of the restricted stock. The surrendered shares are held by the Company as treasury stock.

Restricted Stock Units — Time-Based Awards

During 2009, the Company awarded 4,400 time-based restricted stock units to employees outside the U.S. These awards will be settled in cash based on the value of the Company’s common stock at the vesting date. Since the awards will be settled in cash, they are recorded as a liability award in accordance with the “Stock Compensation” topic of the ASC. Accordingly, the Company records these awards as a component of other non-current liabilities on the Consolidated Balance Sheets. The fair value of the awards, which determines the measurement of the liability on the balance sheet, is remeasured at each reporting period until the award is settled. Fluctuations in the fair value of the liability awards are recorded as increases or decreases to compensation expense. Over the life of these awards, the cumulative amount of compensation expense recognized will match the actual cash paid. The restricted share units vest three years from the date of grant, subject to the recipient remaining employed by the Company on that date. Upon any change in control of the Company, as defined in the applicable plan, or upon retirement, the units become 100% vested. A pro rata number of units will vest in the event of death or disability prior to the stated vesting date.

A summary of the Company’s time-based restricted stock unit awards for 2009 is as follows:


	Units

Nonvested at January 1, 2009		—
Granted		4,400
Forfeited		(900	)

Nonvested at December 31, 2009		3,500

Expected to vest at December 31, 2009		3,500

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

Note 18 — Commitments and Contingencies

In March 2009, GTL was served in the Jersey Islands with an injunction obtained by FG Hemisphere Associates LLC (“FG Hemisphere”) who is seeking to enforce two arbitration awards made in 2003 by an arbitral tribunal operating under the auspices of the International Court of Arbitration against the DRC and Société Nationale D’Electricité for $108.3 million. FG Hemisphere asserts that Gécamines (a partner in GTL) is an organization of the DRC and that FG Hemisphere is entitled to enforce the arbitral awards in the Jersey Islands against any assets of Gécamines and the DRC located in that jurisdiction (including monies paid or to be paid by GTL to Gécamines or the DRC). GTL has been enjoined from making payments to the DRC and Gécamines under the Long Term Slag Sales Agreement between GTL and Gécamines. The Company does not believe the Royal Court of Jersey has jurisdiction over the assets of GTL, including payments to Gécamines; however, until the Court addresses this issue, which is scheduled for the second quarter of 2010, the Company will continue to comply with the terms of the injunction. While there can be no assurances with respect to the final outcome of this process, the Company believes that, based on the information currently available to it, this matter will not have a material adverse effect upon its financial condition, results of operations, or cash flows.

The Company has potential contingent liabilities with respect to environmental matters related to its former PMG operations in Brazil. The Company has been informed by the purchaser of the PMG operations of environmental issues at three of the operating locations in Brazil. Environmental cost sharing arrangements are in place between the original owner and operator of those PMG operations, the Company and the subsequent purchaser of the PMG operations. The Company is reviewing information made available to it on the environmental conditions, but cannot currently evaluate whether or not, or to what extent, it will be responsible for any remediation costs.

The Company is subject to a variety of environmental and pollution control laws and regulations in the jurisdictions in which it operates. As is the case with other companies in similar industries, the Company faces exposure from actual or potential claims and legal proceedings involving environmental matters. A number of factors affect the cost of environmental remediation, including the determination of the extent of contamination, the length of time the remediation may require, the complexity of environmental regulations, and the continuing improvements in remediation techniques. Taking these factors into consideration, the Company estimates the undiscounted costs of remediation, which will be incurred over several years, and accrues an amount consistent with the estimates of these costs when it is probable that a liability has been incurred. At December 31, 2009 and 2008, the Company has recorded environmental liabilities of $2.8 million and $3.4 million, respectively, primarily related to remediation and decommissioning at the Company’s closed manufacturing sites in Newark, New Jersey and Vasset, France. Although it is difficult to quantify the potential impact of compliance with, or liability under, environmental protection laws, the Company believes that any amount it may be required to pay in connection with environmental matters is not reasonably likely to exceed amounts accrued by an amount that would have a material adverse effect upon its financial condition, results of operations or cash flows.

From time to time, the Company is subject to various legal and regulatory proceedings, claims and assessments that arise in the normal course of business. The ultimate resolution of such proceedings, claims and assessments is inherently unpredictable and, as a result, the Company’s estimates of liability, if any, are subject to change and actual results may materially differ from the Company’s estimates. The Company’s estimate of any costs to be incurred as a result of these proceedings, claims and assessments are accrued when the liability is considered probable and the amount can be reasonably estimated. The Company believes the amount of any potential liability with respect to legal and regulatory proceedings, claims and assessments will not have a material adverse effect upon its financial condition, results of operations, or cash flows.

Note 19 — Lease Obligations

The Company rents office space, equipment, land and an airplane under long-term operating leases. The Company’s operating lease expense was $7.4 million in 2009, $7.8 million in 2008 and $5.2 million in 2007.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

Future minimum payments under noncancellable operating leases at December 31, 2009 are as follows for the year ending December 31:


2010	$	6,547
2011		4,550
2012		3,990
2013		2,548
2014		2,012
2015 and thereafter		9,137

Total minimum lease payments	$	28,784

Note 20 — Reportable Segments and Geographic Information

The Company is organized into two segments: Advanced Materials and Specialty Chemicals. The accounting policies of the segments are the same as those described in Note 1. Effective January 1, 2008, the Company reorganized its management structure and external reporting around two segments: Advanced Materials and Specialty Chemicals. The corresponding information for 2007 has been reclassified to conform to the current year reportable segment presentation. Intersegment transactions are generally recognized based on current market prices. Intersegment transactions are eliminated in consolidation. Corporate is comprised of general and administrative expenses not allocated to the Advanced Materials or Specialty Chemicals segments.

The Advanced Materials segment consists of inorganics, the DRC smelter joint venture and metal resale. The Advanced Materials segment manufactures inorganic products using unrefined cobalt and other metals and serves the battery materials, powder metallurgy, ceramic and chemical end markets. The Specialty Chemicals segment is comprised of Electronic Chemicals, Advanced Organics, UPC and Photomasks. Electronic Chemicals develops and manufactures chemicals for the printed circuit board, memory disk, general metal finishing and electronic packaging and finishing markets. Advanced Organics offers products for the coating and inks, chemical and tire markets. UPC develops, manufactures and distributes a wide range of ultra-pure chemicals used in the manufacture of electronic and computer components such as semiconductors, silicon chips, wafers and liquid crystal displays. Photomasks manufactures photo-imaging masks (high-purity quartz or glass plates containing precision, microscopic images of integrated circuits) and reticles for the semiconductor, optoelectronics, microelectronics and micro electro mechanical systems industries under the Compugraphics brand name.

The following table reflects the 2009, 2008 and 2007 sales within Specialty Chemicals:


	2009			2008			2007

Net Sales
Electronic chemicals	$	132,612		$	167,335		$	109,276
Advanced organics		163,216			258,441			194,621
Ultra Pure Chemicals		72,942			82,068			—
Photomasks		33,428			39,366			—
Eliminations		(397	)		(535	)		—

	$	401,801		$	546,675		$	303,897

Sales to one customer in the Advanced Materials segment represented approximately 16%, 22% and 23% of consolidated net sales in 2009, 2008 and 2007, respectively. There are a limited number of supply sources for cobalt. Production problems or political or civil instability in supplier countries, primarily the DRC, Finland and Russia, as well as increased demand in developing countries may affect the supply and market price of cobalt. In particular, political and civil instability in the DRC may affect the availability of raw materials from that country.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

While its primary manufacturing site is in Finland, the Company also has manufacturing and other facilities in North America, Europe, Africa and Asia-Pacific, and the Company markets its products worldwide. Further, approximately 23% of the Company’s investment in property, plant and equipment is located in the DRC, where the Company operates a smelter through a 55% owned joint venture.

The following table reflects the results of the Company’s reportable segments:


	2009			2008			2007

Business Segment Information
Net Sales
Advanced Materials	$	472,412		$	1,192,423		$	721,874
Specialty Chemicals		401,801			546,675			303,897
Intersegment items		(2,544	)		(2,249	)		(4,270	)

	$	871,669		$	1,736,849		$	1,021,501

Operating profit (loss)
Advanced Materials	$	53,301		$	203,545		$	212,609
Specialty Chemicals(a)		(26,981	)		11,168			18,176
Corporate(b)		(27,304	)		(37,540	)		(35,807	)
Intersegment items		—			449			1,257

		(984	)		177,622			196,235

Interest expense		(689	)		(1,597	)		(7,820	)
Interest income		928			1,920			23,922
Loss on redemption of Notes		—			—			(21,733	)
Foreign exchange gain (loss)		(21	)		(3,744	)		8,100
Other expense, net		(292	)		(1,913	)		(449	)

		(74	)		(5,334	)		2,020

Income (loss) from continuing operations before income taxes	$	(1,058	)	$	172,288		$	198,255

Expenditures for property, plant & equipment
Advanced Materials	$	18,996		$	21,783		$	15,336
Specialty Chemicals		6,690			8,929			4,021

	$	25,686		$	30,712		$	19,357

Depreciation and amortization
Advanced Materials	$	26,303		$	26,331		$	26,043
Specialty Chemicals		26,508			28,727			6,290
Corporate		954			1,058			896

	$	53,765		$	56,116		$	33,229

Total assets
Advanced Materials	$	795,186		$	746,347
Specialty Chemicals		503,737			579,185
Corporate		145,213			108,895

	$	1,444,136		$	1,434,427


(a)		Specialty Chemicals includes a $37.5 million non-cash goodwill impairment charge and a $12.7 million restructuring charge in 2009.


(b)		Corporate includes a $4.7 million gain on the termination of the Company’s retiree medical plan in 2009.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued


			Long-Lived
	Net Sales(a)		Assets(b)

Geographic Region Information
2009
Finland	$	260,361	$	89,610
United States		153,539		36,388
Japan		190,122		91
Other		267,647		48,774
Democratic Republic of Congo		—		52,252

	$	871,669	$	227,115

2008
Finland	$	581,260	$	85,904
United States		280,275		40,762
Japan		536,620		102
Other		338,694		55,731
Democratic Republic of Congo		—		62,703

	$	1,736,849	$	245,202

2007
Finland	$	373,148
United States		178,894
Japan		313,195
Other		156,264

	$	1,021,501


(a)		Net sales attributed to the geographic area are based on the location of the manufacturing facility, except for Japan, which is a sales office.


(b)		Long-lived assets consists of property, plant and equipment, net.

Note 21 — Subsequent Events

On January 29, 2010, the Company completed the acquisition of EaglePicher Technologies LLC from EaglePicher Corporation for approximately $172 million in cash, subject to customary post closing adjustments. Based in Joplin, Missouri, EaglePicher Technologies is a leader in portable power solutions and energy storage technologies serving aerospace, defense and medical markets and it is developing technologies in advanced power storage to serve alternative energy storage markets. EaglePicher Technologies product offerings can be grouped into two broad categories (i) proprietary battery products and (ii) complementary battery support products that consist of energetic devices, chargers, battery management systems and distributed products. In fiscal year 2009, EaglePicher Technologies recorded revenues of approximately $125 million, of which approximately 60 percent came from its defense business, approximately 33 percent from its aerospace business, and the balance from its medical and other businesses. EaglePicher Technologies will be operated and reported within a new segment called Battery Technologies. The Company has not yet completed the initial accounting for this acquisition. The amounts recognized for major classes of assets acquired and liabilities assumed as of the acquisition date will be provided in

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued

the Company’s Unaudited Condensed Consolidated Financial Statements and accompanying notes for the period ending March 31, 2010.

In January 2010, in connection with the EaglePicher Technologies acquisition, the Company borrowed $94.0 million under its Revolver at an interest rate of 0.73%. The Revolver provides for interest-only payments during its term, with principal due at maturity on December 20, 2010.

Note 22 — Quarterly Results of Operations (Unaudited)


	2009
	First			Second			Third		Fourth
	Quarter			Quarter			Quarter		Quarter			Full Year

Net sales	$	191,706		$	203,352		$	235,239	$	241,372		$	871,669
Gross profit	$	26,615		$	34,434		$	42,679	$	62,055		$	165,783
Amounts attributable to OM Group, Inc. common shareholders:
Income (loss) from continuing operations, net of tax	$	(8,541	)	$	(35,006	)	$	9,579	$	14,615		$	(19,353	)
Income (loss) from discontinued operations, net of tax		264			(325	)		1,846		(289	)	$	1,496

Net income (loss)	$	(8,277	)	$	(35,331	)	$	11,425	$	14,326		$	(17,857	)

Net income (loss) per common share — basic
Continuing operations	$	(0.28	)	$	(1.16	)	$	0.32	$	0.48		$	(0.64	)
Discontinued operations		0.01			(0.01	)		0.06		(0.01	)		0.05

Net income (loss)	$	(0.27	)	$	(1.17	)	$	0.38	$	0.47		$	(0.59	)

Net income (loss) per common share — assuming dilution
Continuing operations	$	(0.28	)	$	(1.16	)	$	0.32	$	0.48		$	(0.64	)
Discontinued operations		0.01			(0.01	)		0.06		(0.01	)		0.05

Net income (loss)	$	(0.27	)	$	(1.17	)	$	0.38	$	0.47		$	(0.59	)

The first quarter of 2009 includes a $6.6 million adjustment to reduce the carrying value of certain inventory to market value and a non-cash net charge of $2.6 million for the impairment of goodwill.

The second quarter of 2009 includes a non-cash charge of $35.0 million for the impairment of goodwill, a non-cash charge of $1.2 million for the impairment of intangible assets and a $4.7 million gain on termination of the retiree medical plan.

The third quarter of 2009 includes an $11.9 million restructuring charge related to the Company’s Advanced Organics business.

The fourth quarter of 2009 includes an $0.8 million restructuring charge related to the Company’s Advanced Organics business.

The Company’s share of discrete tax items in 2009 totaled income (expense) of ($2.0 million) in the first quarter of 2009, ($1.3 million) in the second quarter of 2009, $1.7 million in the third quarter of 2009 and ($4.4 million) in the fourth quarter of 2009.

Notes to Consolidated Financial Statements
OM Group, Inc. and Subsidiaries — Continued


	2008
	First			Second			Third		Fourth
	Quarter			Quarter			Quarter		Quarter			Full Year

Net sales	$	480,795		$	510,825		$	448,630	$	296,599		$	1,736,849
Gross profit	$	136,666		$	126,023		$	86,261	$	3,598		$	352,548
Amounts attributable to OM Group, Inc. common shareholders:
Income (loss) from continuing operations	$	55,589		$	56,594		$	55,746	$	(33,018	)	$	134,911
Income (loss) from discontinued operations, net of tax		(369	)		(362	)		520		303		$	92

Net income (loss)	$	55,220		$	56,232		$	56,266	$	(32,715	)	$	135,003

Net income (loss) per common share — basic
Continuing operations	$	1.85		$	1.88		$	1.85	$	(1.09	)	$	4.48
Discontinued operations		(0.01	)		(0.01	)		0.01		0.01			—

Net income (loss)	$	1.84		$	1.87		$	1.86	$	(1.08	)	$	4.48

Net income (loss) per common share — assuming dilution
Continuing operations	$	1.82		$	1.86		$	1.84	$	(1.09	)	$	4.45
Discontinued operations		(0.01	)		(0.01	)		0.01		0.01			—

Net income (loss)	$	1.81		$	1.85		$	1.85	$	(1.08	)	$	4.45

In the third quarter of 2008, the Company completed an initial analysis of foreign tax credit positions and recorded a $25.1 million tax benefit related to an election to take foreign tax credits on prior year U.S. tax returns. The $25.1 million tax benefit is net of a valuation allowance of $3.5 million on deferred tax assets as to which the Company believes it is more likely than not it will be unable to realize as a result of its election to claim the foreign tax credits.

The fourth quarter of 2008 includes a $26.9 million adjustment to reduce the carrying value of certain inventory to market value, an additional $21.5 million tax benefit related to completion of the analysis related to the election to take foreign tax credits on prior year U.S. tax returns, and a non-cash charge of $8.8 million for the impairment of goodwill.


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

There are no such changes or disagreements.


Item 9A.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management of the Company, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2009. As defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), disclosure controls and procedures are controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported on a timely basis, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures include components of the Company’s internal control over financial reporting.

Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2009.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision of the Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework.” Based on that evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2009.

The Company’s independent registered public accounting firm, Ernst & Young LLP, audited the Company’s internal control over financial reporting and, based on that audit, issued an attestation report regarding the Company’s internal control over financial reporting, which is included in this Annual Report.

Changes in Internal Controls

There were no changes in the Company’s internal control over financial reporting, identified in connection with management’s evaluation of internal control over financial reporting, that occurred during the fourth quarter of 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


Item 9B.	Other Information

None.

PART III


Item 10.	Directors, Executive Officers of the Registrant and Corporate Governance

Information with respect to directors of the Company will be set forth under the heading “Proposal 1. Election of Directors” in the Company’s proxy statement to be filed pursuant to Regulation 14A under the Exchange Act in connection with the 2010 Annual Meeting of Stockholders of the Company (the “2010 Proxy Statement”) and is incorporated herein by reference. For information with respect to the executive officers of the Company, see “Executive Officers of the Registrant” in Part I of this Form 10-K.

Information with respect to the Company’s audit committee, nominating and governance committee, compensation committee and the audit committee financial experts will be set forth in the 2010 Proxy Statement under the heading “Corporate Governance and Board Matters” and is incorporated herein by reference.

Information with respect to compliance with Section 16(a) of the Exchange Act will be set forth in the 2010 Proxy Statement under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by reference.

The Company has adopted a Code of Conduct and Ethics that applies to all of its employees, including the principal executive officer, the principal financial officer and the principal accounting officer. The Code of Conduct and Ethics, the Company’s corporate governance principles and all committee charters are posted on the “Corporate Governance” portion of the Company’s website (www.omgi.com). A copy of any of these documents is available in print free of charge to any stockholder who requests a copy, by writing to OM Group, Inc., 127 Public Square, 1500 Key Tower, Cleveland, Ohio 44114-1221 USA, Attention: Troy Dewar, Director of Investor Relations.

On May 18, 2009, the Company filed the annual certification by our CEO that, as of the date of the certification, he was unaware of any violation by the Company of the corporate governance listing standards of the New York Stock Exchange.


Item 11.	Executive Compensation

Information with respect to executive and director compensation and compensation committee interlocks and insider participation, together with the report of the compensation committee regarding the compensation discussion and analysis will be set forth in the 2010 Proxy Statement under the headings “Executive Compensation,” “Corporate Governance and Board Matters — Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” and is incorporated herein by reference.


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

Information with respect to security ownership of certain beneficial owners and management will be set forth in the 2010 Proxy Statement under the heading “Security Ownership of Directors, Executive Officers and Certain Beneficial Owners — Beneficial Ownership” and is incorporated herein by reference.

Equity Compensation Plan Information

The following table sets forth information concerning common stock issuable pursuant to the Company’s equity compensation plans as of December 31, 2009.

Number of securities

remaining available for

future issuance under

Number of securities

equity compensation plans

to be issued upon

Weighted-average

(excluding securities

exercise of

exercise price of

issuable under

outstanding options

outstanding options)

Equity Compensation Plans Approved by the Stockholders

947,008

35.53

2,427,729

Equity Compensation Plans Not Approved by the Stockholders(a)

88,934

33.67

—


(a)		As an inducement to join the Company, on June 13, 2005, the Chief Executive Officer was granted options to purchase 88,934 shares of common stock that are not covered by the equity compensation plans approved by the Company’s stockholders. These options have an exercise price of $33.67 per share (the market price of Company stock on the grant date was $24.89) and became exercisable on May 31, 2008. The options have an expiration date of June 13, 2015.


Item 13.	Certain Relationships and Related Transactions, Director Independence

Information with respect to certain relationships and related transactions, as well as director independence, will be set forth in the 2010 Proxy Statement under the heading “Corporate Governance and Board Matters” and is incorporated herein by reference.


Item 14.	Principal Accountant Fees and Services

Information with respect to principal accounting fees and services will be set forth in the 2010 Proxy Statement under the heading “Description of Principal Accountant Fees and Services” and is incorporated herein by reference.

100

PART IV


Item 15.	Exhibits and Financial Statement Schedules

(1) The following Consolidated Financial Statements of OM Group, Inc. are included in Part II, Item 8:


	Consolidated Balance Sheets at December 31, 2009 and 2008

	Statements of Consolidated Operations for the years ended December 31, 2009, 2008 and 2007

	Statements of Consolidated Comprehensive Income for the years ended December 31, 2009, 2008 and 2007

	Statements of Consolidated Cash Flows for the years ended December 31, 2009, 2008 and 2007

	Statements of Consolidated Stockholders’ Equity for the years ended December 31, 2009, 2008 and 2007

	Notes to Consolidated Financial Statements

(2) Schedule II — Valuation and Qualifying Accounts for the years ended December 31, 2009, 2008 and 2007

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

(3) Exhibits

The following exhibits are included in this Annual Report on Form 10-K:



(3) Articles of Incorporation and By-laws

3.1		Restated Certificate of Incorporation of OM Group, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed on November 6, 2008).

3.2		Amended and Restated Bylaws of OM Group, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K filed on February 28, 2008).

(4) Instruments defining rights of security holders including indentures.

4.1		Form of Common Stock Certificate of the Company.‡

(10) Material Contracts

10.1		Technology Agreement among Outokumpu Oy, Outokumpu Engineering Contractors Oy, Outokumpu Research Oy, Outokumpu Harjavalta Metals Oy and Kokkola Chemicals Oy dated March 24, 1993. ‡

*10.2		OM Group, Inc. Benefit Restoration Plan, effective January 1, 1995 (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-4 (No. 333-84128) filed on March 11, 2002).

*10.3		Trust under OM Group, Inc. Benefit Restoration Plan, effective January 1, 1995 (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-4 (No. 333-84128) filed on March 11, 2002).

*10.4		Amendment to OM Group, Inc., Benefit Restoration Plan (frozen Post-2004/Pre-2008 Terms).(incorporated by reference to Exhibit 10.4 of the Company’s Annual Report filed on Form 10-K on February 28, 2008).

10.5		Stock Purchase Agreement dated as of October 7, 2007 by and between Rockwood Specialties Group, Inc. and OM Group, Inc. (incorporated by reference to Exhibit 10.5 of the Company’s Annual Report filed on Form 10-K on February 28, 2008).

*10.6		OM Group, Inc. Bonus Program for Key Executives and Middle Management. ‡

101



+10.7		Joint Venture Agreement among OMG B.V., Groupe George Forrest S.A., La Generale Des Carrieres Et Des Mines and OM Group, Inc. to partially or totally process the slag located in the site of Lubumbashi, Democratic Republic of Congo (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed on March 31, 2005).

10.8		Sale and purchase agreement dated as of December 23, 2009 by and among EaglePicher Corporation, as guarantor of the Seller, EaglePicher Technologies Holdings, LLC, as the Seller, EaglePicher Technologies, LLC, as the Company, OM Group, Inc., as limited guarantor of the Buyer, and OMG Energy Holdings, Inc., as the Buyer.

+10.9		Long Term Slag Sales Agreement between La Generale Des Carriers Et Des Mines and J.V. Groupement Pour Le Traitement Du Terril De Lubumbashi (filed as an Annex to Exhibit10.7).

+10.10		Long Term Cobalt Alloy Sales Agreement between J.V. Groupement Pour Le Traitement Du Terril De Lubumbashi and OMG Kokkola Chemicals Oy (filed as an Annex to Exhibit10.7).

+10.11		Tolling Agreement between Groupement Pour Le Traitement Du Terril De Lubumbashi and Societe De Traitement Due Terril De Lubumbashi (filed as an Annex to Exhibit10.7).

*10.12		OM Group, Inc. 1998 Long-Term Incentive Compensation Plan (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed on March 31, 2005).

*10.13		Separation Agreement by and between OM Group, Inc. and Thomas R. Miklich dated October 17, 2003 (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K filed on March 31, 2005).

*10.14		Form of Stock Option Agreement between OM Group, Inc. and Joseph M. Scaminace (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K filed on August 22, 2005).

*10.15		Form of Restricted Stock Agreement between OM Group, Inc. and Joseph M. Scaminace (incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-K filed on August 22, 2005).

*10.16		Employment Agreement by and between OM Group, Inc. and Joseph M. Scaminace, dated May 15, 2008 (incorporated by reference to Exhibit 99 to the Company’s Current Report on Form 8-K filed on May 21, 2008).

*10.17		Form of Indemnification Agreement between OM Group, Inc. and its directors and certain officers (incorporated by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K filed on August 22, 2005).

*10.18		Employment Agreement by and between OM Group, Inc. and Valerie Gentile Sachs dated September 8, 2005 (incorporated by reference to Exhibit 10.43 to the Company’s Quarterly Report on Form 10-Q filed on November 8, 2005).

*10.19		Severance Agreement by and between OM Group, Inc. and Valerie Gentile Sachs dated November 7, 2005 (incorporated by reference to Exhibit 10.44 to the Company’s Quarterly Report on Form 10-Q filed on November 8, 2005).

*10.20		Form of Non-Incentive Stock Option Agreement under the 1998 Long-Term Incentive Compensation Plan (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on December 21, 2005).

*10.21		OM Group, Inc. 2002 Stock Incentive Plan (incorporated by reference to Exhibit 99 to the Company’s Current Report on Form 8-K filed May 5, 2006).

*10.22		Form of Restricted Stock Agreement for Joseph M. Scaminace under the 1998 Long-Term Incentive Compensation Plan, as amended (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on August 11, 2006).

102



*10.23		Form of Restricted Stock Agreement (time-based) under the 1998 Long-Term Incentive Compensation Plan and the 2002 Stock Incentive Plan (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on August 11, 2006).

*10.24		Form of Restricted Stock Agreement (performance-based) under the 1998 Long-Term Incentive Compensation Plan and the 2002 Stock Incentive Plan (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K filed on August 11, 2006).

*10.25		Employment Agreement by and between OM Group, Inc. and Kenneth Haber dated March 6, 2006 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2006).

*10.26		Form of Severance Agreement between OM Group, Inc. and certain executive officers (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on November 14, 2006).

*10.27		Form of Amended and Restated Change in Control Agreement between OM Group, Inc. and certain executive officers (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on November 14, 2006).

10.28		Reserved

*10.29		Amended and Restated Change in Control Agreement dated as of November 13, 2006 between OM Group, Inc. and Joseph M. Scaminace (incorporated by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K filed on November 14, 2006).

*10.30		Amended and Restated Severance Agreement dated as of November 13, 2006 between OM Group, Inc. and Valerie Gentile Sachs (incorporated by reference to Exhibit 99.5 to the Company’s Current Report on Form 8-K filed on November 14, 2006).

10.31		Reserved

10.32		Stock Purchase Agreement Among OMG Kokkola Chemicals Holding (Two) BV, OMG Harjavalta Chemicals Holding BV, OMG Finland Oy, OM Group, Inc., Norilsk Nickel (Cyprus) Limited And OJSC MMC Norilsk Nickel (incorporated by reference to Exhibit 2 to the Company’s Current Report on Form 8-K filed on March 7, 2007).

*10.33		OM Group, Inc. 2007 Incentive Compensation Plan (incorporated by reference to Exhibit 99 to the Company’s Quarterly Report on Form 10-Q filed on August 2, 2007).

*10.34		Form of Stock Option Agreement under the 2007 Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 2, 2007).

*10.35		Form of Restricted Stock Agreement (time-based) under the 2007 Incentive Compensation Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 2, 2007).

*10.36		Form of Restricted Stock Agreement (performance-based) under the 2007 Incentive Compensation Plan (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on November 2, 2007).

*10.37		OM Group, Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K filed May 21, 2008).

*10.38		Form of Amendment to Severance Agreement between OM Group, Inc. and certain executive officers (incorporated by reference to the Company’s Current Report on Form 8-K filed on December 19, 2008).

10.39		Revolving Credit Agreement, dated as of December 20, 2005, among OM Group, Inc. as the borrower, the lending institutions named therein as lenders; National City Bank, as a Lender, the Swing Line Lender, the Letter of Credit Issuer, the Administrative Agent, the Collateral Agent, the Lead Arranger, and the Book Running Manager (incorporated by reference to Exhibit 4.6 to the Company’s Annual Report on Form 10-K filed on March 9, 2006).

103



10.40		First Amendment to the Revolving Credit Agreement, dated as of November 10, 2006, among OM Group, Inc. as the borrower, the lending institutions named therein as lenders; National City Bank, as a Lender, the Swing Line Lender, the Letter of Credit Issuer, the Administrative Agent, the Collateral Agent, the Lead Arranger, and the Book Running Manager (incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K filed on February 28, 2007).

10.41		Second Amendment to the Revolving Credit Agreement, dated as of January 31, 2007, among OM Group, Inc. as the borrower, the lending institutions named therein as lenders; National City Bank, as a Lender, the Swing Line Lender, the Letter of Credit Issuer, the Administrative Agent, the Collateral Agent, the Lead Arranger, and the Book Running Manager (incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on Form 10-K filed on February 28, 2007).

21		List of Subsidiaries

23		Consent of Ernst & Young LLP

24		Powers of Attorney

31.1		Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)

31.2		Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)

32		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. 1350


*		Indicates a management contract, executive compensation plan or arrangement.

+		Portions of Exhibit have been omitted and filed separately with the Securities and Exchange Commission in reliance on Rule 24b-2 and an Order from the Commission granting the Company’s request for confidential treatment dated June 26, 1998.

‡		These documents were filed as exhibits to the Company’s Form S-1 Registration Statement (Registration No. 33-60444) which became effective on October 12, 1993, and are incorporated herein by reference.

104

OM Group, Inc.
Schedule II — Valuation and Qualifying Accounts
Years Ended December 31, 2009, 2008 and 2007
(Dollars in Millions)


	Balance					Charged			Charged
	at					to			to						Balance at
	Beginning					Costs and			Other						End of
Classifications	of Year		Acquisitions			Expenses			Accounts			Deductions			Year

2009:
Allowance for doubtful accounts	$	7.9		—			0.3	(1)		0.4	(5)		(1.7	)(3)	$	6.9
Allowance for note receivable from joint venture partner		5.2		—			—			—			—			5.2
Environmental reserve		3.4		—			0.2	(2)		0.1	(5)		(0.9	)(4)		2.8

	$	16.5	$	—		$	0.5		$	0.5		$	(2.6	)	$	14.9

2008:
Allowance for doubtful accounts	$	1.5		3.7	(6)		4.3	(1)		—			(1.6	)(3)	$	7.9
Allowance for note receivable from joint venture partner		5.2		—			—			—			—			5.2
Environmental reserve		4.9		—			0.4	(2)		(0.1	)(5)		(1.8	)(4)		3.4

	$	11.6	$	3.7		$	4.7		$	(0.1	)	$	(3.4	)	$	16.5

2007:
Allowance for doubtful accounts	$	1.1		—			0.5	(1)		—			(0.1	)(3)	$	1.5
Allowance for note receivable from joint venture partner		5.2		—			—			—			—			5.2
Environmental reserve		8.0		—			4.9	(3)		0.3	(5)		(8.3	)(4)		4.9

	$	14.3	$	—		$	5.4		$	0.3		$	(8.4	)	$	11.6


(1)		Provision for uncollectible accounts included in selling, general and administrative expenses.

(2)		Provision for environmental costs included in selling, general and administrative expenses.

(3)		Actual accounts written-off against the allowance.

(4)		Actual cash expenditures charged against the accrual.

(5)		Foreign currency translation adjustment.

(6)		Allowance for doubtful accounts related to the Rockwood acquisition were not included in the December 31, 2007 balance.

105

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on February 25, 2010.

OM GROUP, INC.


	By:	/s/ Kenneth Haber

Kenneth Haber

Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below on February 25, 2010 by the following persons on behalf of the registrant and in the capacities indicated.


Signature				Title


/s/ Joseph M. Scaminace Joseph M. Scaminace				Chairman and Chief Executive Officer (Principal Executive Officer)

/s/ Kenneth Haber Kenneth Haber				Chief Financial Officer (Principal Financial Officer)

/s/ Robert T. Pierce Robert T. Pierce				Vice President and Corporate Controller (Principal Accounting Officer)

/s/ Richard W. Blackburn Richard W. Blackburn				Director

/s/ Steven J. Demetriou Steven J. Demetriou				Director

/s/ Katharine L. Plourde Katharine L. Plourde				Director

/s/ David L. Pugh David L. Pugh				Director

/s/ William J. Reidy William J. Reidy				Director

/s/ Gordon A. Ulsh Gordon A. Ulsh				Director

/s/ Kenneth Haber Kenneth Haber Attorney-in-Fact

106

EX-10.8 2 l38672exv10w8.htm EX-10.8 exv10w8

Exhibit 10.8

Execution Version

SALE AND PURCHASE AGREEMENT

by and among

EAGLEPICHER CORPORATION,

as guarantor of the Seller,

EAGLEPICHER TECHNOLOGIES HOLDINGS, LLC,

as the Seller,

EAGLEPICHER TECHNOLOGIES, LLC,

as the Company,

OM GROUP, INC.,

as limited guarantor of the Buyer,

and

OMG ENERGY HOLDINGS, INC.,

as the Buyer

Dated as of December 23, 2009

TABLE OF CONTENTS


		Page
ARTICLE I DEFINITIONS			1

Section 1.1	Certain Defined Terms		1
Section 1.2	Table of Definitions		9

ARTICLE II PURCHASE AND SALE			11

Section 2.1	Purchase and Sale of the Equity Interests		11
Section 2.2	Closing		11
Section 2.3	Deliveries by the Seller		12
Section 2.4	Deliveries by the Buyer		13
Section 2.5	Adjustment of Purchase Price		13
Section 2.6	Purchase Price Allocation		15

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER			16

Section 3.1	Organization		16
Section 3.2	Authority		16
Section 3.3	No Conflict; Required Filings and Consents		16
Section 3.4	Equity Interests		17
Section 3.5	Brokers		17
Section 3.6	Litigation		17
Section 3.7	Value Creation Awards		17
Section 3.8	Exclusivity of Representations and Warranties		18

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY			18

Section 4.1	Organization and Qualification		18
Section 4.2	Authority		18
Section 4.3	No Conflict; Required Filings and Consents		19
Section 4.4	Capitalization		19
Section 4.5	Equity Interests		20
Section 4.6	Financial Statements; No Undisclosed Liabilities		20
Section 4.7	Absence of Certain Changes or Events		21
Section 4.8	Compliance with Law; Permits		21
Section 4.9	Litigation		22
Section 4.10	Employee Benefit Plans		22
Section 4.11	Labor and Employment Matters		25

TABLE OF CONTENTS
(continued)


		Page
Section 4.12	Insurance		26
Section 4.13	Real Property		26
Section 4.14	Intellectual Property		27
Section 4.15	Taxes		30
Section 4.16	Environmental Matters		32
Section 4.17	Material Contracts		34
Section 4.18	Government Contracts		35
Section 4.19	Export Controls		38
Section 4.20	Brokers		38
Section 4.21	Sufficiency of Assets		38
Section 4.22	Product Warranty; Product Liability		38
Section 4.23	Banks; Power of Attorney		39
Section 4.24	Inventories		39
Section 4.25	Accounts and Notes Receivable and Payable		39
Section 4.26	Related Party Transactions		39
Section 4.27	Customers and Suppliers		40
Section 4.28	Exclusivity of Representations and Warranties		40

ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER			40

Section 5.1	Organization		41
Section 5.2	Authority		41
Section 5.3	No Conflict; Required Filings and Consents		41
Section 5.4	Financing		42
Section 5.5	Brokers		42
Section 5.6	Investment Intent		42
Section 5.7	Buyer’s Investigation and Reliance		42
Section 5.8	U.S. Controlled Entity		43
Section 5.9	Litigation		43

ARTICLE VI COVENANTS			43

Section 6.1	Conduct of Business Prior to the Closing		43
Section 6.2	Covenants Regarding Information		45
Section 6.3	Notification of Certain Matters		46

TABLE OF CONTENTS
(continued)


		Page
Section 6.4	Intercompany Arrangements		46
Section 6.5	No Solicitation		46
Section 6.6	Confidentiality		47
Section 6.7	Consents and Filings; Further Assurances		48
Section 6.8	Public Announcements		49
Section 6.9	Release of Guarantees		49
Section 6.10	Use of Names		50
Section 6.11	Employment and Employee Benefits Matters; Other Plans		50
Section 6.12	Real Property Matters		53
Section 6.13	Environmental Mandate Transfers		54
Section 6.14	Waiver of Environmental Claims		54
Section 6.15	Property Taxes		54
Section 6.16	Tax Matters		55
Section 6.17	Insurance Matters		58
Section 6.18	Directors’ and Officers’ Indemnification		59
Section 6.19	Disposition of Assets		59
Section 6.20	Closing Payments		59
Section 6.21	Software		59
Section 6.22	Bankruptcy Documentation		60
Section 6.23	Separation of Bank Accounts		60

ARTICLE VII CONDITIONS TO CLOSING			60

Section 7.1	General Conditions		60
Section 7.2	Conditions to Obligations of the Seller and the Company		60
Section 7.3	Conditions to Obligations of the Buyer		61

ARTICLE VIII INDEMNIFICATION			62

Section 8.1	Survival of Representations and Warranties		62
Section 8.2	Indemnification by the Seller		62
Section 8.3	Indemnification by the Buyer		63
Section 8.4	Procedures		63
Section 8.5	Limits on Indemnification		65
Section 8.6	Exclusive Remedy		67

iii

TABLE OF CONTENTS
(continued)


		Page
Section 8.7	Dispute Resolution		68

ARTICLE IX TERMINATION			68

Section 9.1	Termination		68
Section 9.2	Effect of Termination		69

ARTICLE X GENERAL PROVISIONS			69

Section 10.1	Fees and Expenses; Conveyance Taxes		69
Section 10.2	Amendment and Modification		69
Section 10.3	Waiver		70
Section 10.4	Notices		70
Section 10.5	Interpretation		71
Section 10.6	Entire Agreement		71
Section 10.7	No Third-Party Beneficiaries		71
Section 10.8	Governing Law		71
Section 10.9	Submission to Jurisdiction		71
Section 10.10	Disclosure Generally		72
Section 10.11	Personal Liability		72
Section 10.12	Assignment; Successors		72
Section 10.13	Enforcement		73
Section 10.14	Currency		73
Section 10.15	Severability		73
Section 10.16	Waiver of Jury Trial		73
Section 10.17	Guarantees		73
Section 10.18	Counterparts		74
Section 10.19	Facsimile Signature		74
Section 10.20	Time of Essence		74
Section 10.21	Legal Representation		74
Section 10.22	No Presumption Against Drafting Party		74

TABLE OF CONTENTS
(continued)


Exhibit A		Form of Seller Release
Exhibit B		Form of Trademark Assignment
Exhibit C		Form of Domain Name Assignment
Exhibit D		Form of Transition Services Agreement

SALE AND PURCHASE AGREEMENT

SALE AND PURCHASE AGREEMENT, dated as of December 23, 2009 (this “Agreement”), by and among EAGLEPICHER TECHNOLOGIES HOLDINGS, LLC, a Delaware limited liability company (the “Seller”), EAGLEPICHER TECHNOLOGIES, LLC, a Delaware limited liability company (“EPT” or the “Company”), EAGLEPICHER CORPORATION, a Delaware corporation, as guarantor of all of the Seller’s pre-Closing and post-Closing obligations hereunder (“EPC”), OM GROUP, INC., a Delaware corporation, as guarantor of all of Buyer’s pre-Closing obligations hereunder (“OMG”) and OMG ENERGY HOLDINGS, INC., a Delaware corporation (the “Buyer”).

RECITALS

A. The Seller owns 100% of the issued and outstanding limited liability company membership interests of the Company (the “Equity Interests”).

B. EPC is the ultimate parent corporation of the Company and the Seller.

C. OMG owns 100% of the issued and outstanding common stock of the Buyer.

D. The Seller wishes to sell to the Buyer, and the Buyer wishes to purchase from the Seller, the Equity Interests.

AGREEMENT

In consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1 Certain Defined Terms. For purposes of this Agreement:

“Action” means any claim, action, suit, arbitration, or proceeding by or before any Governmental Authority.

“Affiliate” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.

“Audit Claims” means any adjustment, disallowance, demand, or claim made by any Governmental Authority or any other Person related to any payment made either directly to the Company or its Subsidiaries or to the Company or its Subsidiaries through any one or more Persons in connection with or as a result of the Administrative Contracting Officer’s letter, dated September 28, 2009, and attached hereto as Schedule 1.1(a)

“Bid” means any quotation, bid or proposal by the Company or any of its affiliates which, if accepted or awarded would lead to (i) a contract with the U.S. Government or

for the design, manufacture or sale of products or the provision of services by the Company or any of its Subsidiaries or (ii) a contract with a prime contractor or a higher tier subcontractor to the U.S. Government for the design, manufacture or sale of products or the provision of services by the Company or any of its Subsidiaries in connection with a contract such prime contractor or higher tier subcontractor has with the U.S. Government.

“Business Day” means any day that is not a Saturday, a Sunday, or other day on which banks are required or authorized by Law to be closed in The City of New York.

“Canadian Subsidiary” means EaglePicher Energy Products ULC, a corporation formed and existing under the laws of Alberta, Canada.

“Cash” means the cash and cash equivalents of the Company and its Subsidiaries as of the date of determination, less the amounts of any unpaid checks, drafts and wire transfers issued on or prior to the date of determination, calculated in accordance with the Financial Statements.

“Closing Cash” means Cash of the Company and its Subsidiaries as of the close of business on the Closing Date, which, with respect to the Canadian Subsidiary, shall in no event exceed $500,000, except to the extent such excess, if any, is solely the result of the receipt of payments from customers in ordinary course of business.

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

“Company Employee” means any employee of the Company or its Subsidiaries as of the Closing Date (including, for the avoidance of doubt, any such employee who is on vacation, jury duty leave, leave of absence, or otherwise not actively at work on the Closing Date).

“Company Intellectual Property” means all Intellectual Property owned by the Company or any of its Subsidiaries, and any corresponding, equivalent or counterpart rights, title or interest that now exist or may be secured hereafter anywhere in the world, including the Intellectual Property required to be listed on Schedule 4.14(a).

“Confidentiality Agreement” means the confidentiality agreement dated July 28, 2009 between the Buyer and EPC.

“Contract” means any contract, sublicense, lease (other than any Leases), sublease, conditional sales contract, purchase order, sales order, license, indenture, note, bond, loan, instrument, understanding, permit, concession, franchise, commitment or other agreement, in each case in writing.

“control,” including the terms “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, as general partner or managing member, by contract or otherwise.

“Controlled Group” means any trade or business (whether or not incorporated) (i) under common control within the meaning of Section 4001(b)(1) of ERISA with the Company or (ii) which together with the Company is treated as a single employer under Section 414(t) of the Code.

“Copyrights” means all (i) copyrights, including any copyrights in databases and data collections, Software and web site content, compilations and collective works, and derivative works of any of the foregoing, in each case that constitute original works of authorship, (ii) mask work rights, (iii) registrations and applications for registration for any of the foregoing and renewals or extensions thereof, and (iv) moral rights and economic rights in the foregoing.

“COTS Software” means commercially available “off-the-shelf” software having aggregate fees payable under the existing term of the applicable Contract of not more than $15,000.

“Credit Facilities” means the (i) Second Amended and Restated First Lien Credit and Guaranty Agreement, dated as of December 31, 2007, by and among EPC, the Guarantors (as defined therein), the Lenders (as defined therein) and General Electric Capital Corporation, as Administrative Agent and as Collateral Agent and the Collateral Documents (as defined therein) and (ii) the Second Amended and Restated Second Lien Credit and Guaranty Agreement, dated as of December 31, 2007, by and among EPC, the Guarantors (as defined therein), the Lenders (as defined therein), Obsidian, LLC, as Administrative Agent Obsidian, LLC, as Collateral Agent and General Electric Capital Corporation, as Documentation Agent and the Collateral Documents (as defined therein).

“Domain Names” means Internet electronic addresses, uniform resource locators and alphanumeric designations associated therewith registered with or assigned by any domain name registrar, domain name registry or other domain name registration authority as part of an electronic address on the Internet.

“EaglePicher Marks” means the name “EaglePicher” and any trade name, trademark, service mark, logo, or domain name incorporating the name “EaglePicher” or any derivative thereof; provided, however, that “EaglePicher Marks” shall not include the name “EP Minerals” and any trade name, trademark, service mark, logo, or domain name incorporating the name “EP Minerals” or any derivative thereof.

“Encumbrance” means any charge, claim, mortgage, lien, option, pledge, security interest, or other restriction of any kind.

“Environmental Mandates” means the Post-Closure Permit Number 007158454-PC issued to the Company by the Oklahoma Department of Environmental Quality and Compliance Order and Consent Number 06-07-21-01 issued to New EaglePicher Technologies, LLC by the Colorado Department of Public Health and Environment.

“EPT Pension Plans” means the EaglePicher Salaried and Closed Hourly Pension Plan, the EaglePicher Hourly Pension Plan, the EaglePicher Technologies Salaried Pension Plan and the EaglePicher Technologies Hourly Pension Plan.

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

“Escrow Agent” means a nationally recognized banking institution, agreed to in writing by the Buyer and the Seller, providing escrow services of the nature contemplated by this Agreement.

“Escrow Agreement” means the Escrow Agreement to be entered into as of the Closing by and among the Seller, the Buyer and the Escrow Agent, which shall relate to the Escrow Amount and the Audit Escrow Amount.

“Escrow Amount” means the amount equal to $12,750,000.

“Former Company Employee” means, as of the Closing Date, any former employee of the Company or its Subsidiaries.

“GAAP” means United States generally accepted accounting principles as in effect on the date hereof.

“Governmental Authority” means any U.S. Government or non-United States federal, national, supranational, state, provincial, local, or similar government, governmental, regulatory, or administrative authority, branch, agency, minister, cabinet, governor-in-council, commissioner or commission or any court, tribunal, or arbitral or judicial body.

“Government Contract” means any prime contract, subcontract, teaming agreement or arrangement, joint venture, basic ordering agreement, letter contract, purchase order, delivery order, task order, grant, cooperative agreement, Bid, change order, arrangement or other commitment or funding vehicle of any kind relating to the business of the Company or any of its Subsidiaries between the Company or any of its Subsidiaries and (i) the U.S. Government; (ii) any prime contractor to the U.S. Government or (iii) any subcontractor with respect to any contract described in clause (i) or (ii).

“Indebtedness” of the Company and its Subsidiaries means, without duplication, (i) all obligations for borrowed money, (including all outstanding principal, prepayment premiums, if any, change of control premiums, and accrued interest, fees and expenses related thereto); (ii) all obligations evidenced by notes, bonds, debentures or other similar instruments; (iii) all obligations to pay the deferred purchase price of property or services, except trade accounts payable; (iv) all obligations under any interest rate, currency or other hedging agreements; and (v) any direct or indirect guarantee of Indebtedness of any other Person of a type described in clause (i) through (iv) above; provided, that “Indebtedness” shall not include (a) any obligations under leases required to be capitalized in accordance with GAAP; (b) any obligations for post-employment benefits and (c) any obligations under the EPT Pension Plans.

“Indemnified Joplin Environmental Conditions” means those environmental conditions in existence at, on, under or emanating from the Joplin RCRA Facility as of the Closing Date (other than those described in the Joplin RFI Report and to the extent of the specific accrual in respect thereof as set forth on Schedule 8.5(b)(iii) of the Disclosure

Schedules) that could give rise to any liability, obligation or requirement under Environmental Laws.

“Information Systems” means all computer hardware, databases and data storage systems, computer, data, database and communications networks (other than the Internet but including any FTP Secured site and related Software), architecture interfaces and firewalls (whether for data, voice, video or other media access, transmission or reception) and other apparatus used to create, store, transmit, exchange or receive information in any form.

“Intellectual Property” means (i) Trademarks, (ii) Domain Names, (iii) Patents, (iv) Copyrights, and (v) Trade Secrets, including any of the foregoing that are incorporated in or protect Software.

“IRS” means the Internal Revenue Service of the United States.

“Joplin Letter of Credit” means the letter of credit currently provided by EPC with respect to the Joplin RCRA Facility pursuant to Missouri Hazardous Waste Management Facility Permit MOD046740148.

“Joplin RCRA Facility” means the Company’s facility located at C and Porter Streets in Joplin, Missouri.

“Joplin RFI Report” means the report dated January 2009 prepared by ENVIRON International Corporation and entitled “2009 RCRA Facility Investigation Report” relating to the Joplin RCRA Facility.

“Knowledge” with respect to the Company means the actual (but not constructive or imputed) knowledge of Randy Moore, John Bennett, Ron Nowlin, Archie Meyer, Creed Jones, Pat Aubry, Ben DePompei, Emily Russell, Teri Hocter, David Treadwell and Viet Vu, in each case as of the date of this Agreement (or, with respect to a certificate delivered pursuant to this Agreement, as of the date of delivery of such certificate) without any implication of verification or investigation concerning such knowledge.

“Law” means any statute, law, ordinance, regulation, rule, code, injunction, judgment, ruling, decree, or order of any Governmental Authority.

“Lease” means any lease, sublease or other agreement (including any amendments thereto) which creates the Company’s or any of its Subsidiary’s interest in the Leased Real Property.

“Leased Real Property” means the real property leased by the Company or any of its Subsidiaries, in each case, as tenant, together with, to the extent leased by the Company or any of its Subsidiaries, all buildings and other structures, facilities, or improvements located thereon and all easements, licenses, rights, and appurtenances of the Company or any of its Subsidiaries relating to the foregoing.

“Liability” means any debt, loss, damage, adverse claim, fine, penalty, liability or obligation (whether direct or indirect, asserted or unasserted, absolute or contingent, accrued or

unaccrued, matured or unmatured, determined or determinable, liquidated or unliquidated, or due or to become due, and whether in contract, tort or otherwise), and including all costs and expenses relating thereto (including all reasonable fees, disbursements and expenses of legal counsel, experts, engineers and consultants and costs of investigation).

“Material Adverse Effect” means (i) with respect to the Company, any event, change, occurrence, or effect that (A) has had or would reasonably be expected to have a material adverse effect on the business, financial condition, or results of operations of the Company and its Subsidiaries, taken as a whole, or (B) has or would reasonably be expected to prevent, materially delay, or materially impede the performance by the Company of its obligations under this Agreement or the consummation of the transactions contemplated hereby, other than any event, change, occurrence, or effect resulting from (1) general changes or developments in any of the industries in which the Company or its Subsidiaries operate, (2) changes in global, national, or regional political conditions (including the outbreak of war or acts of terrorism) or in general economic, business, regulatory, political or market conditions or in national or global financial markets, (3) changes in any applicable Laws or applicable accounting regulations or principles or interpretations thereof, (4) the announcement or pendency of this Agreement and the transactions contemplated hereby, including any termination of, reduction in, or similar negative impact on relationships, contractual or otherwise, with any customers, suppliers, distributors, partners, or employees of the Company or any of its Subsidiaries due to the announcement and performance of this Agreement, including compliance with the covenants set forth herein or the identity of the parties to this Agreement, (5) any action taken by the Company, or which the Company causes to be taken by any of its Subsidiaries, in each case which is required by this Agreement, or (6) any actions taken (or omitted to be taken) at the request of the Buyer, provided that with respect to clauses (1), (2) and (3), the impact of such change, effect, event, occurrence, state of facts, development or circumstance is not disproportionately adverse to the Company and its Subsidiaries, taken as a whole, as compared to the adverse impact on the competitors of the Company and its Subsidiaries, (ii) with respect to the Buyer, any event, change, occurrence, or effect that has or would reasonably be expected to prevent, materially delay, or materially impede the performance by the Buyer or OMG of its obligations under this Agreement or the consummation of the transactions contemplated hereby, and (iii) with respect to the Seller, any event, change, occurrence, or effect that has or would reasonably be expected to prevent, materially delay, or materially impede the performance by the Seller or EPC of its obligations under this Agreement, or the consummation of the transactions contemplated hereby.

“ordinary course of business” means the ordinary and usual course of day-to-day operations of the business of the Company and the Subsidiaries through the date hereof consistent with past practice.

“Owned Real Property” means the real property owned by the Company or any of its Subsidiaries other than the Transferred Real Property, together with all buildings and other structures, facilities, or improvements located thereon and all easements, licenses, rights, and appurtenances of the Company or any of its Subsidiaries relating to the foregoing.

“Order” means any order, injunction, judgment, doctrine, notice, decree, ruling, writ, assessment or arbitration award of a Governmental Authority.

“Patents” means all patents, industrial and utility models, industrial designs, petty patents, patents of importation, patents of addition, certificates of invention, and any other indicia of invention ownership issued or granted by any Governmental Authority, including all provisional applications, non-provisional applications, priority and other applications, divisionals, continuations (in whole or in part), extensions, reissues, re-examinations or equivalents or counterparts of any of the foregoing; and moral and economic rights of inventors in any of the foregoing.

“Permitted Encumbrance” means (i) statutory liens for current Taxes not yet due or delinquent (or which may be paid without interest or penalties) or the validity or amount of which is being contested in good faith by appropriate proceedings provided an appropriate reserve has been established for any such liens being contested in good faith, (ii) mechanics’, builders’, carriers’, workers’, repairers’, and other similar liens arising or incurred in the ordinary course of business relating to obligations as to which there is no monetary or material, non-monetary default on the part of the Company or any of its Subsidiaries, or pledges, deposits, or other liens securing the performance of bids, trade contracts, leases, or statutory obligations (including workers’ compensation or unemployment insurance, in each case, arising or incurred in the ordinary course of business, (iii) zoning, entitlement, conservation restriction, and other land use and environmental regulations by Governmental Authorities, in each case, that do not materially interfere with the present use of the assets (or operation of the business) of the Company and its Subsidiaries, (iv) Encumbrances required by the Credit Facilities (which shall be released in full as of the Closing with respect to the Company and its Subsidiaries) and (v) all exceptions, restrictions, easements, imperfections of title, charges, rights-of-way, and other non-monetary title defects or Encumbrances, that, in each case, do not materially interfere with the present use of the assets (or operation of the Business) of the Company and its Subsidiaries, taken as a whole.

“Person” means an individual, corporation, partnership, limited liability company, limited liability partnership, person, trust, association, organization, or other entity, including any Governmental Authority, and including any successor, by merger or otherwise, of any of the foregoing.

“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date.

“Real Property” means the Owned Real Property and Leased Real Property, collectively.

“Reference Amount” means the working capital amount as calculated in accordance with Schedule 2.5(a) of the Disclosure Schedules.

“Representatives” means, with respect to any Person, the officers, directors, employees, agents, accountants, advisors, bankers and other representatives of such Person.

“Return” means any return, declaration, election, filing, report, statement, schedule, claim for refund, form (including estimated Tax), information statement with respect to Taxes, including any supplement or attachment thereto and any amendment thereof.

“RCRA” means the Federal Resource Conservation and Recovery Act of 1976, as amended and all regulations promulgated thereunder.

“Software” means computer software in any form, including object code, source code and code development tools, and regardless of the method stored or the media upon which it resides.

“Specified Accounting Policies” means the principles specified in Schedule 2.5(a) of the Disclosure Schedules.

“Subsidiary” means, with respect to any Person, any other Person of which at least 50% of the outstanding voting securities or other voting equity interests are owned, directly or indirectly, by such first Person.

“Taxes” means any and all (i) foreign, United States federal, state or local net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, penalty, addition to tax or additional amount imposed by any Law or Governmental Authority, whether disputed or not, (ii) liability for the payment of any amounts of any of the foregoing types as a result of being a member of an affiliated, consolidated, combined or unitary group, or being a party to any agreement or arrangement whereby liability for payment of such amounts was determined or taken into account with reference to the liability of any other Person, (iii) liability for the payment of any amounts as a result of being a party to any tax sharing or allocation agreements or arrangements (whether or not written) or with respect to the payment of any amounts of any of the foregoing types as a result of any express or implied obligation to indemnify any other Person, and (iv) liability for the payment of any of the foregoing types as a successor, transferee or otherwise.

“Title Policies” means an ALTA Owner’s Title Insurance Policy for each Real Property (if required by the Buyer), insuring the Company’s or its Subsidiaries’ fee or leasehold title (as applicable) to such Real Property as of the Closing Date (including all recorded appurtenant easements insured as separate legal parcels), subject only to Permitted Encumbrances. Each of the Title Policies shall include all endorsements reasonably requested by the Buyer.

“Trade Secrets” means unpatented inventions (whether patentable or not), industrial designs, discoveries, improvements, ideas, designs, models, formulae, patterns, compilations, data collections, diagrams, drawings, blueprints, mask works, devices, methods, techniques, processes, know-how, instructions, configurations, prototypes, samples, specifications, technology, trade secrets, confidential information, proprietary information, customer lists, Software and technical information, in each case that derive economic value (actual or potential) from not being generally known to the public.

“Trademarks” means trademarks, service marks, fictional business names, trade names, commercial names, certification marks, collective marks, and other proprietary rights to

any words, names, slogans, symbols, logos, devices or combinations thereof used to identify, distinguish and indicate the source or origin of goods or services; registrations, renewals, applications for registration, equivalents and counterparts of the foregoing; and the goodwill of the business associated with each of the foregoing.

“Transaction Expenses” means, except as otherwise expressly set forth in this Agreement, the aggregate amount of all out-of-pocket fees and expenses, incurred by or on behalf of, or paid or to be paid by, the Company or any of its Subsidiaries in connection with the process of selling the Company or otherwise relating to the negotiation, preparation or execution of this Agreement or any documents or agreements contemplated hereby or the performance or consummation of the transactions contemplated hereby, including (A) any fees and expenses associated with obtaining necessary or appropriate waivers, consents or approvals of any filings required by the HSR Act or third parties on behalf of the Company or any of its Subsidiaries, (B) any fees and expenses associated with obtaining the release and termination of any Encumbrances, (C) all brokers’ or finders’ fees, (D) fees and expenses of counsel, advisors, consultants, investment bankers, accountants, and auditors and experts, (E) all fees, expenses and Taxes associated with the transfer of the Transferred Real Property and (F) all sale, “stay-around,” retention, or similar bonuses or payments to current or former directors, officers, employees and consultants payable solely as a result of or in connection with the transactions contemplated hereby.

“Transferred Real Property” means the parcels of real property owned by the Company and located at 3820 South Hancock Expressway in Colorado Springs, Colorado, 737 Highway 69A in Quapaw, Oklahoma, and Parcel No. 19-4:0-17-010-005.001.001 (located at the south side of 20^th Street and the west side of Iron Gates Road) in Joplin, MO.

“U.S. Government” means any United States governmental entity, agency or body, including United States Government corporations and non-appropriated fund activities.

Section 1.2 Table of Definitions. The following terms have the meanings set forth in the Sections referenced below:


Definition		Location
Agreement		Preamble
Asset Acquisition Statement		2.6
Audit Claim Cap		8.5(b)(i)
Audit Claims		2.2(c)
Audit Escrow Amount		2.2(c)
Balance Sheet		4.6(a)
Basket Amount		8.5(b)(ii)
Business		4.21
Buyer		Preamble
Buyer Indemnified Parties		8.2(a)
Buyer Plan		6.11(c)
Buyer’s Flexible Account Plan		6.11(i)
Cap		8.5(b)(i)
Claim		6.17(a)


Definition		Location
Closing		2.2(a)
Closing Balance Sheet		2.5(a)
Closing Date		2.2(a)
Closing Working Capital		2.5(a)
Company		Preamble
Company Employee Plan		4.10(a)
Company Trust		6.11(d)
Confidential Information		6.6(c)
Conveyance Taxes		10.1(b)
Core Representations		7.3(a)
Disagreement Notice		8.4(d)
Disclosure Schedules		Article IV
Disputes		8.7(a)
Employee Plan		4.10(a)
Employee Plans		4.10(a)
Environmental Laws		4.16(c)(i)
Environmental Permits		4.16(c)(ii)
EP Minerals		6.10(b)
EPC		Preamble
EPT		Preamble
Equity Interests		Recitals
Financial Statements		4.6(a)
Foreign Plan		4.10(l)
Guarantees		6.9
Hazardous Material		4.16(c)(iii)
HSR Act		3.3(b)
Indemnified Party		8.4(a)
Indemnifying Party		8.4(a)
Independent Accounting Firm		2.5(c)
Independent Expert		8.7(a)
Insurance Policies		4.12
Landlord		6.12(c)
Losses		8.2(a)
LTD		6.11(g)
Master Trust		6.11(d)
Material Contracts		4.17(a)
Minimum Loss Amount		8.5(b)(ii)
Non-Company Employee Plan		4.10(a)
Notice of Disagreement		2.5(b)
PBGC		6.11(d)
Permits		4.8(b)
Post-Closing Straddle Period		6.16(a)
Potential Contributor		8.6
Pre-Closing Straddle Period		6.16(a)
Privilege Period		6.16(a)
Property Taxes		6.15(a)


Definition		Location
Purchase Price		2.1
Related Persons		4.26
Remedial Action		8.4(f)
Revised Statements		2.6
Securities Act		5.6
Seller		Preamble
Seller Indemnified Parties		8.3
Seller’s Flexible Account Plan		6.11(i)
Straddle Period		6.16(a)
Tax Matters		6.16(d)
Termination Date		9.1(c)
Third Party Claim		8.4(a)
Title Requirements		6.12(a)
Transition Services Agreement		2.4(d)

WARN		6.11(f)

ARTICLE II
PURCHASE AND SALE

Section 2.1 Purchase and Sale of the Equity Interests. Upon the terms and subject to the conditions of this Agreement, at the Closing, the Seller shall sell, assign, transfer, convey, and deliver the Equity Interests to the Buyer, free and clear of any Encumbrances other than Encumbrances created by the Buyer and any transfer restrictions under applicable securities laws. The Buyer shall purchase the Equity Interests from the Seller, for an aggregate purchase price of U.S.$171,978,593 less (i) any Transaction Expenses unpaid as of the close of business on the day immediately preceding the Closing Date, and (ii) Indebtedness of the Company and its Subsidiaries as of the close of business on the day immediately preceding the Closing Date, subject to adjustment pursuant to Section 2.5 (as adjusted pursuant to Section 2.5, the “Purchase Price”).

Section 2.2 Closing.

(a) The sale and purchase of the Equity Interests shall take place at a closing (the “Closing”) to be held at the offices of Gibson, Dunn & Crutcher LLP, 1050 Connecticut Avenue, NW, Washington, DC, 22305, at 10:00 A.M., Eastern Standard time on the last Business Day of the month in which the last of all of the conditions to the obligations of the parties set forth in Article VII (other than such conditions as may, by their terms, only be satisfied at the Closing or on the Closing Date) are satisfied or, to the extent permitted by applicable Law, waived by the party entitled to the benefit thereof, or at such other place or at such other time or on such other date as the Seller and the Buyer mutually may agree in writing. The day on which the Closing takes place is referred to as the “Closing Date.”

(b) At the Closing, the Buyer shall deliver to the Seller, by wire transfer to a bank account or bank accounts designated in writing by the Seller to the Buyer at least two Business Days prior to the Closing Date, an amount equal to the Purchase Price minus the

Escrow Amount and the Audit Escrow Amount in immediately available funds in United States dollars.

(c) At the Closing, the Buyer shall deposit (i) the Escrow Amount in an account with the Escrow Agent to be held by the Escrow Agent in accordance with the terms of the Escrow Agreement and (ii) $2,500,000 (the “Audit Escrow Amount”) in a separate account with the Escrow Agent to be held by the Escrow Agent in accordance with the terms of the Escrow Agreement.

Section 2.3 Deliveries by the Seller. On the Closing Date, the Seller shall deliver, or cause to be delivered, to the Buyer the following items:

(a) a copy of the Escrow Agreement, duly executed by the Seller;

(b) a certificate of the Seller attesting to the matters set forth in Sections 7.3(a) and 7.3(b);

(c) a certificate of an officer of the Seller, dated as of the Closing Date, setting forth in detail reasonably acceptable to the Buyer the aggregate amount of (i) Indebtedness of the Company and (ii) unpaid Transaction Expenses, in each case as of the close of business on the day immediately preceding the Closing Date;

(d) appropriate termination statements under the Uniform Commercial Code set forth on Schedule 2.3(d);

(e) written resignations of each manager of the Company and its Subsidiaries and each director and officer of the Company and its Subsidiaries who is also an officer of EPC;

(f) a release, in substantially the form attached hereto as Exhibit A hereto, duly executed by the Seller, EPC and EaglePicher Management Company;

(g) a non-foreign person affidavit that complies with the requirements of Section 1445 of the Code and the Treasury Regulations promulgated thereunder, executed by the Seller and in form and substance reasonably satisfactory to Buyer;

(h) a duly executed trademark assignment substantially in the form of Exhibit B, pursuant to which Seller and its Affiliates assign to EPT all right, title and interest in all trade names, trademarks, service marks, and logos that are EaglePicher Marks, including all goodwill associated with any of the foregoing;

(i) a duly executed domain name assignment substantially in the form of Exhibit C, pursuant to which Seller and its Affiliates assign to EPT all right, title and interest in all domain names that are EaglePicher Marks, including all goodwill associated with any of the foregoing;

(j) a copy of the transition services agreement (the “Transition Services Agreement”) substantially in the form of Exhibit D hereto, duly executed by the Seller and EPC; and

(k) such other documents and instruments as the Buyer may reasonably request in order to consummate the transactions contemplated by this Agreement.

Section 2.4 Deliveries by the Buyer. On the Closing Date, the Buyer shall deliver, or cause to be delivered, to the Seller the following items:

(a) a copy of the Escrow Agreement, duly executed by the Buyer;

(b) a certificate of the Buyer attesting to the matters set forth in Sections 7.2(a) and 7.2(b);

(c) evidence reasonably acceptable to the Seller that the Buyer has established a sufficient financial assurance mechanism allowed under applicable law to replace the Joplin Letter of Credit and that such mechanism will be effective as of the Closing;

(d) a copy of the Transition Services Agreement, duly executed by the Buyer; and

(e) such other documents and instruments as the Seller may reasonably request in order to consummate the transactions contemplated by this Agreement.

Section 2.5 Adjustment of Purchase Price.

(a) Within 60 days after the Closing Date, the Buyer shall deliver to the Seller an unaudited consolidated balance sheet of the Company and its Subsidiaries as of the close of business on the Closing Date (the “Closing Balance Sheet”), prepared in accordance with GAAP as modified by the Specified Accounting Policies in a manner consistent with the manner in which GAAP and the Specified Accounting Policies were applied in the preparation of the Balance Sheet. For purposes of this Agreement, “Closing Working Capital” shall be equal to (i) the current asset line items as shown in the Reference Amount less (ii) the current liability line items as shown in the Reference Amount. An example of how Closing Working Capital shall be determined is set forth in Schedule 2.5(a) of the Disclosure Schedules. The Seller shall cause its employees and the employees of its Subsidiaries to assist the Buyer and its Representatives in the preparation of the Closing Balance Sheet and shall provide the Buyer and its Representatives reasonable access, during normal business hours and upon reasonable prior notice, to the personnel, properties, books, and records of the Seller and its Subsidiaries for such purpose.

(b) During the 30 Business Day period following the Seller’s receipt of the Closing Balance Sheet, the Buyer shall cooperate with the Seller and its Representatives to provide them with any information used in preparing the Closing Balance Sheet reasonably requested by the Seller and its Representatives reasonably available to the Buyer. The Closing Balance Sheet shall become final and binding on the 30^th Business Day following delivery thereof, unless prior to the end of such period, the Seller delivers to the Buyer written notice of its disagreement (a “Notice of Disagreement”) specifying the nature and amount of any disputed item. The Seller shall be deemed to have agreed with all items and amounts in the Closing Balance Sheet not specifically referenced in the Notice of Disagreement, and such items and amounts shall not be subject to review in accordance with Section 2.5(c). The dispute of any

items or amounts may be based for purposes of this Section 2.5 only on mathematical errors or amounts reflected on the Closing Balance Sheet not being calculated in accordance with the principles used in preparing the Balance Sheet.

(c) During the ten Business Day period following delivery of a Notice of Disagreement by the Seller to the Buyer, the parties in good faith shall seek to resolve in writing any differences that they may have with respect to the matters specified therein. During such ten Business Day period, the Seller shall cooperate with the Buyer and its Representatives to provide them with any information used in preparing the Notice of Disagreement reasonably requested by the Buyer or its Representatives reasonably available to the Seller. Any disputed items resolved in writing between the Seller and the Buyer within such ten Business Day period shall be final and binding with respect to such items, and if the Buyer and the Seller agree in writing on the resolution of each disputed item specified by the Seller in the Notice of Disagreement and the calculation of the Closing Working Capital, the Closing Working Capital so determined shall be final and binding on the parties for all purposes hereunder. If the Buyer and the Seller have not resolved all such differences by the end of such ten Business Day period, the Buyer and the Seller shall submit, in writing, to an independent public accounting firm (the “Independent Accounting Firm”), their briefs detailing their views as to the nature and amount of each item remaining in dispute and the calculation of the Closing Working Capital, and the Independent Accounting Firm shall make a reasoned written determination as to each such disputed item and the calculation of the Closing Working Capital, which determination shall be final and binding on the parties for all purposes hereunder. The Independent Accounting Firm shall be authorized to resolve only those items remaining in dispute between the parties in accordance with the standards set forth in this Section 2.5 within the range of the difference between the Seller’s position with respect thereto and the Buyer’s position with respect thereto. The determination of the Independent Accounting Firm shall be based solely on the briefs submitted by the parties and not on independent review, and shall be accompanied by a certificate of the Independent Accounting Firm that it reached such determination in accordance with the provisions of this Section 2.5. The Independent Accounting Firm shall be an independent public accounting firm agreed to in writing by the Buyer and the Seller. The Buyer and the Seller shall use their commercially reasonable efforts to select the Independent Accounting Firm within 30 days from the date hereof and to cause the Independent Accounting Firm to render a reasoned written decision resolving the matters submitted to it within 20 Business Days following the submission thereof. Judgment may be entered upon the written determination of the Independent Accounting Firm in any court referred to in Section 10.9. The fees and expenses of the Independent Accounting Firm pursuant to this Section 2.5(c) shall be borne equally by the parties. The fees and disbursements of the Representatives of each party incurred in connection with their preparation or review of the Closing Balance Sheet and preparation or review of any Notice of Disagreement, as applicable, shall be borne by such party.

(d) The Purchase Price shall be adjusted, upwards or downwards, as follows:

(i) if the Closing Working Capital as finally determined pursuant to this Section 2.5 exceeds the Reference Amount by at least $1,000,000, the Purchase Price shall be adjusted upwards in an amount equal to such excess, and the Buyer shall pay such amount to the Seller; and

(ii) if the Reference Amount exceeds the Closing Working Capital as finally determined pursuant to this Section 2.5 by at least $1,000,000, the Purchase Price shall be adjusted downwards in an amount equal to such excess, and the Seller shall pay such amount to the Buyer.

(e) Amounts to be paid pursuant to Section 2.5(d) shall bear interest from the Closing Date to the date of such payment at a rate equal to the rate of interest from time to time announced publicly by J.P. Morgan Chase & Co. as its prime rate, calculated on the basis of a year of 365 days and the number of days elapsed. Payments in respect of Section 2.5(d) shall be made within three Business Days of final determination of the Closing Working Capital pursuant to the provisions of this Section 2.5 by wire transfer of United States dollars in immediately available funds to such account or accounts as may be designated in writing by the party entitled to such payment at least two Business Days prior to such payment date.

(f) The adjustment to the Purchase Price to be made pursuant to this Section 2.5 is intended only to reflect changes in working capital resulting from the time interval between the date of the Reference Amount and the date of the Closing Balance Sheet. Any challenge to the Closing Balance Sheet on any basis except as specified in this Section 2.5 shall be made solely pursuant to the provisions of Article VIII.

(g) Within five Business Days after the Closing Date, the Buyer shall deliver to the Seller a statement setting forth the Closing Cash. Following the delivery of such statement, the Buyer shall cooperate with the Seller and its Representatives to provide them with any information used in preparing such statement of Closing Cash. Within 15 days following the Closing, the Buyer shall pay to the Seller by wire transfer of United States Dollars in immediately available funds to such account as may be designated in writing by the Seller at least two Business Days prior thereto, an amount equal to the Closing Cash. Any dispute with respect to the calculation of Closing Cash shall be submitted to the Independent Accounting Firm for resolution in accordance with the procedures set forth in Section 2.5(c).

Section 2.6 Purchase Price Allocation. The sale and purchase of the Equity Interests shall be treated for United States federal and state income tax purposes as the sale and purchase of the assets of the Company and no party hereto or any Affiliate thereof shall take any position inconsistent with such treatment. The Seller and the Buyer agree that the final Purchase Price (and any assumed liabilities as determined for United States federal income tax purposes) will be allocated among the assets of the Company for all United States Tax purposes in a manner consistent with Section 1060 of the Code and the Treasury Regulations promulgated thereunder. No later than one-hundred and twenty (120) days after the Closing Date, the Buyer shall prepare and deliver to the Seller for the Seller’s review and approval, a copy of the Form 8594 and any required exhibits thereto (the “Asset Acquisition Statement”) allocating the final Purchase Price (and any assumed liabilities as determined for United States federal income tax purposes) among the Company’s assets. The Buyer shall prepare and deliver to the Seller, from time to time, for the Seller’s review and approval revised copies of the Asset Acquisition Statement (the “Revised Statements”) so as to reflect any matters on the Asset Acquisition Statement that need updating (including purchase price adjustments, if any). If the Buyer and the Seller agree on the allocation of the final Purchase Price (and any assumed liabilities as determined for United States federal income tax purposes) within thirty (30) days after the delivery of the Asset Acquisition

Statement or the Revised Statements, as the case may be (which shall be evidenced by an Asset Acquisition Statement or the Revised Statements signed by each of the Buyer and the Seller), the Buyer, the Seller and their Affiliates shall file all Tax Returns and information reports in a manner consistent with such agreed allocation and shall take no position inconsistent therewith. In the event that the Buyer and the Seller are unable to agree on such allocation within thirty (30) days after the delivery of the Asset Acquisition Statement or the Revised Statements, as the case may be, such disagreement shall be referred to the Independent Accounting Firm in accordance with the procedures set forth in Section 2.5(c). The decision of the Independent Accounting Firm shall be binding on the parties and the Buyer, the Seller and their Affiliates shall file all Tax Returns and information reports in a manner consistent with such agreed allocation and shall take no position inconsistent therewith unless otherwise required by Law.

ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER

The Seller hereby represents and warrants to the Buyer as follows:

Section 3.1 Organization. The Seller is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its formation and has all necessary organizational power and authority to own, lease, and operate its properties and to carry on its business as it is now being conducted. The Seller is duly qualified or licensed as a foreign entity to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased, or operated by it or the nature of its business makes such qualification or licensing necessary, except, in each case, for any such failures that would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Seller.

Section 3.2 Authority. The Seller has the requisite organizational power and authority to execute and deliver this Agreement and the Escrow Agreement, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by the Seller of this Agreement and the Escrow Agreement and the consummation by the Seller of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary organizational action. This Agreement has been, and the Escrow Agreement will be at or prior to Closing, duly executed and delivered by the Seller. This Agreement constitutes, and the Escrow Agreement will constitute when so executed and delivered, the legal, valid, and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

Section 3.3 No Conflict; Required Filings and Consents.

(a) The execution, delivery, and performance by the Seller of this Agreement and the Escrow Agreement, and the consummation of the transactions contemplated hereby and thereby, do not and will not:

(i) conflict with or violate the organizational documents of the Seller;

(ii) conflict with or violate any Law or Order applicable to the Company, its subsidiaries or the Seller or by which any property or asset of the Company, its Subsidiaries or the Seller is bound or affected; or

(iii) conflict with, result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, or give rise to a right of termination or acceleration of any obligation under, or result in the creation of any Encumbrance upon any of the assets of the Company or any of its Subsidiaries, or require any consent of any Person pursuant to, any Lease, Material Contract (as defined below) or material Permit;

except, in the case of clause (ii) or (iii), as set forth in Schedule 3.3(a) of the Disclosure Schedules and for any such conflicts, violations, breaches, defaults, or other occurrences that would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Company or the Seller.

(b) The Seller is not required to file, seek, or obtain any notice, authorization, approval, order, permit, or consent of or with any Governmental Authority or Person in connection with the execution, delivery, and performance by the Seller of this Agreement or the consummation of the transactions contemplated hereby, except (i) as set forth in Schedule 3.3(b) of the Disclosure Schedules, (ii) any filings required to be made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (iii) for such filings as may be required by any applicable federal or state securities or “blue sky” laws, (iv) for such notices and consents required to be made to the lenders under the Credit Facilities or (v) where failure to seek or obtain such authorization, approval, order, permit or consent, or to make such filing or notification, would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Seller.

Section 3.4 Equity Interests. The Seller is the record and beneficial owner of the Equity Interests. The Seller has the right, authority, and power to sell, assign, and transfer the Equity Interests that it owns to the Buyer. Upon delivery to the Buyer of the Equity Interests at the Closing (if certificated), the Buyer’s payment of the Purchase Price, and registration of the Equity Interests in the name of the Buyer in the records of the Company, the Buyer shall acquire good and valid title to the Equity Interests, free and clear of any Encumbrance other than Encumbrances created by the Buyer and restrictions on transfers imposed by applicable securities Laws.

Section 3.5 Brokers. Except for Lazard Frères & Co. LLC, the fees of which will be paid by the Seller, no broker, finder, or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Seller.

Section 3.6 Litigation. Except as set forth in Schedule 3.6 of the Disclosure Schedules, there is no Action pending or, to the knowledge of the Seller, threatened in writing

against the Seller, or to which the Seller is otherwise a party relating to this Agreement, the Escrow Agreement or the transactions contemplated hereby or thereby.

Section 3.7 Value Creation Awards. EPC has granted awards under the EaglePicher Corporation Value Creation Transaction Bonus Plan to certain employees of the Company. None of the Company or any of the Subsidiaries of the Company has and none of them shall have any obligations under the awards granted by EPC under the EaglePicher Corporation Value Creation Transaction Bonus Plan or, except as set forth on Schedule 3.7 of the Disclosure Schedules, any obligation under any other Non-Company Employee Plan.

Section 3.8 Exclusivity of Representations and Warranties. Neither the Seller nor any of its Affiliates or Representatives is making any representation or warranty on behalf of the Seller of any kind or nature whatsoever, oral or written, express or implied, except as expressly set forth in this Article III, and the Seller hereby disclaims any such other representations or warranties.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the Disclosure Schedules attached hereto (collectively, the “Disclosure Schedules”), the Company hereby represents and warrants to the Buyer as follows:

Section 4.1 Organization and Qualification.

(a) Each of the Company and its Subsidiaries is (i) duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation as set forth in Schedule 4.1(a) of the Disclosure Schedules, and has all necessary organizational power and authority to own, lease, and operate its properties and to carry on its business as it is now being conducted and (ii) duly qualified, licensed or registered as a foreign entity to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased, or operated by it or the nature of its business makes such qualification, licensing or registration necessary, except, in each case, for any such failures that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company.

(b) The Company has heretofore furnished to the Buyer a complete and correct copy of the certificate of formation and the limited liability company agreement or equivalent organizational documents, each as amended to date, of the Company and each of its Subsidiaries. Such organizational documents are in full force and effect.

(c) Except for the Canadian Subsidiary, there are no minute books, stock certificate books or stock transfer ledgers of the Company or its Subsidiaries.

Section 4.2 Authority. The Company has the requisite organizational power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution, delivery, and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary organizational

action. This Agreement has been duly executed and delivered by the Company. This Agreement constitutes the legal, valid, and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

Section 4.3 No Conflict; Required Filings and Consents.

(a) The execution, delivery and performance by the Company of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not:

(i) conflict with or violate the organizational documents of the Company or any of its Subsidiaries;

(ii) conflict with or violate any Law or Order applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected; or

(iii) conflict with, result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, or give rise to a right of termination, cancellation or acceleration of any obligation under, or result in the creation of any Encumbrance upon any of the assets of the Company or any of its Subsidiaries, or require any consent of any Person pursuant to, any Lease, Material Contract or material Permit;

except, in the case of clause (ii) or (iii), as set forth in Schedule 4.3(a) of the Disclosure Schedules and for any such conflicts, violations, breaches, defaults or other occurrences that would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Company.

(b) The Company is not required to file, seek, or obtain any notice, authorization, approval, order, permit, or consent of or with any Person pursuant to a Material Contract or any Governmental Authority in connection with the execution, delivery, and performance by the Company of this Agreement or the consummation of the transactions contemplated hereby, except as set forth in Schedule 4.3(b) of the Disclosure Schedules and for (i) any filings required to be made under the HSR Act, (ii) such filings as may be required by any applicable federal or state securities or “blue sky” laws, or (iii) where failure to seek or obtain such authorization, approval, order, permit or consent, or to make such filing or notification, would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Company.

Section 4.4 Capitalization. The Company’s and each of its Subsidiaries’ authorized and outstanding equity interests are as set forth in Schedule 4.4 of the Disclosure Schedules and are owned of record by the holders as set forth on such schedule. All of the Company’s and the Subsidiaries’ issued and outstanding equity interests are validly issued, fully paid and nonassessable, and were not issued in violation of any preemptive right or similar right. The equity interests identified on Schedule 4.4 of the Disclosure Schedules constitute all of the issued and outstanding equity interests of the Company and its Subsidiaries. There are no outstanding

obligations, options, warrants, convertible securities, or other rights, agreements, arrangements, or commitments of any kind relating to the equity interests of the Company or its Subsidiaries or obligating the Company or its Subsidiaries to issue or sell any equity interests of, or any other interest in, the Company or such Subsidiary. There are no outstanding contractual obligations of the Company or its Subsidiaries to repurchase, redeem, or otherwise acquire any equity interests of the Company or such Subsidiary or to provide funds to, or make any investment in, any other Person. There are no outstanding stock appreciation, phantom stock, profit participation or similar rights with respect to the Company or any of its Subsidiaries. There are no bonds, debentures, notes or other indebtedness of the Company or its Subsidiaries having the right to vote or consent (or, convertible into, or exchangeable for, securities having the right to vote or consent) on any matters on which stockholders (or other equityholders) of the Company or its Subsidiaries may vote. Other than as set forth under the Credit Facilities, there are no voting trusts, irrevocable proxies or other Contracts in effect to which the Company or any of its Subsidiaries is a party or is bound with respect to the voting or transfer of any of the equity interests of the Company or its Subsidiaries.

Section 4.5 Equity Interests.

(a) Except for the Subsidiaries set forth in Schedule 4.5 of the Disclosure Schedules, neither the Company nor any of its Subsidiaries directly or indirectly owns any equity, partnership, membership, or similar interest in, or any interest convertible into, exercisable for the purchase of or exchangeable for any such equity, partnership, membership, or similar interest in any Person.

(b) Schedule 4.5 of the Disclosure Schedules sets forth the name of each Subsidiary of the Company, and, with respect to each such Subsidiary, the jurisdiction in which it is incorporated or organized, and the jurisdictions, if any, in which it is qualified to do business. Each such Subsidiary is a duly organized and validly existing corporation, partnership or other entity in good standing under the laws of the jurisdiction of its incorporation or organization and is duly qualified or authorized to do business as a foreign corporation or entity and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing has not had and would not have a Material Adverse Effect with respect to the Company. Each such Subsidiary has all requisite corporate or entity power and authority to own its properties and carry on its business as presently conducted. All such shares or other equity interests represented as being owned by the Company or any of its Subsidiaries are owned by them free and clear of any and all Encumbrances, except as set forth in the Credit Facilities or in Schedule 4.5 of the Disclosure Schedules.

Section 4.6 Financial Statements; No Undisclosed Liabilities.

(a) Copies of the unaudited consolidated balance sheet of the Company and its Subsidiaries as at November 30, 2008 and November 30, 2009 (such November 30, 2009 balance sheet is referred to as the “Balance Sheet”), and the related unaudited consolidated statements of income of the Company and its Subsidiaries (collectively referred to as the “Financial Statements”), are attached hereto as Schedule 4.6(a) of the Disclosure Schedules.

Each of the Financial Statements (i) has been prepared based on the books and records of the Company and its Subsidiaries, (ii) has been prepared in accordance with GAAP as modified by the Specified Accounting Policies, in each case, applied consistently, and (iii) fairly presents, in all material respects, the consolidated financial position and results of operations of the Company and its Subsidiaries as at the respective dates thereof and for the respective periods indicated therein.

(b) The financial books, records and accounts of the Company and its Subsidiaries have been and are being maintained in all material respects in accordance with GAAP as modified by the Specified Accounting Policies, in each case, consistently applied.

(c) There are no debts, liabilities, or obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, or determined or determinable, of the Company or any of its Subsidiaries of a nature required to be reflected on a balance sheet prepared in accordance with GAAP as modified by the Specified Accounting Policies in a manner consistent with the manner in which GAAP and the Specified Accounting Policies were applied in the preparation of the Financial Statements, other than any such debts, liabilities, or obligations (i) reflected or reserved against on the Balance Sheet, (ii) incurred since the date of the Balance Sheet in the ordinary course of business, (iii) for Taxes or (iv) that are not material to the Company and its Subsidiaries.

(d) Except as set forth in Schedule 4.6(d), neither the Company nor any Subsidiary has any obligation for the reimbursement of any obligor on any letter of credit, bankers’ acceptance or similar credit transaction.

(e) The Company and its Subsidiaries are not required to comply, and are not in compliance, with the Sarbanes Oxley Act of 2002.

(f) Except as set forth on Schedule 4.6(f) and pursuant to the Credit Facilities, none of the obligations of the type referred to in clauses (i) through (v) in the definition of “Indebtedness” of Persons (other than the Company or its Subsidiaries) is secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Encumbrances on any property or asset of the Company or its Subsidiaries.

Section 4.7 Absence of Certain Changes or Events. Since the date of the Balance Sheet, (a) the Company and its Subsidiaries have conducted their respective businesses in the ordinary course of business, except for activities in connection with the sale of the Company and the transactions contemplated by this Agreement, (b) there has not occurred any Material Adverse Effect with respect to the Company and (c) neither the Company nor any of its Subsidiaries has taken any action that, if taken after the date of this Agreement, would constitute a breach of any of the covenants set forth in Section 6.1.

Section 4.8 Compliance with Law; Permits.

(a) Except as set forth in Schedule 4.8(a) of the Disclosure Schedules, each of the Company and its Subsidiaries is in compliance in all material respects with all applicable Laws. Except as set forth in Schedule 4.8(a) of the Disclosure Schedules, neither the Company

nor any of its Subsidiaries has received written notice that it is under investigation with respect to the violation of any Laws.

(b) Each of the Company and its Subsidiaries is in possession of all permits, licenses, franchises, approvals, certificates, consents, waivers, concessions, exemptions, orders, registrations, notices, or other authorizations of any Governmental Authority necessary for each of the Company and its Subsidiaries to own, lease and operate its properties and to carry on its business as currently conducted (the “Permits”), except where the failure to have, or the suspension or cancellation of, any of the Permits would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Company. Schedule 4.8(b) of the Disclosure Schedules sets forth all material Permits and each of the Company and its Subsidiaries is in compliance in all material respects with all such Permits. No suspension, cancellation, modification, revocation, or nonrenewal of any Permit is pending or, to the Knowledge of the Company, threatened in writing. A certificate of occupancy has been issued with respect to each Owned Real Property and Leased Real Property.

No representation or warranty is made under this Section 4.8 with respect to ERISA, taxes, or environmental matters, which are covered exclusively by Sections 4.10, 4.15, and 4.16, respectively.

Section 4.9 Litigation. Schedule 4.9 of the Disclosure Schedules sets forth a list, as of the date of this Agreement and for 24 months prior thereto, of each Action (other than non-litigation matters brought by employees of the Company and its Subsidiaries) pending, resolved, settled or, to the Knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries. As of the date hereof, there is no Action by or against the Company or any of its Subsidiaries pending, or to the Knowledge of the Company, threatened in writing (or to the Knowledge of the Company, pending or threatened in writing, against any of the officers, directors or employees of the Company or any of the Subsidiaries with respect to their business activities on behalf of the Company) that is material to the Company or would affect the legality, validity, or enforceability of this Agreement or the consummation of the transactions contemplated hereby. Except as set forth on Schedule 4.9 of the Disclosure Schedules, the Company and its Subsidiaries are not subject to any Order and the Company and its Subsidiaries are not in breach or violation of any such Order in any material respect. Except as set forth on Schedule 4.9 of the Disclosure Schedules, neither the Company nor any of its Subsidiaries is engaged in any Action outside the ordinary course of business to recover monies due it or for damages sustained by it. There are no Actions pending or, to the Knowledge of the Company, threatened in writing against the Company or to which the Company is otherwise a party relating to this Agreement or the Escrow Agreement or the transactions contemplated hereby or thereby.

Section 4.10 Employee Benefit Plans.

(a) Schedule 4.10(a) of the Disclosure Schedules sets forth a complete list of (i) all material “employee benefit plans,” as defined in Section 3(3) of ERISA, (ii) all other material severance pay, salary continuation, bonus, incentive, stock option, retirement, pension, profit sharing or deferred compensation plans, contracts, programs, funds, or arrangements of any kind, and (iii) all other material employee benefit plans, contracts, programs, funds, or arrangements (whether written or oral, qualified or nonqualified, funded or unfunded, foreign or

domestic, currently effective or terminated) and any trust, escrow, or similar agreement related thereto, whether or not funded, in respect of any present or former employees, directors, officers, shareholders, consultants, or independent contractors of the Company or any of its Subsidiaries that (i) are sponsored or maintained by the Company, (ii) are sponsored or maintained by or on behalf of a member of the Controlled Group of the Company or (iii) with respect to which the Company or any of its Subsidiaries has made or is required to make payments, transfers, or contributions (all of the above being hereinafter individually or collectively referred to as an “Employee Plan” or “Employee Plans,” respectively). Schedule 4.10(a) of the Disclosure Schedules separately identifies each Employee Plan that is sponsored, maintained or entered into solely by the Company or its Subsidiaries (and not by EPC or its other Affiliates) (each, a “Company Employee Plan”), and each Employee Plan that is not a Company Employee Plan (each, a “Non-Company Employee Plan”).

(b) Copies of the following materials have been delivered or made available to the Buyer: (i) all plan documents for each Employee Plan or, in the case of an unwritten Employee Plan, a written description thereof, (ii) all determination or opinion letters from the IRS with respect to any of the Employee Plans, (iii) all summary plan descriptions, summaries of material modifications, annual reports, and summary annual reports with respect to any of the Employee Plans, and (iv) all trust agreements, insurance contracts, and other documents relating to the funding or payment of benefits under any Employee Plan.

(c) Each Employee Plan is being and has been maintained in all material respects in accordance with its terms, any applicable collective bargaining agreement and the requirements of all applicable Law. The Company has performed all material obligations required to be performed by it under any Employee Plan and is not in any material respect in default under or in violation of any Employee Plan. No Action (other than claims for benefits in the ordinary course) or investigation is pending or, to the Knowledge of the Company, threatened (i) with respect to any Employee Plan that could result in liability of the Company or its Subsidiaries or (ii) with respect to any Company Employee Plan. There have been no prohibited transactions or breaches of any of the duties imposed on “fiduciaries” (within the meaning of Section 3(21) of ERISA) by ERISA with respect to the Employee Plans that could result in any material liability or excise tax under ERISA or the Code being imposed on the Company or its Subsidiaries.

(d) Each Employee Plan intended to be qualified under Section 401(a) of the Code is so qualified and has been either determined by the IRS to be so qualified or submitted for such determination, and each trust created thereunder has been determined by the IRS to be exempt from tax under the provisions of Section 501(a) of the Code, and, to the Knowledge of the Company, nothing has occurred since the date of any such determination that could reasonably be expected to give the IRS grounds to revoke such determination.

(e) Neither the Company nor any member of the Controlled Group currently has, and at no time since August 1, 2006 has had, an obligation to contribute to a “multiemployer plan” as defined in Section 3(37) of ERISA or Section 414(f) of the Code or a “multiple employer plan” within the meaning of Section 210(a) of ERISA or Section 413(c) of the Code. Any liability under Title IV of ERISA that the Company or any member of its Controlled Group

has incurred with respect to any “multiemployer plan” or “multiple employer plan” has been satisfied in full.

(f) Neither the Company nor any member of the Controlled Group has incurred any liability under Title IV of ERISA (other than for premiums pursuant to Section 4007 of ERISA which have been timely paid) or Section 4971 of the Code, and no condition exists that presents a risk to the Company or any of its Subsidiaries of incurring any such liability or failure. Each Employee Plan to which Section 412 of the Code or Section 302 of ERISA applies has satisfied the requirements of Sections 412, 430 and 436 of the Code and Sections 302 and 303 of ERISA. Schedule 4.10(f) of the Disclosure Schedules identifies the funded status of each EPT Pension Plan for financial accounting purposes (on a FAS 158 basis) as of October 31, 2009. No EPT Pension Plan currently is in “at-risk status” within the meaning of Section 430(i)(4) of the Code or Section 303(i)(4) of ERISA or currently subject to the limitations of Section 436 of the Code. No Employee Plan has or has incurred an accumulated funding deficiency within the meaning of Section 302 of ERISA or Section 412 of the Code, nor has any waiver of the minimum funding standards of Section 302 of ERISA and Section 412 of the Code been requested of or granted by the IRS with respect to any Employee Plan, nor has any lien in favor of any Employee Plan arisen under Section 412(n) or 430(k) of the Code or Section 302(f) or 303(k) of ERISA. Neither the Company nor any member of the Controlled Group has been required to provide security to any defined benefit pension plan pursuant to Section 412(c)(4) or 436 of the Code or Section 306 or 307 of ERISA. There has been no “reportable event” within the meaning of Section 4043 of ERISA and the regulations and interpretations thereunder which has not been fully and accurately reported in a timely fashion, as required, or which, whether or not reported, would to the Knowledge of the Company reasonably be expected to constitute grounds for the Pension Benefit Guaranty Corporation to institute termination proceedings with respect to any Employee Plan.

(g) Except as would not result in liability to the Company or any of its Subsidiaries, with respect to each group health plan benefiting any current or former employee of the Company or any member of the Controlled Group that is subject to Section 4980B of the Code, the Company and each member of the Controlled Group has complied with the continuation coverage requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA.

(h) All (i) insurance premiums required to be paid with respect to, (ii) benefits, expenses, and other amounts due and payable under, and (iii) contributions, transfers, or payments required to be made to, any Employee Plan prior to the Closing Date will have been paid, made or accrued on or before the Closing Date.

(i) With respect to any insurance policy providing funding for benefits under any Company Employee Plan (but, excluding, for the avoidance of doubt, any workers’ compensation insurance), (i) there is no liability of the Company in the nature of a retroactive rate adjustment, loss sharing arrangement, or other actual or contingent liability, nor would there be any such liability if such insurance policy was terminated on the date hereof, and (ii) to the Knowledge of the Company, no insurance company issuing any such policy is in receivership, conservatorship, liquidation or similar proceeding.

(j) No Company Employee Plan provides benefits, including death or medical benefits, beyond termination of service or retirement other than (i) coverage mandated by Law or (ii) death or retirement benefits under any Employee Plan that is intended to be qualified under Section 401(a) of the Code.

(k) Except as set forth in Schedule 4.10(k) of the Disclosure Schedules, the execution and performance of this Agreement will not (i) constitute a stated triggering event under any Employee Plan that will result in any payment (whether of severance pay or otherwise) becoming due from the Company or any of its Subsidiaries to any current or former officer, employee, director or consultant (or dependents of such Persons), or (ii) accelerate the time of payment or vesting, or increase the amount of compensation or benefits due from the Company or any of its Subsidiaries to any current or former officer, employee, director or consultant (or dependents of such Persons) of the Company.

(l) None of EPC, the Company or their respective Affiliates and Subsidiaries has agreed or committed to institute any plan, program, arrangement or agreement for the benefit of employees or former employees of the Company other than the Employee Plans, or to make any amendments to any of the Employee Plans.

(m) Subject to the terms of any collective bargaining Contract with the Company, the plan sponsor has reserved all rights necessary to amend or terminate the Employee Plans that provide medical, dental or vision benefits without the consent of any other person.

(n) The Company is not a party to any Contract, agreement or arrangement that could, directly or in combination with other events, result, separately or in the aggregate, in the payment, acceleration or enhancement of any benefit as a result of the transactions contemplated by this Agreement, including, without limitation, the payment of any “excess parachute payments” within the meaning of Section 280G of the Code.

(o) The term “Foreign Plan” shall mean any Employee Plan that is maintained outside of the United States. Each Foreign Plan complies with all applicable Law (including applicable Law regarding the form, funding and operation of the Foreign Plan) in all material respects. The Financial Statements accurately reflect the Foreign Plan liabilities and accruals for contributions required to be paid to the Foreign Plans, in accordance with applicable generally accepted accounting principles consistently applied. All contributions required to have been made to all Foreign Plans as of the Closing will have been made as of the Closing. All Foreign Plans that are required to be funded by applicable Law are fully funded (or appropriate accruals are reflected in the Balance Sheet) and in good standing with such Governmental Authorities as may be relevant and no notice of underfunding, non-compliance, failure to be in good standing or otherwise has been received from any such Governmental Authorities. There are no actions, suits or claims pending or, to the Knowledge of the Company, threatened in writing with respect to the Foreign Plans (other than routine claims for benefits). There have not occurred, nor are there continuing any transactions or breaches of fiduciary duty under applicable Law with respect to any Foreign Plan which could have a material adverse effect on (1) any Foreign Plan or (2) the condition of the Company or any of its Subsidiaries.

Section 4.11 Labor and Employment Matters. Except as set forth on Schedule 4.11(a) of the Disclosure Schedules, neither the Company nor any of its Subsidiaries is a party to any labor or collective bargaining Contract that pertains to employees of the Company or any of its Subsidiaries. To the Knowledge of the Company, there are no organizing activities or additional collective bargaining arrangements with respect to any Company Employee pending or under discussion with any labor organization or group of Company Employees. During the past three years there has been no strike, slowdown, work stoppage, or lockout affecting the Company or any of its Subsidiaries (except as set forth on Schedule 4.11(b) of the Disclosure Schedules) and, to the Knowledge of the Company, during such time no strike, slowdown, work stoppage or lockout has been threatened in writing by the union representing Company Employees. Neither the Company nor any of its Subsidiaries has materially breached or otherwise failed to comply in any material respect with the provisions of any collective bargaining or union Contract. Except as set forth on Schedule 4.11(c) of the Disclosure Schedule, there are no unfair labor practice charges or complaints against the Company or any of its Subsidiaries, and to the Knowledge of the Company, none are threatened in writing by the union representing Company Employees. Except as set forth on Schedule 4.11(d), to the Knowledge of the Company, there are no pending investigations into the Company’s employment practices.

Section 4.12 Insurance. Schedule 4.12 of the Disclosure Schedules sets forth a true and complete list of all material insurance policies in force with respect to the Company and its Subsidiaries. All insurance policies in force with respect to the Company and its Subsidiaries (the “Insurance Policies”) provide insurance in such amounts and against such risks as the management of the Company has reasonably determined to be prudent in accordance with industry practice. The Company has heretofore provided the Buyer with a brief summary of the coverage and terms of each such material policy including the policy name, policy number, carrier, term and type and amount of coverage. Subject to Section 6.17, none of such insurance will remain in effect with respect to the Company and its Subsidiaries following the Closing.

Section 4.13 Real Property.

(a) Schedule 4.13(a) of the Disclosure Schedules lists the street address and tax identification number of each parcel of Owned Real Property and the current owner of each parcel of Owned Real Property. The Company or its Subsidiaries have good and marketable fee title to all Owned Real Property, free and clear of all Encumbrances, other than Permitted Encumbrances. Except as set forth on Schedule 4.13(a) of the Disclosure Schedules: (i) neither the Company nor any Subsidiaries has leased or otherwise granted to any Person the right to use or occupy such Owned Real Property or portion thereof, (ii) other than the right of the Buyer pursuant to this Agreement, there are no outstanding options, rights of first offer, or rights of first refusal to purchase such Owned Real Property or any portion thereof or interest therein, and (iii) neither the Company nor any of its Subsidiaries is a party to any agreement or option to purchase any real property or interest therein.

(b) Schedule 4.13(b) of the Disclosure Schedules lists the street address of each parcel of Leased Real Property and the identity of the lessor, lessee and current occupant (if different from lessee) of each such parcel of Leased Real Property. The Company or its Subsidiaries have a valid leasehold estate in all Leased Real Property pursuant to the applicable

leases, free and clear of all Encumbrances, other than Permitted Encumbrances. Each Lease is valid and binding on the Company or the applicable Subsidiary, as the case may be, and, to the Knowledge of the Company, the counterparties thereto, and is in full force and effect, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar Laws and principles of equity affecting creditors’ rights and remedies generally. With respect to each Leased Real Property, except as disclosed on Schedule 4.13(b) of the Disclosure Schedules: (i) neither the Company nor any of its Subsidiaries, and to Knowledge of Seller, no lessor with respect to any Lease, is in material default under any Lease and no event has occurred or circumstance exists which, with the delivery of notice or passage of time or both, would constitute a breach or default under any Lease, (ii) neither the Company nor any of its Subsidiaries have subleased, licensed or otherwise granted any Person the right to use or occupy such Leased Real Property or portion thereof, (iii) neither the Company nor any of the Subsidiaries have collaterally assigned or granted any other security interest in such Lease or any interest therein (except as required under the Credit Facilities), (iv) the Company has delivered a true and complete copy of all Leases pertaining to the Leased Real Property to the Buyer, and no Leases have been modified, extended, renewed or assigned to any Person since the date of such delivery and (v) neither the Company nor any of its Subsidiaries has paid a security deposit.

(c) Except as set forth in Schedule 4.13(c) of the Disclosure Schedules, all of the Real Property is in good condition and repair (subject to normal wear and tear) and is sufficient for the operation of the Real Property and the Business as currently conducted. To the Knowledge of the Seller, there are no material (i) defects in, (ii) mechanical failures of, or (iii) damages to the Real Property. None of the Company or its Subsidiaries has received written notice of any condemnation, expropriation, eminent domain or similar proceeding affecting all or any material portion of the Real Property.

(d) The conveyance of the Transferred Real Property will not violate or conflict with the terms of any options, rights of first offer, rights of first refusal or other agreements affecting the Transferred Real Property.

Section 4.14 Intellectual Property.

(a) Schedule 4.14(a) of the Disclosure Schedules sets forth, with the owner, country(ies) or region, registration and application numbers and dates indicated, as applicable, a true and complete list of all of the following Company Intellectual Property: Patents, registered Trademarks and applications therefor, registered Copyrights and applications therefor, and Domain Names. All fees, taxes, annuities and other payments associated with filing, prosecuting, issuing, recording, registering or maintaining any such Intellectual Property that are currently due have been paid in full in a timely manner to the proper Governmental Authority, and except as set forth on Schedule 4.14(a), no such fees are expected to be due within the four month period following the date of this Agreement. All Company Intellectual Property required to be listed on Schedule 4.14(a) is in full force and effect, is owned beneficially and of record solely by the Company or its Subsidiaries and, to the Knowledge of the Company, is enforceable. The Company Intellectual Property is owned by the Company and/or its Subsidiaries free from any Encumbrances other than Permitted Encumbrances.

(b) Except for any fees payable to a Governmental Authority to issue, register or maintain any of the Company Intellectual Property listed on Schedule 4.14(a) and for any payments required pursuant to a Material Contract or COTS Software licensed by the Company or any Subsidiary, no payment is required to be made to any Person for ownership or use of any Intellectual Property (other than Patents) and, to the Knowledge of the Company, Patents used by the Company or any of its Subsidiaries. Except as set forth in a Material Contract, neither the Company nor any of its Subsidiaries has licensed or otherwise granted any right to any Person under any Company Intellectual Property or otherwise agreed not to assert rights in any Company Intellectual Property against any Person. Except as set forth in a Material Contract or a license of COTS Software, neither the Company nor any of its Subsidiaries has been licensed or otherwise granted any rights to any Intellectual Property of any Person.

(c) All consultants or contractors of the Company or any of its Subsidiaries (other than a consultant or contractor that has granted a license to the Company or any such Subsidiary pursuant to a Material Contract) have executed and delivered valid, written instruments that assign to the Company or one of its Subsidiaries all rights to any Intellectual Property that is used or held for use in the current conduct of the Business, including currently under development by the Company or any of its Subsidiaries and that was conceived, reduced to practice, created or otherwise developed in the course of performing services for the Company or its Subsidiaries that were generally intended to create Intellectual Property, including services such as software development, materials design, and chemical processing design. All employees of the Company or any of its Subsidiaries who participated in the conception, reduction to practice, creation or development of Intellectual Property that is used or held for use in the current conduct of the Business, including currently under development by the Company or any of its Subsidiaries were employees of the Company or such Subsidiary at the time of rendering such services and such services were within the scope of their employment or such employees have otherwise validly assigned such Intellectual Property to the Company or its Subsidiaries. No director, officer, equityholder, employee, consultant, contractor, agent or other Representative of Seller, the Company or any of its Subsidiaries owns, nor, to the Knowledge of the Company, claims any rights in any Intellectual Property owned or used by the Company or any of its Subsidiaries (other than a consultant or contractor that has granted a license to the Company or any such Subsidiary pursuant to a Material Contract or to COTS Software).

(d) The Company or its Subsidiaries have entered into confidentiality and nondisclosure agreements with all of its directors, officers, employees, consultants, contractors and agents and any other Person with access to confidential Company Intellectual Property, including the Trade Secrets, to protect the confidentiality and value thereof, and, to the Knowledge of the Company, there has not been any breach by any of the foregoing to any such agreement. The Company and each of its Subsidiaries have taken commercially reasonable measures commensurate with industry standards to maintain the confidentiality thereof and in each such case using not less than a reasonable degree of care under the circumstances.

(e) Since August 1, 2006, no written claim has been asserted against the Company or any of its Subsidiaries or, to the Knowledge of the Company, is currently threatened against the Company or any of its Subsidiaries, alleging that the use or exploitation by the Company or any of its Subsidiaries of any Intellectual Property owned by the Company or any of its Subsidiaries infringes the Intellectual Property of any third party. Neither the Company nor

any of its Subsidiaries infringes, misappropriates or otherwise violates or conflicts with, nor have any of them infringed, misappropriated or otherwise violated or conflicted with, in any material respect, any Intellectual Property of any other Person (including the Seller or any of its Affiliates). To the Knowledge of the Company, none of the Company Intellectual Property is being infringed, misappropriated or otherwise violated by any other Person (including the Seller or any of its Affiliates) in any material respect. Since August 1, 2006, neither the Seller, the Company nor any of its Subsidiaries has received or requested and not received any opinions of patent counsel concerning the risk that the operation of the Business (or any portion thereof) infringes the Patents of any other Person.

(f) Since August 1, 2006, there has been no Action pending, or to the Knowledge of the Company, threatened in writing, whether or not resolved or settled, that (i) challenges the rights of the Company or any of its Subsidiaries in respect of any Intellectual Property or (ii) asserts that the Company or any of its Subsidiaries is, was or will be infringing, misappropriating or otherwise violating or in conflict with any Intellectual Property, or is required to pay any royalty, license fee, charge or other amount with regard to any Intellectual Property. None of the Company Intellectual Property is the subject of any order, decree or injunction of any Governmental Authority, and neither the Company nor any of its Subsidiaries has been the subject of any order, decree or injunction of any Governmental Authority in respect of any other Person’s Intellectual Property, in each case, of which the Company or any of its Subsidiaries have been given notice.

(g) All data and personal information used or maintained by the Company or any of its Subsidiaries has been collected, maintained, used and transferred in all material respects in accordance with applicable data protection and privacy principles and policies. All such data protection and privacy principles and policies are designed and administered in accordance with all applicable Laws. No Person has claimed any compensation from the Company or any of its Subsidiaries for the loss of or unauthorized disclosure or transfer of personal data or information, and, to the Knowledge of the Company, no facts or circumstances exist that might give rise to such a claim.

(h) Except (i) for the inventions covered by Patents which were developed using government funds and (ii) for Technical Data and Computer Software the development of which was accomplished, in whole or in part, with government funds, to the Knowledge of the Company, no Governmental Authority, educational institution or non-profit entity provided any funding for or facilities or equipment used in the conception, reduction to practice, creation or development of any of the Company Intellectual Property nor does any Governmental Authority, educational institution or non-profit entity claim or have a right to claim any ownership, right to practice or other interest in any of the Company Intellectual Property. Except as described on Schedule 4.14(h) of the Disclosure Schedules and to the Knowledge of the Company, no employee or contractor of the Company or any of its Subsidiaries who was involved in, or who contributed to, the conception, reduction to practice, creation or development of any of the Company Intellectual Property was performing services for any Governmental Authority, educational institution or non-profit entity during such time as such employee or contractor was providing services on behalf of or to the Company or its Subsidiaries.

(i) Except as described on Schedule 4.14(i) of the Disclosure Schedules, all Information Systems used by the Company or any of its Subsidiaries in the conduct of the Business (other than any back-up storage maintained by the vendors listed on Schedule 4.14(i) of the Disclosure Schedules in the ordinary course) are owned, controlled and operated by the Company or its Subsidiaries, are not dependent upon any Information System of any other Person and are sufficient for the conduct of the Business as currently conducted. The Company and its Subsidiaries use commercially reasonable means commensurate with industry standards to protect the security and integrity of all Information Systems used by the Company and its Subsidiaries. All Information Systems used or held for use in the current conduct of the Business are fully operational.

Section 4.15 Taxes.

(a) The Company and each of its Subsidiaries are entities that are disregarded for purposes of United States federal and applicable state income Tax purposes and have not made any filing with any Governmental Authority, including Form 8832 with the IRS, to be treated as an association taxable as a corporation for income Tax purposes.

(b) The Company and each of its Subsidiaries (other than the Canadian Subsidiary) have timely filed (or have had timely filed on their behalf) with the appropriate Governmental Authorities all Tax Returns required to be filed by each of them (taking into account for this purpose any extensions), and such Tax Returns are complete and accurate in all material respects.

(c) The Company, its Subsidiaries (other than the Canadian Subsidiary) and the Seller have withheld or collected all Taxes that the Company, such Subsidiary and the Seller have been required to withhold or collect with respect to the Company and, to the extent required when due, have timely paid such Taxes to the proper Governmental Authority.

(d) There are no written claims by any Governmental Authority in a jurisdiction where the Seller and the Company do not file Tax Returns that the Company or any of its Subsidiaries (other than the Canadian Subsidiary) may be subject to taxation by that jurisdiction.

(e) The Seller, its Affiliates and the Company have timely paid, or have caused to be timely paid, all Taxes that include or relate to the Company, the Company’s assets and the operation of the Company’s business that will have been required to be paid on or prior to the Closing Date, the nonpayment of which could result in an Encumbrance on any asset of the Company, could have an adverse effect on the Buyer’s ability to conduct the Business or could result in the Buyer becoming liable or responsible therefor.

(f) Neither the Company nor any of its Subsidiaries (other than the Canadian Subsidiary) is a party to any agreement or arrangement providing for the allocation, indemnification or sharing of Taxes.

(g) All Returns required to be filed with any taxing authority with respect to any Pre-Closing Tax Period by or on behalf of the Canadian Subsidiary, to the extent required to be filed on or before the Closing Date, have been timely filed in accordance with all applicable

Laws. The information contained in such Returns is correct and complete in all material respects and such Returns reflect accurately in all material respects all liability for Taxes of the Canadian Subsidiary for the periods covered thereby.

(h) All Returns with respect to Pre-Closing Tax Periods correctly and completely reflect the facts regarding the income, business, assets, operations, activities and status of the Canadian Subsidiary. The Canadian Subsidiary is not currently a beneficiary of any extension of time within which to file any Return.

(i) All Taxes owed by the Canadian Subsidiary (whether or not shown as due and payable on any Return) have been timely paid to the appropriate taxing authority. Except as set forth on Schedule 4.15(i) of the Disclosure Schedules, the Canadian Subsidiary has not received any refund of Taxes to which it is not entitled.

(j) The Canadian Subsidiary has withheld and timely remitted to the appropriate taxing authority all Taxes required by applicable Law to have been withheld and remitted by it on account of Taxes.

(k) Since August 1, 2006, no Return of the Canadian Subsidiary with respect to any Pre-Closing Tax Period has been audited by any Governmental Authority.

(l) The Canadian Subsidiary has not granted, or has not had granted on its behalf, any extension or waiver of the statute of limitations period applicable to any Return or within which any Tax may be assessed, reassessed or collected by any Governmental Authority, which period (after giving effect to such extension or waiver) has not yet expired.

(m) There is no proceeding, claim, audit or other Action pending or to the Knowledge of the Company threatened in writing against or with respect to the Canadian Subsidiary in respect of any Tax.

(n) There are no liens for Taxes upon the assets or properties of the Canadian Subsidiary, except for Permitted Encumbrances.

(o) The Canadian Subsidiary has not been a member of an affiliated, consolidated, combined or unitary group or participated in any other arrangement whereby any income, revenues, receipts, gain or loss was determined or taken into account for Tax purposes with reference to or in conjunction with any income, revenues, receipts, gain, loss, asset or liability of any other Person other than a group of which the Canadian Subsidiary was the parent. The Canadian Subsidiary has no liability for the Taxes of any Person (other than the Canadian Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by contract, or otherwise.

(p) Schedule 4.15(p) contains a list of all jurisdictions (whether foreign or domestic) to which any Tax imposed on overall net income is properly payable by the Canadian Subsidiary.

(q) The Canadian Subsidiary has not received notice of any claim by a Governmental Authority in a jurisdiction where the Canadian Subsidiary does not file Returns that it is or may be subject to taxation by that Governmental Authority.

(r) The Canadian Subsidiary will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any period ending after the Closing Date (i) under Section 481 of the Code (or any similar provision of state, local or foreign Law) as a result of change in method of accounting for a Pre-Closing Tax Period, (ii) pursuant to the provisions of any agreement entered into with any Governmental Authority or pursuant to a “closing agreement” as defined in Section 7121 of the Code (or any similar provisions of state, local or foreign Law) executed on or prior to the Closing Date, (iii) the installment method of accounting, the completed contract method of accounting or the cash method of accounting with respect to a transaction that occurred prior to the Closing Date, (iv) any prepaid amount received on or prior to the Closing Date, or (v) pursuant to Section 108(i) of the Code as a result of the discharge of any indebtedness on or prior to the Closing Date.

(s) The Canadian Subsidiary is not a party to any Tax sharing, allocation or indemnity agreement, arrangement or similar Contract.

(t) The Canadian Subsidiary has not distributed the stock of another Person, or has not had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Sections 355 or 361 of the Code.

(u) The Canadian Subsidiary has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

(v) The Canadian Subsidiary has not participated in any “reportable transaction” as defined in Section 6707A of the Code or Treasury Regulation Section 1.6011-4 (or any predecessor provision).

(w) There are no circumstances existing which could result in the application of section 17, section 78 or sections 80 to 80.04 of the Income Tax Act (Canada), or any equivalent provision under applicable provincial Law, to the Canadian Subsidiary. The Canadian Subsidiary has not claimed nor will it claim any reserve under any provision of the Income Tax Act (Canada), or any equivalent provincial provision, if any amount could be included in the income of the Canadian Subsidiary for any period ending after the Closing Date.

(x) The Canadian Subsidiary has made or obtained records or documents that satisfy the requirements of paragraphs 247(4)(a) to (c) of the Income Tax Act (Canada), for all transactions between the Canadian Subsidiary, on the one hand, and any non-resident Person with whom the Canadian Subsidiary was not dealing at arm’s length, for the purposes of the Income Tax Act (Canada), on the other hand, during a taxation year commencing after 1998 and ending on or before the Closing Date.

(y) The Equity Interests are not “taxable Canadian property” as defined in subsection 248(1) of the Income Tax Act (Canada).

Section 4.16 Environmental Matters.

(a) Except as set forth in Schedule 4.16(a) of the Disclosure Schedules:

(i) the Company and its Subsidiaries are, and since July 31, 2006 have been, in compliance in all material requests with all applicable Environmental Laws and have obtained and are, and since July 31, 2006 have been, in compliance in all material requests with all Environmental Permits;

(ii) there are no written claims pursuant to any Environmental Law pending or to the Knowledge of the Company threatened against the Company or its Subsidiaries;

(iii) there is no condition at the Leased Real Property, the Owned Real Property or any other real property at which, to the Knowledge of the Company, there has been any treatment, storage or disposal of any Hazardous Material generated by the Company or any of its Subsidiaries that could reasonably be expected to give rise to any material liability, obligation or requirement under any applicable Environmental Law on the part of the Company or any of its Subsidiaries;

(iv) the Company and its Subsidiaries have not undertaken or assumed any liabilities, responsibilities or obligations, including any investigation, corrective or remedial obligation, under any Environmental Law;

(v) Schedule 4.16(a)(v) of the Disclosure Schedules sets forth a true and complete list of all Environmental Permits held by the Company or any of its Subsidiaries; and

(vi) neither this Agreement nor the transactions contemplated hereby will result in any material requirement for disclosure, investigation, cleanup, removal or remedial action, or notification to or consent of any Governmental Authority or third party, with respect to the Leased Real Property or the Owned Real Property pursuant to any Environmental Laws, including any so-call “property transfer law;” and

(vii) Seller has made available to Buyer true and complete copies of any material audit, report, assessment, study, analysis or evaluation regarding the compliance of the Company or any of its Subsidiaries with any applicable Environmental Laws since July 31, 2006 or the responsibilities, obligations or liability of the Company or any of its Subsidiaries under any applicable Environmental Laws since July 31, 2006.

(b) The representations and warranties contained in this Section 4.16 are the only representations and warranties being made with respect to compliance with or liability under Environmental Laws or with respect to any environmental, health or safety matter, including natural resources, related to the Company or its Subsidiaries.

(i) “Environmental Laws” means any Laws of any Governmental Authority in effect as of the date hereof relating to pollution or protection of human health and safety or the environment or omissions, discharges, releases, manufacturing, processing, use, treatment, storage, disposal, transport, handling of any Hazardous Material.

(ii) “Environmental Permits” means all Permits under any Environmental Law.

(iii) “Hazardous Material” means (1) toxic mold, radiation or radioactive material, (2) any substance that is or contains asbestos, polychlorinated biphenyls, petroleum or petroleum-derived substances or wastes, leaded paints or radon, (3) any chemical, pollutant, contaminant, hazardous waste, or toxic substance that requires removal or remediation or other treatment under any applicable Environmental Laws, or (4) any substance that is regulated or is defined as a “special waste,” “toxic waste,” “hazardous waste” or “hazardous substance” under any applicable Environmental Law.

Section 4.17 Material Contracts.

(a) For purposes of this Section 4.17, Material Contracts do not include Government Contracts. Schedule 4.17 of the Disclosure Schedules lists each of the following written Contracts and agreements of the Company and its Subsidiaries (such Contracts and agreements as described in this Section 4.17(a) being “Material Contracts”):

(i) all Contracts or agreements that provide for payment or receipt by the Company or any of its Subsidiaries of more than $1,000,000 over the life of such Contract or agreement, including any such Contracts and agreements with customers or clients;

(ii) all Contracts and agreements relating to Indebtedness or the guarantee or repayment of such Indebtedness;

(iii) all Contracts and agreements that limit or purport to limit the ability of the Company or any of its Subsidiaries to compete in any line of business or with any Person or in any geographic area or during any period of time, or not to solicit or hire any Person;

(iv) all joint venture, partnership, or similar agreements or arrangements;

(v) involving a material distributor, sales representative, broker or advertising arrangement that by its express terms is not terminable by the Company or its Subsidiaries at will or by giving notice of 30 days or less;

(vi) involving the acquisition of any business enterprise whether via stock or asset purchase or otherwise and providing for payment by the Company or applicable Subsidiary in excess of $1,000,000;

(vii) all security agreements or other agreements pursuant to which any lien, security interest or similar Encumbrance is created with respect to the Company or its

Subsidiaries or any of their respective assets as security for its obligations with respect to borrowed money in an amount in excess of $500,000;

(viii) all Contracts providing for the employment of any Person;

(ix) all Contracts entered into other than in the ordinary course of business with any Affiliate of the Company or any of its Subsidiaries;

(x) all Contracts containing a “most favored nation” pricing agreement; and

(xi) all Contracts (other than Contracts licensing COTS Software or having aggregate fees payable under the existing term of not more than $10,000) wherein the Company or any of its Subsidiaries is the recipient of a license, covenant not to sue or assert, or immunity from suit under any Intellectual Property of any other Person;

(xii) all Contracts (other than Contracts granting nonexclusive licenses to customers in the ordinary course of business) wherein the Company or any of its Subsidiaries grants a license, covenant not to sue or assert, or immunity from suit under any Intellectual Property; and

(xiii) any other Contract or agreement that is material to the Company and its Subsidiaries, taken as a whole.

There are no oral understandings or arrangements with any person that are material to the Company and its Subsidiaries, taken as a whole, other than such oral understandings or arrangements in the ordinary course of business that would not be required to be disclosed on Schedule 4.17 of the Disclosure Schedules. Each Material Contract is valid and binding on the Company or the applicable Subsidiary, as the case may be, and, to the Knowledge of the Company, the counterparties thereto, and is in full force and effect, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar Laws and principles of equity affecting creditors’ rights and remedies generally. Neither the Company nor any of its Subsidiaries is in breach of, or default under, any Material Contract to which it is a party, except for such breaches or defaults that would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Company. The Company has provided to the Buyer true and complete copies of each Material Contract, as amended through the date hereof. With respect to the Material Contracts listed on Schedule 4.17 (or required to be listed on Schedule 4.17): (i) the Company or the applicable Subsidiary, and to the Knowledge of the Company, all other parties to such Material Contract, have complied in all material respects with such Material Contract and (ii) no party to a Material Contract has repudiated any of the terms thereof or, to the Knowledge of the Company, threatened in writing to terminate, cancel or not renew any Material Contract.

Section 4.18 Government Contracts.

(a) Schedule 4.18(a) of the Disclosure Schedules lists each of the Government Contracts of the Company and its Subsidiaries under which performance is ongoing that provides for receipt by the Company of more than $1,000,000 per year.

(b) Each Government Contract under which performance is ongoing is valid and binding on the Company or the applicable Subsidiary, as the case may be, and, to the Knowledge of the Company, the counterparties thereto, and is in full force and effect, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar Laws and principles of equity affecting creditors’ rights and remedies generally. The Company entered into each Government Contract under which performance is ongoing in the ordinary course of business consistent with past practice and, based upon assumptions that the Company believes to be reasonable and subject to such assumptions being fulfilled, should be capable of being performed in accordance with its terms and conditions without a loss. The Company has provided to the Buyer true and complete copies of each Government Contract of the Company and its Subsidiaries under which performance is ongoing that provides for receipt by the Company of more than $1,000,000 per year, as amended through the date hereof.

(c) Since August 1, 2006, with respect to each executory Government Contract (as defined below) or outstanding Bid to which the Company or any of its Subsidiaries is a party:

(i) the Company and each of its Subsidiaries has complied in all material respects with all material terms and conditions of such Government Contract or Bid;

(ii) neither the Company nor any of its Subsidiaries, nor to the Knowledge of the Company any other party, is in material breach, default or violation (and no event has occurred or not occurred through the Company’s or any of its Subsidiaries’ action or inaction or, to the Knowledge of the Company, through the action or inaction of any third party, that with notice or the lapse of time or both would constitute a breach, default or violation) of any material term, condition or provision of any Government Contract to which the Company or any of its Subsidiaries is now a party, or by which any of them or any of their respective properties or assets may be bound;

(iii) the Company and each of its Subsidiaries has complied in all material respects with all material requirements of any statute, rule, regulation, order or agreement with the U.S. Government pertaining to such Government Contract or Bid;

(iv) all representations and certifications executed, acknowledged or set forth in or pertaining to such Government Contract or Bid were current, accurate and complete in all material respects as of their effective date, and the Company and each of its Subsidiaries has complied in all material respects with all such representations and certifications;

(v) except as set forth in Schedule 4.18(c) of the Disclosure Schedules, neither the U.S. Government, nor any prime contractor, subcontractor or other Person, has notified the Company or any of its Subsidiaries, in writing, that the Company or any of its Subsidiaries has materially breached or violated any statute, rule, regulation, certification, representation, clause, provision or requirement;

(vi) no termination notice has been issued, and no cure notice or show cause notice has been issued and not resolved or cured; and

(vii) none of the Company’s Government Contracts was awarded pursuant to the Small Business Innovative Research program or any small business set-aside program administered by the Small Business Administration or as a result of the Company’s “small business” or other preferred status under applicable Law.

(vii) For purposes of this Section 4.18 (c), “executory Government Contract” means a Government Contract that has not been closed by the U.S. Government, prime contractor or subcontractor, as appropriate.

(d) Neither the Company nor any of its Subsidiaries nor any of the Company’s or its Subsidiaries’ directors, officers or employees is (or for the last three years has been) convicted or had a civil judgment rendered against them, or under administrative, civil or criminal investigation, indictment or information, or audit (other than routine contract audits) or internal investigation for fraud or a criminal offense or with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or Bid; or (ii) since August 1, 2006, neither the Company nor any of its Subsidiaries nor any of the Company’s or its Subsidiaries’ directors, officers or employees has initiated any internal investigation or made a voluntary disclosure to any Governmental Authority with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or Bid that has led or could lead, either before or after the Closing Date, to any of the consequences set forth in subsection (i) above or any other material damages, assessment of penalties, recoupment or offset of payment or disallowance of cost.

(e) Neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any of their respective directors, officers or employees is (or at any time during the last three years has been) suspended or debarred from doing business with the U.S. Government or declared nonresponsible or ineligible for U.S. Government contracting and has had no suspension or debarment action commenced against them. Neither the Company nor any Subsidiary has, within the past three years, been terminated for default under any Government Contract. Since August 1, 2006, no Governmental Authority nor any prime contractor or subcontractor has asserted any demand, claim, or any other action for relief nor initiated any dispute proceeding against the Company for an amount that would be reasonably expected to be material to the Company, and neither the Company nor any of its Subsidiaries has asserted any claim or any other action for relief nor initiated any dispute proceeding against any Governmental Authority, prime contractor, or subcontractor for an amount that would be reasonably expected to be material to the Company.

(f) Except as disclosed in Schedule 4.18(f) of the Disclosure Schedules, the Company and its Subsidiaries have not been found to be in violation of, nor are there any allegations, or ongoing or expected investigations regarding compliance with, the Truth in Negotiations Act, the Cost Accounting Standards, the Anti-Kickback Act, the Davis-Bacon Act, the Service Contract Act of 1965, the Federal Procurement Integrity Act, or any other Laws addressing gratuities to and/or bribery of federal officers.

(g) The Company and its Subsidiaries have not been found to be in violation of, nor are there any ongoing or expected investigations regarding compliance with, the National

Industrial Security Program Operating Manual or any Laws dealing with safeguarding, controlling and disclosing classified information.

(h) The Company and its Subsidiaries have not assigned any of their claims, rights to receive value, or other interests under any Government Contract pursuant to the Assignment of Claims Act (31 U.S.C. § 3727), as amended, or otherwise, except as required by the Credit Facilities.

(i) Except for (i) the inventions covered by Patents which were developed using government funds and (ii) Technical Data and Computer Software the development of which was accomplished, in whole or in part, with government funds, no Governmental Authority is currently entitled to claim any rights (including license rights) in: (A) any “Technical Data” (as defined below) included in any of the Company Intellectual Property used or held for use in the current conduct of the Business, other than “Limited Rights” (as defined below); (B) any “Computer Software” (as defined below) included in the Company Intellectual Property used or held for use in the current conduct of the Business, other than “Restricted Rights” (as defined below); (C) any patents or patentable invention included in the Company Intellectual Property used or held for use in the current conduct of the Business or (D) any copyright included in the Company’s Intellectual Property used or held for use in the current conduct of the Business. The terms “Technical Data” and “Limited Rights” have the meanings set forth at 48 C.F.R. 252.227-7013, and the terms “Restricted Rights” and “Computer Software” have the meanings set forth at 48 C.F.R. 252.227-7014.

Section 4.19 Export Controls. Except as set forth on Schedule 4.19 of the Disclosure Schedules, each of the Company and its Subsidiaries is now, and since August 1, 2006 has been, in material compliance with all applicable Laws concerning the exportation of products, technology, technical data and services, including all statutory and regulatory requirements under the Arms Export Control Act (22 U.S.C. 1778), the International Traffic in Arms Regulations, the Export Administration Regulations, the Laws implemented by the Office of Foreign Assets Control, U.S. Department of the Treasury and the equivalent Laws in any jurisdiction in which each of the Company or its Subsidiaries operates.

Section 4.20 Brokers. The Buyer shall not be obligated to pay any brokerage, finder’s or other fee or commission to any broker, finder or investment banker in connection with the transactions contemplated by this Agreement based on arrangements made by or on behalf of the Company.

Section 4.21 Sufficiency of Assets. The Company and its Subsidiaries are the only entities through which the Seller and EPC conduct their business of providing technologically advanced products and solutions for critical energy storage applications in the aerospace, defense and medical markets (the “Business”). Except as set forth in Schedule 4.21 of the Disclosure Schedules, the assets and properties, tangible and intangible, currently owned, leased or licensed by the Company and its Subsidiaries or supplied by customers to the Company and its Subsidiaries in the ordinary course of business constitute all of the assets and properties that are necessary to conduct the business currently conducted by the Company and its Subsidiaries immediately after the Closing in the same manner in all material respects as such business was conducted by Seller immediately prior to the Closing.

Section 4.22 Product Warranty; Product Liability.

(a) Except as set forth on Schedule 4.22(a) of the Disclosure Schedules, all of the products manufactured, sold, leased, or delivered by the Company and its Subsidiaries have conformed in all material respects with all applicable contractual commitments and all warranties applicable to such products. Except for the warranties described on Schedule 4.22(a), there are no warranties of the Company or its Subsidiaries outstanding as of November 30, 2009 with more than two years of warranty coverage remaining to third parties in respect of the Business, including the Business’ products and services.

(b) Except as set forth on Schedule 4.22(b) of the Disclosure Schedules, there is no material liability of the Company or its Subsidiaries arising out of any injury to individuals or property as a result of the ownership, possession or use of any product sold or services rendered by the Company or its Subsidiaries since August 1, 2006.

Section 4.23 Banks; Power of Attorney. Schedule 4.23 of the Disclosure Schedules contains a complete and correct list of the names and locations of all banks in which the Company or any Subsidiary has accounts or safe deposit boxes and the names of all Persons authorized to draw thereon or to have access thereto. Except as set forth on Schedule 4.23 of the Disclosure Schedules, no Person holds a power of attorney to act on behalf of the Company or any of its Subsidiaries.

Section 4.24 Inventories. The inventories of the Company and its Subsidiaries are in good and marketable condition, and are usable and of a quantity and quality saleable in the ordinary course of business subject to applicable reserves. The inventories of the Company and its Subsidiaries set forth in the Balance Sheet were valued at the lower of cost (on a FIFO/LIFO basis) or market and were properly stated therein in accordance with GAAP as modified by the Specified Accounting Policies in a manner consistent with the manner in which GAAP and the Specified Accounting Policies were applied in the preparation of the Balance Sheet. Adequate reserves have been reflected in the Balance Sheet for obsolete, excess, damaged, slow-moving, or otherwise unusable inventory, which reserves were calculated in accordance with GAAP as modified by the Specified Accounting Policies in a manner consistent with the manner in which GAAP and the Specified Accounting Policies were applied in the preparation of the Balance Sheet. The inventories of the Company and its Subsidiaries constitute sufficient quantities for the operation of business in accordance with past practice.

Section 4.25 Accounts and Notes Receivable and Payable

(a) All accounts and notes receivable of the Company and its Subsidiaries have arisen from bona fide transactions in the ordinary course of business and are payable on ordinary trade terms. All accounts and notes receivable of the Company and its Subsidiaries reflected on the Balance Sheet are good and collectible at the aggregate recorded amounts thereof (net of reserves), it being understood by Buyer that this representation is not a guarantee that such accounts and notes receivable will actually be collected by the Company and its Subsidiaries. All accounts and notes receivable arising after the date of the Balance Sheet are good and collectible at the aggregate recorded amounts thereof (net of reserves) it being understood by Buyer that this representation is not a guarantee that such accounts and notes

receivable will actually be collected by the Company and its Subsidiaries. Except as set forth on Schedule 4.25 of the Disclosure Schedules, none of the accounts or the notes receivable of the Company or any of its Subsidiaries (i) are subject to any setoffs or counterclaims or (ii) represent obligations for goods sold on consignment, on approval or on a sale-or-return basis or subject to any other repurchase or return arrangement.

(b) All accounts payable of the Company and its Subsidiaries reflected in the Balance Sheet or arising after the date thereof are the result of bona fide transactions in the ordinary course of business and have been paid or are not yet due and payable.

Section 4.26 Related Party Transactions. There are no Leases, Contracts, agreements or Liabilities between the Company or any of its Subsidiaries, on the one hand, and any Affiliate of the Company, on the other hand (excluding (i) Leases or Contracts wholly between the Subsidiaries of the Company or between the Company and one or more of its Subsidiaries, and (ii) with respect to Company employees, those relating to employment) other than the agreements listed in Schedule 4.26 of the Disclosure Schedules. No officer or director (or any member of such director’s or officer’s immediate family), equityholder, partner or member of the Company or any of its Subsidiaries (“Related Persons”) (i) owes any amount to the Company or any of its Subsidiaries nor does the Company or any of its Subsidiaries owe any amount to (in either case, other than amounts owed in the ordinary course of business in respect of business expenses), or has the Company or any of its Subsidiaries committed to make any loan or extend or guarantee credit to or for the benefit of, any Related Person, (ii) owns any property or right, tangible or intangible, that is used by the Company or any of its Subsidiaries, and (iii) possesses, directly or indirectly, any financial interest in, or is a director, officer or employee of, any Person which is a competitor, supplier, customer, lessor or lessee of the Company or any of its Subsidiaries. Ownership of securities of a company whose securities are registered under the Securities Exchange Act of 1934, as amended, of less than 5% of any class of such securities shall not be deemed to be a financial interest for purposes of this Section 4.26.

Section 4.27 Customers and Suppliers.

(a) Schedule 4.27 of the Disclosure Schedules sets forth a list of the ten largest customers and the ten largest suppliers of the Company and its Subsidiaries, as measured by the dollar amount of purchases therefrom or thereby, during the twelve (12) month period ended November 30, 2008 and November 30, 2009 showing the approximate total sales by the Company and its Subsidiaries to each such customer and the approximate total purchases by the Company and its Subsidiaries from each such supplier, during such period.

(b) Since January 1, 2009, no customer or supplier listed on Schedule 4.27 of the Disclosure Schedules has terminated its relationship with the Company or any of its Subsidiaries (other than the expiration or non-renewal of purchase orders and contract programs, in each case, in the ordinary course of business). To the Knowledge of the Company, no customer or supplier listed on Schedule 4.27 of the Disclosure Schedules has notified the Company or its Subsidiaries that it intends to terminate its relationship with the Company or any of its Subsidiaries or materially reduce or change the pricing or other terms of its business with the Company or any of its Subsidiaries, other than such changes in the ordinary course of business.

Section 4.28 Exclusivity of Representations and Warranties. Neither the Company nor any of its Affiliates or Representatives is making any representation or warranty on behalf of the Company of any kind or nature whatsoever, oral or written, express or implied (including, but not limited to, any relating to financial condition, results of operations, assets or liabilities of the Company and its Subsidiaries), except as expressly set forth in this Article IV and the Disclosure Schedules, and the Company hereby disclaims any such other representations or warranties.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer hereby represents and warrants to the Seller and the Company as follows:

Section 5.1 Organization. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has all necessary corporate power and authority to own, lease, and operate its properties and to carry on its business as it is now being conducted.

Section 5.2 Authority. The Buyer has the corporate power and authority to execute and deliver this Agreement and the Escrow Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by the Buyer of this Agreement and the Escrow Agreement and the consummation by the Buyer of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action. This Agreement has been and the Escrow Agreement will be at or prior to the Closing duly and validly executed and delivered by the Buyer. This Agreement constitutes and the Escrow Agreement when so executed and delivered will constitute the legal, valid, and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

Section 5.3 No Conflict; Required Filings and Consents.

(a) The execution, delivery, and performance by the Buyer of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not:

(i) conflict with or violate the certificate of incorporation or bylaws of the Buyer;

(ii) conflict with or violate any Law or Order applicable to the Buyer or by which any property or asset of the Buyer is bound or affected; or

(iii) conflict with, result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, or require any consent of any Person pursuant to, any material contract or agreement to which the Buyer is a party;

except, in the case of clause (ii) or (iii), as set forth in Schedule 5.3(a) and for any such conflicts, violations, breaches, defaults, or other occurrences that would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Buyer or that arise as a result of any facts or circumstances relating to the Seller or any of its Affiliates.

(b) The Buyer is not required to file, seek or obtain any notice, authorization, approval, order, permit, or consent of or with any Person pursuant to a material Contract of the Buyer or any Governmental Authority in connection with the execution, delivery, and performance by the Buyer of this Agreement or the consummation of the transactions contemplated hereby, except for (i) any filings, authorizations, permits or consents of or any Governmental Authority required under the HSR Act, (ii) such filings as may be required by any applicable federal or state securities or “blue sky” laws, or (iii) where failure to seek or obtain such authorization, approval, order, permit or consent, or to make such filing or notification, would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Buyer.

Section 5.4 Financing. The Buyer has, or shall have at the Closing, sufficient funds to permit the Buyer to consummate the transactions contemplated by this Agreement. Notwithstanding anything to the contrary contained herein, the parties acknowledge and agree that it shall not be a condition to the obligations of the Buyer to consummate the transactions contemplated hereby that the Buyer have sufficient funds for payment of the Purchase Price.

Section 5.5 Brokers. Except for Hill Street Capital, the fees of which will be paid by the Buyer, no broker, finder, or investment banker is entitled to any brokerage, finder’s, or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Buyer.

Section 5.6 Investment Intent. The Buyer is acquiring the Equity Interests for its own account for investment purposes only and not with a view to any public distribution thereof or with any intention of selling, distributing or otherwise disposing of the Equity Interests in a manner that would violate the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Buyer agrees that the Equity Interests may not be sold, transferred, offered for sale, or otherwise disposed of without registration under the Securities Act and any applicable state securities laws, except pursuant to an exemption from such registration under the Securities Act and such laws.

Section 5.7 Buyer’s Investigation and Reliance. The Buyer is a sophisticated purchaser and has made its own investigation, review, and analysis regarding the Company and its Subsidiaries and the transactions contemplated hereby, which investigation, review and analysis were conducted by the Buyer with expert advisors that it has engaged for such purpose. The Buyer and its Representatives have been provided with full and complete access to the Representatives, properties, offices, plants, and other facilities, books, and records of the Company and its Subsidiaries. The Buyer is not relying on any statement, representation, or warranty, oral or written, express or implied, at law or in equity, in respect of the Business, the Company and its Subsidiaries and their respective businesses, assets, liabilities, operations, prospects or condition (financial or otherwise) made by the Seller or the Company or any of their respective Affiliates or Representatives, except as expressly set forth in this Agreement. No

officer, agent, representative or employee of the Seller, the Company or any of their Subsidiaries has any authority, express or implied to make any representations, warranties or agreements not expressly set forth in this Agreement and subject to the limited remedies specified herein. Neither the Seller nor the Company nor any of their respective Affiliates or Representatives shall have any liability to the Buyer or any of its Affiliates or Representatives resulting from the use of any information, documents, or materials made available to the Buyer, whether orally or in writing, in any confidential information memoranda, “data rooms,” management presentations, due diligence discussions, or in any other form in expectation of the transactions contemplated by this Agreement. Neither the Seller nor the Company nor any of their respective Affiliates or Representatives is making, directly or indirectly, any representation or warranty with respect to any, projections, or forecasts involving the Company and its Subsidiaries. The Buyer acknowledges that there are inherent uncertainties in attempting to make such, projections and forecasts and that it takes full responsibility for making its own evaluation of the adequacy and accuracy of any such projections or forecasts (including the reasonableness of the assumptions underlying any such projections and forecasts). The Buyer acknowledges that, should the Closing occur, the Buyer shall acquire the Company and its Subsidiaries without any representation or warranty as to merchantability or fitness for any particular purpose of their respective assets, on an “as is” and “where is” basis, except as expressly set forth in this Agreement.

Section 5.8 U.S. Controlled Entity The Buyer is an entity the majority ownership of which is, and the control of which is, by citizens of the United States of America or corporations or other organizations incorporated or organized under the laws of a state of the United States whose business is administered principally in the United States. Neither the consummation of this Agreement nor the other transactions contemplated hereby will be the basis for a voluntary notification to or an involuntary review by the Committee on Foreign Investment in the United States in accordance with Exon-Florio. No foreign interests hold a majority (greater than fifty percent) or substantial minority interest in the Buyer, when considering the Buyer and its immediate, intermediate, and ultimate parent companies, if any. For purposes of this Section 5.8, a minority interest is substantial if it consists of greater than five percent of the common ownership interests or ten percent of the voting interests of the Buyer. The Buyer is not under foreign ownership, control or influence as set forth in the Department of Defense National Industrial Security Program Operating Manual.

Section 5.9 Litigation. There is no Action pending or, to the knowledge of the Buyer, threatened in writing against the Buyer, or to which the Buyer is otherwise a party relating to this Agreement, the Escrow Agreement or the transactions contemplated hereby or thereby.

ARTICLE VI
COVENANTS

Section 6.1 Conduct of Business Prior to the Closing. Between the date of this Agreement and the Closing Date, except as contemplated by this Agreement, as set forth in Schedule 6.1 of the Disclosure Schedules or unless the Buyer shall otherwise agree in writing, the business of the Company and its Subsidiaries shall be conducted only in the ordinary course of business in all material respects, and the Company and its Subsidiaries shall use their respective commercially reasonable efforts to preserve intact in all material respects their

business organization. Except as set forth in Schedule 6.1, between the date of this Agreement and the Closing Date, without the prior consent of the Buyer (which consent shall not be unreasonably withheld or delayed), neither the Company nor any of its Subsidiaries will, and the Seller and EPC will cause them not to:

(a) amend or otherwise change its certificate of formation or limited liability company agreement or equivalent organizational documents;

(b) transfer, issue, sell or dispose of any limited liability company membership interests or shares of capital stock of the Company or any of its Subsidiaries, or any options, warrants, convertible securities, or other rights of any kind to acquire any such interests or shares;

(c) pledge or encumber any limited liability company membership interests or shares of capital stock of the Company or any of its Subsidiaries;

(d) reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its limited liability company membership interests or capital stock or make any other change with respect to its capital structure;

(e) acquire any corporation, partnership, limited liability company, other business organization or division thereof, or any assets other than in the ordinary course of business, in each case that is material, individually or in the aggregate, to the Company and its Subsidiaries, taken as a whole;

(f) sell, lease, or otherwise dispose of any assets or properties other than in the ordinary course of business, in each case that is material, individually or in the aggregate, to the Company and its Subsidiaries, taken as a whole;

(g) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, or recapitalization of the Company or any of its Subsidiaries;

(h) incur, assume or guarantee (i) any Indebtedness in excess of $50,000 individually or $250,000 in the aggregate or (ii) any Leases required to be capitalized under GAAP;

(i) pay, repay, discharge, purchase, repurchase, satisfy or amend the terms of any Indebtedness or other material Liability other than in the ordinary course of business;

(j) subject any properties or assets to any Encumbrance other than Permitted Encumbrances;

(k) enter into any Lease, Contract, agreement, or arrangement that would be a Material Contract if entered into prior to the date hereof, other than any such Leases, Contracts, agreements, or arrangements entered into in the ordinary course of business (including Leases, Contracts, agreements, or arrangements with customers, vendors, or clients);

(l) terminate or materially amend any Material Contract, Lease or material Permit other than in the ordinary course of business;

(m) authorize or make any capital expenditure (i) outside the ordinary course of business or (ii) not reflected in the capital budget of the Company attached as Schedule 6.1(m) of the Disclosure Schedules;

(n) fail to exercise any rights of renewal with respect to any material Leased Real Property that by its terms would otherwise expire;

(o) fail to pay any required maintenance or other similar fees or otherwise fail to make required filings or payments required to maintain and further prosecute any applications for registration of material Intellectual Property;

(p) settle or compromise any pending Action for an amount that could reasonably be expected to be greater than $500,000;

(q) modify its credit or collection policies, procedures or practices, including acceleration of collections or receivables (whether or not past due);

(r) fail to pay and discharge current liabilities within ninety (90) days of the due date thereof, except as permitted by their respective vendors, or where disputed in good faith;

(s) (i) except as required by Law or by any Contract in existence on the date hereof (and a true and complete copy of which has been provided or made available to the Buyer prior to the date hereof): (A) grant, increase or accelerate the vesting or payment of, or announce or promise to grant, increase or accelerate the vesting or payment of, any base wages or salaries, any bonuses, incentives, severance pay, or other compensation, pension or other benefits payable or potentially available to any Company Employee, other than base wage or salary increases of no more than 3% for each Company Employee, effective as of March 1, 2010, resulting from the annual merit review and made in the ordinary course of business consistent with past practices of the Company, or (B) establish, adopt, increase or amend (or promise to take any such action(s)) any Company Employee Plan or any benefits potentially available thereunder; or (ii) hire any Company Employee or retain any independent contractor with an annual base salary or anticipated annual compensation over $150,000;

(t) make any change in any method of accounting or accounting practice or policy, except as required by GAAP or, with respect to the Canadian Subsidiary, Canadian generally accepted accounting principles as in effect on the date hereof;

(u) other than cash dividends, declare, set aside, make or pay any dividend or other distribution in respect of any limited liability company membership interest of, or other ownership interests in, the Company or any of its Subsidiaries;

(v) enter into any Contract, understanding or commitment that by its terms restrains, restricts, limits or impedes the ability of the Company or any of its Subsidiaries to

compete with or conduct any business or line of business in any geographic area or solicit the employment of any persons; or

(w) enter into any Contract or agreement, including any collective bargaining agreement, pertaining to the Company or any of its Subsidiaries, with any labor organization.

Section 6.2 Covenants Regarding Information.

(a) From the date hereof until the Closing Date, upon reasonable notice, the Company and its Subsidiaries shall afford the Buyer and its Representatives reasonable access to the Representatives, properties, offices, plants and other facilities, books, and records of the Company and each of its Subsidiaries, and the Company and its Subsidiaries shall furnish the Buyer with such financial, operating, and other data and information as the Buyer may reasonably request; provided, however, that any such access or furnishing of information shall be conducted at the Buyer’s expense, during normal business hours, under the supervision of the Company’s personnel and in such a manner as not unreasonably to interfere with the normal operations of the Company and its Subsidiaries. Notwithstanding anything to the contrary in this Agreement, neither the Company nor its Subsidiaries shall be required to disclose any information to the Buyer or its Representatives if such disclosure would, in the Company’s sole discretion, (i) jeopardize any attorney-client or other legal privilege, (ii) contravene any applicable Laws, fiduciary duty, or binding agreement entered into prior to the date hereof or in compliance with Section 6.1 or (iii) relate to any consolidated, combined, or unitary Return filed by the Seller, the Company, or any of their Affiliates or any of their respective predecessor entities.

(b) In addition to and not in limitation of the foregoing, each party shall cooperate with and make available to the other party and its Representatives, during normal business hours and upon reasonable notice, (i) all books, records and other documents related to the Company and its Subsidiaries, (ii) information related to the Company and its Subsidiaries and (iii) employees (without substantial disruption of employment), in each case retained and remaining in existence after the Closing which are necessary or useful in connection with any Return, Tax inquiry, audit, investigation or dispute, any litigation or investigation or any other matter requiring any such books and records, information or employees for any reasonable business purpose. The party requesting any such books and records, information or employees shall bear all of the out-of-pocket costs and expenses (including without limitation legal fees, but excluding reimbursement for salaries and employee benefits) reasonably incurred in connection with providing such books and records, information or employees.

Section 6.3 Notification of Certain Matters. Until the Closing, each party hereto shall promptly notify the other parties in writing of any fact, change, condition, circumstance, or occurrence or nonoccurrence of any event of which it is aware that will or is reasonably likely to result in any of the conditions set forth in Article VII of this Agreement becoming incapable of being satisfied; provided that the delivery of any notice pursuant to this Section 6.3 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice, or the representations or warranties of, or the conditions or obligations of, the parties hereto.

Section 6.4 Intercompany Arrangements. Except for the Medical Reimbursement Obligation, all intercompany and intracompany accounts or Contracts between the Company and its Subsidiaries, on the one hand, and the Seller and its Affiliates (other than the Company and its Subsidiaries), on the other hand, shall be cancelled without any consideration or further liability to any party and without the need for any further documentation, immediately prior to the Closing. “Medical Reimbursement Obligation” means the obligation of the Company to promptly reimburse EPC, to the extent of the accrual (AC# 119000-02221; Other Accrued Liabilities-Accrued Medical Exp) reflected in Closing Working Capital as finally determined pursuant to Section 2.5, with respect to payments made by EPC to Cigna on the Company’s behalf under the EaglePicher Medical and Dental Plan.

Section 6.5 No Solicitation.

(a) If this Agreement is terminated prior to Closing, the Buyer will not, directly, or indirectly, for a period of two years thereafter, without the prior written consent of the Seller, solicit (other than a solicitation by general advertisement not specifically targeted at any such person) any person who is an employee of the Company or any of its Subsidiaries to terminate his or her employment with the Company or such Subsidiary, or hire any such person, provided that this restriction shall not apply to any individuals who are no longer employed by the Company or any of its Subsidiaries. The Buyer agrees that any remedy at law for any breach by the Buyer of this Section 6.5(a) may be inadequate, and that the Seller and the Company would be entitled to seek injunctive relief in such a case. If it is ever held that this restriction on the Buyer is too onerous and is not necessary for the protection of the Company, the Buyer agrees that any court of competent jurisdiction may impose such lesser restrictions which such court may consider to be necessary or appropriate properly to protect the Company.

(b) From and after the Closing, the Seller will not, directly or indirectly, for a period of two years thereafter, without the prior written consent of the Buyer, solicit (other than a solicitation by general advertisement not specifically targeted at any such person) any person who is an employee of the Company or any of its Subsidiaries to terminate his or her employment with the Company or such Subsidiary, or hire any such person, provided that this restriction shall not apply to any individuals who are no longer employed by the Company or any of its Subsidiaries. The Seller agrees that any remedy at law for any breach by the Seller of this Section 6.5(b) may be inadequate, and that the Buyer and the Company would be entitled to seek injunctive relief in such a case. If it is ever held that this restriction on the Seller is too onerous and is not necessary for the protection of the Company, the Seller agrees that any court of competent jurisdiction may impose such lesser restrictions which such court may consider to be necessary or appropriate properly to protect the Company.

Section 6.6 Confidentiality.

(a) The Buyer shall hold, and shall cause its Representatives to hold, in confidence all documents and information furnished to it by or on behalf of the Seller in connection with the transactions contemplated hereby pursuant to the terms of the Confidentiality Agreement. If for any reason this Agreement is terminated prior to the Closing Date, the Confidentiality Agreement shall nonetheless continue in full force and effect in accordance with its terms. The parties shall use any information regarding the employees,

customers, directors, officers or shareholders of the Company and its Subsidiaries solely for the purposes of this Agreement.

(b) For a period of four years after the Closing Date, EPC and each of its direct and indirect Subsidiaries, including the Seller, shall not, directly or indirectly, own, manage, engage in, operate, control or participate in the ownership, management, operation or control of, any business, whether in corporate, proprietorship or partnership form or otherwise, engaged in the Business; provided, however, that the restrictions contained in this Section 6.6(b) shall not restrict the acquisition by EPC and each of its direct and indirect Subsidiaries, including the Seller, directly or indirectly, in the aggregate of less than 2% of the outstanding capital stock of any publicly traded company engaged in the Business.

(c) Following the Closing Date, EPC and each of its direct and indirect Subsidiaries, including the Seller, shall not, directly or indirectly, use or disclose to any Person any Confidential Information (as defined below), other than disclosure to EPC’s and the Seller’s officers, directors and representatives solely in connection with EPC’s and the Seller’s performance of their respective obligations, or enforcement of their respective rights under this Agreement, the Escrow Agreement and the Transition Services Agreement. EPC and the Seller shall be responsible for any breach of this Section 6.6(c) by any such directors, officers or representatives. The Seller shall be permitted to disclose Confidential Information if and only to the extent disclosure thereof is required by applicable Law; provided, however, that in the event disclosure is so required, the Seller shall, to the extent reasonably possible, provide Buyer with prompt notice of such requirement prior to making any disclosure so that Buyer may seek an appropriate protective order. For purposes of this Section 6.6(c), “Confidential Information” means any information with respect to the Company or any of its Subsidiaries, including trade secrets, technical information, including formulae, documentation, presentations, drawings, hardware, know-how, ideas, inventions, whether patentable or not, photographs, plans, procedures, processes (formulation or manufacturing), reports, research, samples, data, tests, test results, sketches, software, specifications, employee data and related employee information, business information, including supplier, customer and distributor names, marketing information, operations, plans, products, financial information, including pricing and other confidential information. “Confidential Information” does not include, and there shall be no obligation hereunder with respect to, information that (i) is generally available to the public on the date of this Agreement or (ii) becomes generally available to the public other than as a result of a disclosure or use not otherwise permissible hereunder.

(d) The Seller agrees that any remedy at law for any breach by the Seller of this Section 6.6 may be inadequate, and that the Buyer and the Company would be entitled to seek injunctive relief in such a case. If it is ever held that this restriction on the Seller is too onerous and is not necessary for the protection of the Company, the Seller agrees that any court of competent jurisdiction may impose such lesser restrictions which such court may consider to be necessary or appropriate properly to protect the Company.

Section 6.7 Consents and Filings; Further Assurances.

(a) Each of the parties shall use commercially reasonable efforts to take, or cause to be taken, all appropriate action to do, or cause to be done, all things necessary, proper or

advisable under applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement as promptly as practicable, including to (i) obtain from Governmental Authorities and other Persons all consents, approvals, authorizations, qualifications, and orders as are necessary for the consummation of the transactions contemplated by this Agreement and (ii) promptly make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement any filings, authorizations, permits or consents of or any Governmental Authority required under the HSR Act and any foreign antitrust or competition laws, laws and rules treating the safeguarding of classified information, or any other applicable Law. The Buyer shall pay one-half of all filing fees and other charges for filing under the HSR Act and any applicable foreign antitrust or competition laws by all parties.

(b) Without limiting the generality of the parties’ undertaking pursuant to Section 6.7(a), the Buyer agrees to use its commercially reasonable efforts and to take any and all steps necessary to avoid or eliminate each and every impediment under any antitrust, competition, or trade regulation Law that may be asserted by any United States or foreign Governmental Authority or any private party so as to enable the parties hereto to expeditiously close the transactions contemplated by this Agreement no later than the Termination Date, including but not limited to proposing, negotiating, committing to, and effecting, by consent decree, hold separate orders, or otherwise, the sale, divesture, licensing, disposition or restriction of Buyer’s control or ownership of, any of Buyer’s assets, properties, or businesses or of the assets, properties, or businesses, including but not limited to the businesses and assets to be acquired by it pursuant hereto as are required to be divested in order to avoid any injunction (or to effect the dissolution thereof), temporary restraining order, or other order or decision in any suit or proceeding, which would otherwise have the effect of preventing the Closing by the Termination Date. In addition, the Buyer shall use its commercially reasonable efforts to defend through litigation on the merits (including all available appeals) any claim asserted in court by any party in order to avoid entry of, or to have vacated or terminated, any decree, order, or judgment (whether temporary, preliminary, or permanent) that would prevent the Closing by the Termination Date.

(c) Each of the parties shall promptly notify the other parties of any communication it or any of its Affiliates receives from any Governmental Authority relating to the matters that are the subject of this Agreement and permit the other parties to review in advance any proposed communication by such party to any Governmental Authority. No party to this Agreement shall agree to participate in any meeting with any Governmental Authority in respect of any filings, investigation, or other inquiry unless it consults with the other parties in advance and, to the extent permitted by such Governmental Authority, gives the other parties the opportunity to attend and participate at such meeting. Subject to a customary confidentiality agreement to be mutually agreed between the parties hereto, the parties will coordinate and cooperate fully with each other in exchanging such information and providing such assistance as the other parties may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods including under the HSR Act and any applicable foreign antitrust or competition laws. Subject to a customary confidentiality agreement to be mutually agreed between the parties hereto, the parties will provide each other with copies of all correspondence, filings, or communications between them or any of their Representatives, on the

one hand, and any Governmental Authority or members of its staff, on the other hand, with respect to this Agreement and the transactions contemplated hereby.

(d) Certain consents and waivers with respect to the transactions contemplated by this Agreement may be required from parties to Contracts to which the Company or a Subsidiary of the Company is a party that have not been and may not be obtained. Neither Seller nor the Company nor any of their Affiliates shall have any liability to the Buyer arising out of or relating to the failure to obtain any consents or waivers that may be required in connection with the transactions contemplated by this Agreement or because of the termination of any Contract as a result thereof, and no such failure or termination shall result in the failure of any condition set forth in Article VII.

Section 6.8 Public Announcements. The parties hereto shall consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statement with respect to the transactions contemplated hereby, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law.

Section 6.9 Release of Guarantees. The parties hereto agree to cooperate and use their commercially reasonable efforts to obtain the release of the Seller or any of its Affiliates that are a party to each of the guarantees, performance bonds, bid bonds, and other similar agreements, if any, listed in Schedule 6.9 of the Disclosure Schedules (the “Guarantees”). Such commercially reasonable efforts shall include OMG agreeing to enter into an agreement substantially similar in all material respects to such existing Guarantees. In the event any of the Guarantees are not released prior to or at the Closing, the Buyer will provide the Seller at the Closing with a guarantee that indemnifies and holds the Seller and any of its Affiliates that are a party to each such Guarantee harmless for any and all payments required to be made under, and costs and expenses incurred in connection with, such Guarantee by the Seller or any of its Affiliates that are a party to such Guarantee until such Guarantee is released.

Section 6.10 Use of Names.

(a) After the Closing, neither the Seller nor any of its Affiliates shall use in any manner the EaglePicher Marks or any word that is similar in sound or appearance to such names or marks. Notwithstanding the foregoing, the Buyer hereby consents to the use of the name “EaglePicher” or any trade name, trademark, service mark, or logo incorporating the name “EaglePicher” by the Seller and its Affiliates in connection with copies of existing marketing and promotional materials, letterhead, business cards; provided, that the Seller and its Affiliates shall only use such materials during the first ninety (90) days following the Closing. As promptly as practicable, and in any event no later than ten days after the Closing, the Seller and its Affiliates shall take all necessary corporate action to cause the corporate name of the Seller, such Affiliates and all Subsidiaries thereof to be changed to a name that does not include the word “EaglePicher.”

(b) The Buyer acknowledges that notwithstanding the foregoing, the Seller and its Affiliates, including EP Minerals, LLC (“EP Minerals”), have the right after the Closing to use the name “EP Minerals” and any trade name, trademark, service mark, logo, or domain

name incorporating the name “EP Minerals” or any derivative thereof in any manner that is not confusingly similar to “EaglePicher,” and the Buyer shall not have any right hereunder to limit the use thereof.

(c) In the event the Seller or any of its Affiliates violates any of its obligations under Section 6.10(a), the Buyer may proceed against it in law or in equity for such damages or other relief as a court may deem appropriate. In the event the Buyer or any of its Affiliates violates any of its obligations under Section 6.10(b), the Seller may proceed against it in law or in equity for such damages or other relief as a court may deem appropriate. The Seller, the Buyer and their respective Affiliates acknowledge that a violation of this Section 6.10 may cause the Buyer, the Company or EP Minerals, as applicable, irreparable harm that may not be adequately compensated for by money damages. The Seller, the Buyer and their respective Affiliates therefore agree that in the event of any actual or threatened violation of this Section 6.10, the other party shall be entitled, in addition to other remedies that it may have, to a temporary restraining order and to preliminary and final injunctive relief against the Seller, the Buyer or Affiliate, as applicable, to prevent any violations of this Section 6.10.

Section 6.11 Employment and Employee Benefits Matters; Other Plans.

(a) Except as provided in this Section 6.11, effective as of the Closing, Company Employees (and their dependents and beneficiaries) shall cease participation in the Non-Company Employee Plans.

(b) As soon as administratively feasible after the Closing, Buyer shall adopt severance plans with terms that are substantially similar to the EaglePicher Executive Severance Pay Plan (January 1, 2009 Restatement) and the EaglePicher Salaried Employees Severance Pay Plan (effective as of May 15, 2007). Schedule 6.11(b) of the Disclosure Schedules identifies each Company Employee who is eligible to participate in Seller’s EaglePicher Executive Severance Pay Plan and Seller’s EaglePicher Salaried Employees Severance Pay Plan.

(c) As of and after the Closing, the Buyer shall give Company Employees full credit for purposes of eligibility and vesting (and, for vacation, benefit accrual) under any employee compensation, incentive, and benefit (including vacation) plans, programs, policies and arrangements maintained for the benefit of Company Employees as of and after the Closing by the Buyer or its Subsidiaries for the Company Employees’ service with the Company (each, a “Buyer Plan”) to the same extent recognized by the Company immediately prior to the Closing. With respect to each Buyer Plan that is a “welfare benefit plan” (as defined in Section 3(1) of ERISA), the Buyer and its Subsidiaries shall use commercially reasonable efforts to (i) cause there to be waived any pre-existing condition or eligibility limitations to the extent waived under the similar Employee Plan immediately prior to Closing and (ii) give effect, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, Company Employees under similar plans Company Employee Plans for the plan year in which the Closing occurs to the extent the applicable Buyer Plan and Employee Plan have the same plan year.

(d) Effective no later than immediately prior to the Closing, the Seller shall cause the Company to assume sponsorship of, and the Company shall become the sole plan

sponsor of, the EPT Pension Plans. Prior to the Closing, the Seller shall, or shall cause the Company to, take all actions necessary (including providing the notice required by Section 204(h) of ERISA) to ensure that any active participant in the EaglePicher Salaried and Closed Hourly Pension Plan and the EaglePicher Hourly Pension Plan will cease to be an active participant as of the Closing and no benefits will accrue under such plans for any participant after the Closing. In connection with the transfer of sponsorship of the EPT Pension Plans to the Company, the assets of the EPT Pension Plans that are held in the master trust of which the Seller is the settlor (the “Master Trust”) shall be transferred to a new master trust of which the Company is the settlor (the “Company Trust”). The assets of the EaglePicher Technologies Salaried Pension Plan and the EaglePicher Technologies Hourly Pension Plan shall be transferred to the Company Trust in cash. The assets of the EaglePicher Salaried and Closed Hourly Pension Plan and the EaglePicher Hourly Pension Plan shall be transferred to the Company Trust in cash unless Buyer notifies Seller in writing no later than twenty (20) days prior to the Closing Date, that Buyer desires the assets of both such plans to be transferred in kind. Buyer shall notify Seller in writing when the Company Trust has been established and the assets of the EPT Pension Plans can be transferred to the Company Trust (which notice shall be delivered no later than sixty (60) days after the Closing Date), and the Seller shall effect such transfer no later than seven (7) days after receipt of such notice. No later than the earlier of (i) 30 days after the date hereof or (ii) the Closing Date, the Company shall file or cause to be filed a notice with the Pension Benefit Guaranty Corporation (“PBGC”) in full compliance with ERISA Section 4043, and the regulations thereunder, for each of the EPT Pension Plans for the reportable event described in ERISA Section 4043(c)(9) and PBGC Regulation Section 4043.29 and any other reportable event that will be triggered by the parties entering into this Agreement.

(e) Effective as of the Closing Date, the Buyer or an Affiliate shall be responsible for providing Company Employees and Former Company Employees and each of their qualified beneficiaries with COBRA continuation coverage in accordance with the requirements of Section 4980B of the Code.

(f) The Seller shall take all necessary actions to permit the distribution and/or rollover of Company Employees’ account balances under any Non-Company Employee Plan that is a tax-qualified defined contribution plan (within the meaning of Section 3(34) of ERISA). The Buyer shall permit (or shall cause an Affiliate to permit) Company Employees to directly roll over to a tax-qualified defined contribution plan sponsored by the Buyer or an Affiliate each such Company Employee’s account balance under any such Employee Plan, including any loan note(s) under such plan. The Seller shall be responsible for compliance with any and all obligations under the Worker Adjustment and Retraining Notifications Act of 1988 or under any similar state, local or foreign law, (together with any similar state or local Law, “WARN”) with respect to the Company Employees and Former Company Employees arising prior to the Closing Date. On and after the Closing Date, the Buyer shall be responsible, with respect to the Company Employees, for compliance with any and all obligations under WARN. The Buyer shall indemnify, defend and hold harmless the Seller and its Affiliates against or with respect to all Losses of Seller or any of its Affiliates under the WARN Act as a result of the termination by Buyer of any Company Employee’s employment occurring on or after the Closing Date. As of the Closing, the Seller shall provide the Buyer with a schedule that contains the names, position, work location, date, and reason for termination for each Company Employee or Former

Company Employee involved or impacted by a plant closing, layoff, or employment loss (as those terms are defined in the WARN Act) in the 120 days preceding the Closing.

(g) The Seller shall be responsible for all workers’ compensation claims and long-term disability (“LTD”) claims of Company Employees and Former Company Employees incurred before the Closing. Workers’ compensation claims and LTD claims of Company Employees and Former Company Employees with respect to injuries or disabilities that occur or arise before the Closing shall continue to be covered by the Seller’s workers’ compensation policy or LTD policy or plan. Seller shall also be responsible for any surety bond requirements associated with LTD and workers’ compensation claims incurred before the Closing. The Company shall be responsible for any workers’ compensation claims of Company Employees incurred after the Closing. For the avoidance of doubt, none of the Seller, the Buyer, the Company or any of their respective Affiliates will be obligated to provide any life insurance benefits for Company Employees or Former Company Employees on or after the Closing other than, in the case of the Company, life insurance benefits required pursuant to the terms of any collective bargaining Contract with the Company.

(h) The Seller and the Company will take all actions necessary to ensure that, at the Seller’s sole cost and expense, Company Employees will have been paid, at or prior to Closing, the amounts the Company Employees earned or would have earned with respect to the fiscal year ending November 30, 2009 (which amounts are set forth on Schedule 6.11(h) of the Disclosure Schedules) under the EaglePicher Corporation EP Technologies LLC Annual Incentive Compensation Program, the Performance Feature Contribution under the EaglePicher Hourly 401(k) Plan and the EaglePicher Salaried 401(k) Plan and discretionary bonuses had they each remained an employee participant in these Employee Plans or any other Employee Plan providing for an annual bonus. Any amounts owed or payable under the EaglePicher 401(k) Restoration Plan and the Eagle Pension Restoration Plan shall be paid at the sole cost and expense of Seller at or promptly following the Closing.

(i) To the extent Company Employees participate in a dependent care or medical expense reimbursement account under an Employee Plan subject to Section 125 of the Code (“Seller’s Flexible Account Plan”) during the calendar year that includes the Closing, the Buyer or its Affiliates shall establish one or more comparable plans (“Buyer’s Flexible Account Plan”) that will recognize the elections that such Company Employees had in effect for purposes of the plan year in which the Closing occurs under the Seller’s Flexible Account Plan. Buyer’s Flexible Account Plan shall (a) assume the obligations of Seller’s Flexible Account Plan with respect to Company Employees as of the Closing Date. As soon as practicable after the Closing, (i) if the total amount that Company Employees have contributed to Seller’s Flexible Account Plan through the Closing Date for the calendar year that includes the Closing exceeds all amounts that have been paid from Seller’s Flexible Account Plan through the Closing Date for medical expense and dependent care claims incurred by the Company Employees in the calendar year that includes the Closing, the Seller shall transfer to the Buyer such excess amount in cash, or (ii) if the total amounts that have been paid from Seller’s Flexible Account Plan through the Closing Date for medical expense and dependent care claims incurred by the Company Employees in the calendar year that includes the Closing exceeds the amount that Company Employees have contributed to Seller’s Flexible Account Plan through the Closing Date for the calendar year that includes the Closing, the Buyer shall transfer to the Seller such excess amount

in cash. After the Closing Date, Buyer’s Flexible Account Plan will be responsible for reimbursement of all previously unreimbursed reimbursable medical expense and dependent care claims incurred by Company Employees with respect to the calendar year that includes the Closing.

(j) No provision of this Section 6.11 shall (a) create any third party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of the Company or its Subsidiaries, EPC or any of its other Affiliates, the Buyer or any of its Affiliates or any other Person other than the parties hereto and their respective successors and permitted assigns, (b) constitute or create or be deemed to constitute or create an employment agreement, or (c) constitute or be deemed to constitute an amendment to any employee benefit plan sponsored or maintained by the Company or its Subsidiaries, EPC or any of its other Affiliates, the Buyer or any of its Affiliates.

(k) In connection with the preparation and filing of any filing or report, including without limitation an Annual Return or Report of Employee Benefit Plan (Form 5500), or any administrative or judicial proceedings relating to any Company Employee Plan, the Buyer and the Seller agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Company Employee Plans including, during normal business hours, the furnishing or making available of books and records, personnel (as reasonably required and at no cost to the other party) or other materials necessary or helpful for the preparation of such filings or reports, the conduct of audit examinations or the defense of claims by governmental authorities or any individual or entity with respect to any such Company Employee Plans. The Buyer and the Seller shall retain all schedules and workpapers and all material records or other documents relating to all Company Employee Plans until the expiration of the statute of limitations for the periods to which such documents relate, and each of the Buyer and the Seller shall maintain such schedules, workpapers, records and documents in the same manner and with the same care it uses in maintaining its schedules, workpapers, records and documents. Each of the Buyer, the Seller, the Company and its Subsidiaries shall give the other parties reasonable written notice prior to destroying or discarding any such books or records that could impact the other party’s administration of the Company Employee Plans and, if another party so requests, the other party shall take possession of such books and records. Any information obtained under this Section 6.11(k) shall be kept confidential.

Section 6.12 Real Property Matters.

(a) The Company and its Subsidiaries shall maintain the Real Property, including all of the improvements, in accordance with current ordinary business practices, ordinary wear and tear excepted, and except in the ordinary course of business shall not (i) demolish or remove any of the existing improvements, or (ii) erect new improvements on the Real Property or any portion thereof, without the prior written consent of the Buyer. The Company and Seller shall use commercially reasonable efforts to assist the Buyer in obtaining commitments for policies of title insurance, Title Policies issued pursuant to such commitments and surveys in form and substance reasonably satisfactory to the Buyer. The Company and Seller shall provide to the Buyer’s title company such customary affidavits and indemnities (such affidavits and indemnities, the “Title Requirements”) as may be reasonably requested by the title

company to issue the Title Policies. The cost and expense of any title work, commitments for policies of title insurance, the Title Policies and surveys shall be borne solely by Buyer. The Seller shall not be required to execute any instrument which expands in any way the representations and warranties contained herein or the liabilities of Seller hereunder.

(b) The Company and the Seller shall transfer the Transferred Real Property via a quit-claim deed to the Seller or an Affiliate of the Seller (other than a Subsidiary of the Company) prior to the Closing.

(c) The Company and the Seller shall use commercially reasonable efforts (and work with diligence) to cause the City of Joplin, Missouri (“Landlord”) to execute and deliver on or prior to the Closing Date an instrument (in a form reasonably acceptable to Buyer and in recordable form) confirming that the Company is the tenant under that certain Lease and Operation Agreement, dated December 18, 1990, between Landlord and Eagle Picher Industries, Inc., as tenant-named-therein. Any costs or expenses associated with obtaining such confirmation shall be deemed Transaction Expenses for purposes of this Agreement.

Section 6.13 Environmental Mandate Transfers

(a) Each of the parties shall use its commercially reasonable efforts to take, or cause to be taken, all appropriate action to do, or cause to be done, all things necessary, proper or advisable under applicable Environmental Law regarding the transfer, modification or reissuance of the Environmental Mandates in the name of EPC to the extent possible, prior to the Closing Date, including to (i) obtain from Governmental Authorities all consents, approvals, authorizations, qualifications, waivers and orders as are necessary for the transfer, modification or reissuance of the Environmental Mandates and (ii) promptly make all necessary filings, and thereafter make any other required submissions, with respect to the transfer, modification or reissuance of the Environmental Mandates; provided, however, that Seller shall pay all fees and other charges for obtaining any such transfer, modification or reissuance.

(b) If the transfer, modification or reissuance of either Environmental Mandate is not obtained on or prior to the Closing Date, then (i) the parties shall continue to use their respective commercially reasonable efforts to effectuate such transfer, modification or reissuance after the Closing Date; and (ii) the Buyer will hold the Environmental Mandate in trust for EPC and the covenants and obligations thereunder shall be performed by EPC in the Company’s name and all benefits and obligations existing thereunder shall be for EPC until such consent or approval is received.

Section 6.14 Waiver of Environmental Claims. EPC, the Seller and their Affiliates waive any rights and release any claims any of them may have against the Company, the Buyer and their Affiliates, whether in Law or equity, relating to any environmental conditions at the Transferred Real Property, including claims for contribution under the Comprehensive Environmental Response, Compensation and Liability Act.

Section 6.15 Property Taxes.

(a) All real and personal property taxes, ad valorem obligations and similar recurring taxes and fees, including general assessments and special assessments on the

Company’s assets (“Property Taxes”) for taxable periods beginning on or before, and ending after, the Closing Date, shall be prorated between the Buyer and the Seller as of the Closing Date on a daily basis with (i) the Seller being liable for all such Property Taxes accruing under such daily proration methodology during any period up to and including the day of the Closing Date and (ii) the Buyer being liable for all such Property Taxes accruing under such daily proration methodology during any period or periods including, and beginning after, the Closing Date. Proration of Property Taxes will be made on the basis of the most recent officially certified tax valuation and assessment for the Company’s assets. With respect to Property Taxes described in this Section 6.15, the Seller shall timely file all Returns for Property Taxes due before the Closing Date and the Buyer shall prepare and timely file all Returns for Property Taxes due on or after the Closing Date subject to Seller’s prior review approval (which shall not be unreasonably withheld, conditioned or delayed). All such Returns shall be prepared in a manner consistent with past practice, except as required by applicable Law. If one party remits to the appropriate Governmental Authority payment for Property Taxes, which are subject to proration under this Section 6.15 and such payment includes the other party’s share of such Property Taxes, such other party shall promptly reimburse the remitting party for its share of such Property Taxes. Any such reimbursements shall be made within five Business Days of the party making such payment to the appropriate Governmental Authority; provided that the party requesting reimbursement of Property Taxes shall provide the other party with a written notice indicating the amount due and the computation thereof. Notwithstanding the foregoing, all real estate transfer fees and stamps and all recording fees incurred in connection with the transactions contemplated by this Agreement shall be borne by the Seller. Special assessments, if any, for work actually commenced or levied with respect to the Company’s assets prior to the Closing Date shall be paid by the Seller at the Closing.

Section 6.16 Tax Matters.

(a) For purposes of this Agreement, the portion of Tax, with respect to the income, property or operations of the Company or the Canadian Subsidiary that is attributable to any Tax period that begins on or before the Closing Date and ends after the Closing Date (a “Straddle Period”) will be apportioned between the period of the Straddle Period that extends before the Closing Date through the Closing Date (the “Pre-Closing Straddle Period”) and the period of the Straddle Period that extends from the day after the Closing Date to the end of the Straddle Period (the “Post-Closing Straddle Period”) in accordance with this Section 6.16(a). The portion of such Tax attributable to the Pre-Closing Straddle Period will (i) in the case of any Taxes other than sales or use taxes, value-added taxes, employment taxes, withholding taxes, and any Tax based on or measured by income, receipts or profits earned during a Straddle Period, be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the Pre-Closing Straddle Period and denominator of which is the number of days in the Straddle Period, and (ii) in the case of any sales or use taxes, value-added taxes, employment taxes, withholding taxes, and any Tax based on or measured by income, receipts or profits earned during a Straddle Period, be deemed equal to the amount that would be payable if the Straddle Period ended on and included the Closing Date. The portion of Tax attributable to a Post-Closing Straddle Period shall be calculated in a corresponding manner. To the extent that any Tax for a Straddle Period is based on the greater of a Tax on net income, on the one hand, and a Tax measured by net worth or some other basis not otherwise measured by income, on the other hand, the portion of such Tax related to the Pre-Closing Straddle Period

and the Post-Closing Straddle Period will be determined based on the foregoing and based on the manner in which the actual Tax liability for the entire Straddle Period is determined. In the case of a Tax that is (i) paid for the privilege of doing business during a period (a “Privilege Period”) and (ii) computed based on business activity occurring during an accounting period ending prior to such Privilege Period, any reference to a “Tax period,” a “tax period,” or a “taxable period” shall mean such accounting period and not such Privilege Period.

(b) The Buyer shall prepare and timely file, or cause to be prepared and timely filed, all Returns of the Company and its Subsidiaries that are due with respect to any Straddle Period or Pre-Closing Tax Period other than Returns for which the due date (with applicable extensions) falls on or before the Closing Date. All such Returns shall be prepared in a manner consistent with past practice, except to the extent required by applicable Law, and shall be subject to the prior review and approval of the Seller (which shall not be unreasonably withheld, conditioned or delayed). The Buyer shall pay or cause to be paid all Taxes imposed on the Company and its Subsidiaries shown as due and owing on such Tax Returns subject to reimbursement by the Seller pursuant to Section 8.2(a) hereof.

(c) In connection with the preparation and filing of Returns, audit examinations, obtaining tax clearance certificates in connection with transactions contemplated by this Agreement, and any administrative or judicial proceedings relating to any Tax liabilities imposed on the Buyer, the Seller, the Company or its Subsidiaries, the Buyer and the Seller agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Company or its Subsidiaries including, but not limited to, during normal business hours, the furnishing or making available of books and records, personnel (as reasonably required and at no cost to the other party) or other materials necessary or helpful for the preparation of such Returns, the conduct of audit examinations or the defense of claims by governmental authorities as to the imposition of Taxes. The Buyer and the Seller shall retain all Returns, schedules and workpapers and all material records or other documents relating to all Taxes of the Company or its Subsidiaries for the Tax period first ending after the Closing Date and for all prior Tax periods until the later of (i) the expiration of the statute of limitations of the Tax periods to which such Returns and other documents relate, without regard to extension, except to the extent notified by another party in writing of such extensions for the respective Tax periods, or (ii) seven years following the due date (without extension) for such Returns, and each of the Buyer and the Seller shall maintain such Returns, schedules, workpapers, records and documents in the same manner and with the same care it uses in maintaining its Returns, schedules, workpapers, records and documents. Each of the Buyer, the Seller, the Company and its Subsidiaries shall give the other parties reasonable written notice prior to destroying or discarding any such books or records and, if another party so requests, the other party shall take possession of such books and records. Any information obtained under this Section 6.16(c) shall be kept confidential, except as may be otherwise necessary in connection with the filing of Returns or claims for refund or in conducting an audit or other proceeding.

(d) Subject to this Section 6.16, the Buyer has the right to represent the interests of the Company and its Subsidiaries before the relevant Governmental Authority with respect to any inquiry, assessment, proceeding or other similar event relating to Taxes for any Pre-Closing Tax Period or Straddle Period (a “Tax Matter”) and has the right to control the defense, compromise or other resolution of any such Tax Matter, including responding to

inquiries, filing Returns and contesting, defending against and resolving any assessment for additional Taxes or notice of Tax deficiency or other adjustment of Taxes of, or relating to, such Tax Matter. If the Seller would be required to indemnify the Buyer, the Company or any of their Affiliates pursuant to Section 8.2(a) of this Agreement with respect to such Tax Matter then: (i) the Seller has the right (but not the duty) to participate in the defense of such Tax Matter and to employ counsel, at its own expense, separate from counsel employed by the Buyer, and (ii) the Buyer shall not enter into any settlement of or otherwise compromise any such Tax Matter to the extent that it adversely affects the Tax liability or indemnification obligations of the Seller without the prior written consent of the Seller, which consent shall not be unreasonably conditioned, withheld or delayed.

(e) The Buyer will provide notice to the Seller of any inquiries made by, discussions with or representations or submissions proposed to be made to any Governmental Authority to the extent that the subject matter thereof relates to the Company or its Subsidiaries and relates to representations, covenants or obligations of the Seller hereunder or could reasonably give rise to a right of indemnity hereunder. The Buyer will forthwith advise the Seller of the substance of any such inquiries or discussions and provide the Seller with copies of any written communications from any Governmental Authority relating to such inquiries or discussions. The Buyer will provide the Seller a reasonable opportunity to comment on any such representations or submissions and to attend any meeting with any such Governmental Authority with respect to such matters.

(f) The Buyer will provide the reasonable assistance of the employees or personnel of the Buyer, the Company and its Subsidiaries and the accounting and legal and other representatives and advisors of the Buyer, the Company and its Subsidiaries and otherwise take such reasonable steps to cooperate with the Seller and render all reasonable assistance, as the Seller may reasonably request (including, to the extent requested by the Seller, dealing directly with any Governmental Authority in relation to audits, inquiries, discussions or disputes), with respect to all matters relating to any inquires, discussions or disputes where the subject matter thereof relates to representations, covenants or obligations of the Seller hereunder or could reasonably be expected to give rise to a right of indemnity hereunder.

(g) The Buyer, the Company and its Subsidiaries will, upon reasonable request of the Seller, use all reasonable commercial efforts to take reasonable steps, including obtaining any certificate or other document from, or effect any filing with, any Governmental Authority as may be considered desirable to mitigate, reduce or eliminate any Taxes that could be imposed on the Company or its Subsidiaries and that could reasonably give rise to a right of indemnity hereunder, provided that the Buyer, the Company and its Subsidiaries will not be required to expend more than nominal amounts of money to effect same, unless their reasonable costs of doing so are reimbursed by the Seller.

(h) The Buyer covenants that it will not, or cause or permit the Company or its Subsidiaries to, take any action on or after the Closing, make any election or deemed election or make or change any Tax election, amend any Tax Return or take any position on any Tax Return that results in any increased Tax liability or reduction of any deduction, credit or loss carry-over of the Company or its Subsidiaries in respect of any period ending on or before, or

which includes, the Closing Date, unless the Buyer agrees to indemnify and hold harmless the Seller and its Affiliates against any such Tax.

(i) The Buyer shall promptly pay to the Seller any refunds of Taxes paid with respect to the Company or its Subsidiaries attributable to any periods ending on or before or which include the Closing Date (plus any interest received with respect thereto from any applicable Taxation Authority) to the extent not shown or reflected in the Closing Balance Sheet.

(j) Upon request of the Seller, the Buyer and the Canadian Subsidiary will effect the election described in subsection 256(9) of the Income Tax Act (Canada)

Section 6.17 Insurance Matters.

(a) From and after the Closing, the Seller shall use its commercially reasonable efforts (which shall not require conversion of any claims made policy to an occurrence based policy or acceptance of adverse changes in the existing Insurance Policies of the Seller or its Affiliates), subject to the terms of the Insurance Policies, to retain the right to make claims and receive recoveries, for the benefit of the Company and its Subsidiaries, under any of the Insurance Policies (except to the extent that any such policy provides for coverage only if the policy is in effect at the time such claim is made) maintained at any time prior to the Closing by either the Seller or its Affiliates covering any loss, liability, claim, damage or expense (to the full extent of the existing coverage) relating to the assets, business, operations, conduct, products and employees of the Company and its Subsidiaries that relates to or arises out of occurrences prior to the Closing (each, a “Claim”). The Seller agrees to use commercially reasonable efforts (which shall not require conversion of any claims made policy to an occurrence based policy or acceptance of adverse changes in the existing Insurance Policies of the Seller or its Affiliates) so that the Company and its Subsidiaries shall have the right, power and authority to (i) make directly any Claims under the Insurance Policies, (ii) control the administration of any such Claims in accordance with the terms of the Insurance Policies, (iii) receive directly recoveries thereunder, and (iv) control the prosecution, defense and/or settlement of any litigation or other proceeding by or against the Company or any of its Subsidiaries underlying any such Claims in accordance with the terms of the Insurance Policies. Each of the parties understands and agrees that to the extent that any litigation or other proceeding underlying a Claim is by or against the Seller or its Affiliates (other than the Company or its Subsidiaries), the Seller shall retain the right, power and authority to (i) make directly any Claims under the Insurance Policies, (ii) control the administration of any such Claims in accordance with the terms of the Insurance Policies, (iii) receive directly recoveries thereunder, and (iv) control the prosecution, defense and/or settlement of any litigation or other proceeding. The Buyer acknowledges and agrees that certain of the Insurance Policies are claims made policies and the ability of the Buyer, the Company and its Subsidiaries to make post-Closing Claims with respect to such claims made policies may be limited by terms of such policies. In addition, from and after the Closing, Seller shall use its commercially reasonable efforts to continue to pursue, for the benefit and on behalf of the Company and its Subsidiaries, Claims that are pending under the existing Insurance Policies as of the Closing Date, and Seller shall consult with Buyer with respect to all such matters.

(b) The Buyer agrees, and shall cause the Company and its Subsidiaries promptly, to reimburse, indemnify and hold the Seller and its Affiliates harmless for out-of-pocket costs and expenses incurred (including any self-insured loss or deductible amounts paid by the Seller or its Affiliates, any administrative costs and any retrospective premiums imposed on the Seller or its Affiliates to the extent arising from Claims) to carry out any obligations pursuant to this Section 6.17.

Section 6.18 Directors’ and Officers’ Indemnification.

(a) Except as otherwise provided in this Agreement, the Buyer covenants, for itself and its successors and assigns, that it and they shall not institute any action or proceeding in any court or before any administrative agency or before any other tribunal against any of the current directors or officers of the Company and its Subsidiaries, in their capacity as such, with respect to any liabilities, actions or causes of action, judgments, claims or demands of any nature or description (consequential, compensatory, punitive, or otherwise), in each such case solely to the extent resulting from their approval of this Agreement or the transactions contemplated hereby.

(b) With respect to the Company’s and its Subsidiaries’ directors and officers who will continue in such capacity after the Closing, the Buyer shall not take any action directly or indirectly to disaffirm or adversely affect the provisions of the Company’s organizational documents and any other written agreements of the Company and its Subsidiaries that provide indemnification of and expense reimbursement to such individuals.

Section 6.19 Disposition of Assets.

(a) For a period of 24 months after the Closing, the Buyer will not, and will not permit the Company or any of its Subsidiaries to, (i) sell, transfer or otherwise dispose of any of its property or assets, other than any such sale, transfer or disposition (a) in the ordinary course of business (including sales of inventory) or (b) that is not, individually or in the aggregate, material to the Company and its Subsidiaries taken as a whole, or (ii) make, or agree to make, any dividend or distribution of assets other than dividends and distribution of Cash.

Section 6.20 Closing Payments. On or prior to the Closing Date, the Seller or EPC shall, at its sole cost and expense, pay the bonuses and payments described in clause (F) of the definition of “Transaction Expenses” to the individuals entitled thereto.

Section 6.21 Software. The Seller shall, at its sole cost and expense prior to the Closing, transfer to or obtain for the Company, licenses of all Software that is neither (A) owned by the Company or any of its Subsidiaries nor (B) licensed to the Company or any of its Subsidiaries pursuant to a license that will remain in effect following the Closing, and is used or held for use in the current conduct of the Business by the Company or its Subsidiaries, which licenses will permit the use of such Software to the same extent and in the same manner as used by the Company or its Subsidiaries immediately prior to the date of this Agreement. Within 15 days from the date of this Agreement, the Seller shall provide the Buyer a written list of licenses of Software and Information Systems used or held for use in the current conduct of the Business by the Company or its Subsidiaries that are due to expire or renew within 180 days from the date

of this Agreement and the respective dates of such expirations or renewals and copies of all such licenses. Other than as provided under the Transition Services Agreement, the Seller shall not be responsible for the payment of any renewal license fees for licenses on such list with respect to any such licenses transferred to or obtained for the Company that become due post-Closing in order to renew such licenses for periods that begin following the Closing Date.

Section 6.22 Bankruptcy Documentation. Prior to the Closing, the Seller shall, at its sole cost and expense prior to the Closing, provide, with respect to the bankruptcy proceedings of EaglePicher Holdings, Inc. in 2005, true, correct and complete copy of the plan of reorganization, as confirmed by the bankruptcy court.

Section 6.23 Separation of Bank Accounts. EPC, the Seller and OMG shall use their commercially reasonable efforts to take, or cause to be taken, all appropriate action to do, or cause to be done, all things necessary, proper or advisable to separate the bank accounts of the Company and its Subsidiaries from EPC’s and its Affiliates’ cash management system, including to establish a meeting within 15 days of the date of this Agreement with representatives of PNC Bank and other Persons that are necessary for such separation. Each of EPC and OMG maintains cash management systems at PNC Bank and agrees to execute such documentation as may be reasonably requested by PNC Bank in order to effect such separation. Such separation is to be effective as of the Business Day immediately following the Closing Date such that the bank accounts of the Company and its Subsidiaries will then operate on a stand-alone basis. After the Closing, if Seller or any of its Affiliates (other than the Company and its Subsidiaries) receives any refund or other amount which is an asset of, or is otherwise properly due and owing to, the Company or its Subsidiaries, Seller promptly shall remit, or cause to be remitted, such amount by check to Buyer at the address set forth in Section 10.4 or by wire transfer into an account or accounts of Buyer and/or the Company, as designed in writing by Buyer.

ARTICLE VII
CONDITIONS TO CLOSING

Section 7.1 General Conditions. The respective obligations of the Buyer, the Seller, and the Company to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may, to the extent permitted by applicable Law, be waived in writing by any party in its sole discretion (provided, that such waiver shall only be effective as to the obligations of such party):

(a) No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) that is then in effect and that enjoins, restrains, makes illegal, or otherwise prohibits the consummation of the transactions contemplated by this Agreement.

(b) Any waiting period (and any extension thereof) under the HSR Act shall have expired or shall have been terminated. All other consents of, or registrations, declarations or filings with, any Governmental Authority legally required for the consummation of the transactions contemplated by this Agreement shall have been obtained or filed.

Section 7.2 Conditions to Obligations of the Seller and the Company. The obligations of the Seller and the Company to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may be waived in writing by the Seller in its sole discretion:

(a) (i) The representations and warranties of the Buyer set forth in this Agreement, other than the representations and warranties contained in Sections 5.1 relating to organization and existence, Section 5.2 relating to authority, and Section 5.5 relating to broker’s fees and finder’s fees, shall be true and correct both when made and as of the Closing Date as though made at and as of the Closing Date, or in the case of representations and warranties that are made as of a specified date, such representations and warranties shall be true and correct as of such specified date, except where the failure to be so true and correct (without giving effect to any limitation or qualification as to “materiality” (including the word “material” and “in all material respects”) or “Material Adverse Effect” set forth therein) would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Buyer, and (ii) the representations and warranties contained in Sections 5.1, 5.2 and Section 5.5 shall be true and correct both when made and as of the Closing Date as though made at and as of the Closing Date.

(b) The Buyer shall have performed all obligations and agreements and complied with all covenants and conditions in all material respects required by this Agreement to be performed or complied with by it prior to or at the Closing.

Section 7.3 Conditions to Obligations of the Buyer. The obligations of the Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may be waived in writing by the Buyer in its sole discretion:

(a) (i) The representations and warranties of the Seller and the Company set forth in this Agreement, other than the representations and warranties contained in Sections 3.1 and 4.1 relating to organization and existence, Sections 3.2 and 4.2 relating to authority, Section 3.4 relating to the Equity Interests, Section 4.4 relating to capitalization, Section 4.5 relating to Subsidiaries, and Sections 3.5 and 4.20 relating to broker’s fees and finder’s fees (Sections 3.1, 3.2, 3.4, 3.5, 4.1, 4.2, 4.4, 4.5 and 4.20 are collectively referred to as the “Core Representations”, shall be true and correct both when made and as of the Closing Date as though made at and as of the Closing Date, or in the case of representations and warranties that are made as of a specified date, such representations and warranties shall be true and correct as of such specified date, except where the failure to be so true and correct (without giving effect to any limitation or qualification as to “materiality” (including the word “material” and “in all material respects”) or “Material Adverse Effect” set forth therein) would not, individually or in the aggregate, have a Material Adverse Effect with respect to the Seller or the Company, (ii) the Core Representations (other than those in Sections 3.2, 3.4, 4.2, 4.4, 4.5(a) and 4.5(b)(last sentence)) shall be true and correct in all material respects both when made and as of the Closing Date as though made at and as of the Closing Date and (iii) the representations and warranties contained in Sections 3.2, 3.4, 4.2, 4.4, 4.5(a) and 4.5(b)(last sentence) shall be true and correct both when made and as of the Closing Date as though made at and as of the Closing Date

(without giving effect to any limitation or qualification as to “materiality” (including the word “material” and “in all material respects”) or “Material Adverse Effect” set forth therein).

(b) The Seller and the Company shall have performed all obligations and agreements and complied with all covenants and conditions in all material respects required by this Agreement to be performed or complied with by them prior to or at the Closing.

ARTICLE VIII
INDEMNIFICATION

Section 8.1 Survival of Representations and Warranties. The representations and warranties of the Seller, the Company, and the Buyer contained in this Agreement and the covenants in Section 6.1 shall survive the Closing for a period of 24 months after the Closing Date. The survival periods set forth herein are in lieu of, and the parties expressly waive, any otherwise applicable statute of limitations; provided, however, that (a) the Core Representations and the representations and warranties set forth in Section 5.1 relating to organization and existence, Section 5.2 relating to authority, and Section 5.5 relating to broker’s fees and finder’s fees, shall survive for the longer of (i) a period of five years after the Closing Date or (ii) the expiration of the 30 day period immediately following the expiration of the applicable statute of limitations, (b) the representations and warranties set forth in Section 4.15 relating to Taxes shall survive until the expiration of the 30 day period immediately following the expiration of the applicable Tax statute of limitations, (c) the representations and warranties set forth in Section 4.14(a) relating to Intellectual Property shall survive the Closing for a period of 36 months after the Closing Date and (d) any representation in the case of fraud or intentional misrepresentation, shall survive indefinitely. The term “applicable Tax statute of limitations”, as used in this Article VIII, shall mean, with respect to any particular type of Tax, a period of time equal to the applicable statute of limitations established pursuant to any Law pertaining to such Tax.

Section 8.2 Indemnification by the Seller.

(a) The Seller shall save, defend, indemnify, and hold harmless the Buyer and its Affiliates (including the Company and its Subsidiaries), officers, directors, employees, agents, successors and assigns (collectively, the “Buyer Indemnified Parties”) from and against any and all: (i) losses, damages, liabilities, deficiencies, claims, interest, awards, judgments, penalties, costs and expenses (including reasonable attorneys’ fees, costs, and other out-of-pocket expenses incurred in investigating, preparing, or defending the foregoing) (hereinafter collectively, “Losses”) to the extent resulting from or relating to any breach of any representation or warranty set forth in this Agreement made by the Seller or the Company, (ii) Losses to the extent arising from or relating to any breach of any covenant set forth in this Agreement made by the Seller or, prior to the Closing, by the Company, (iii) Losses to the extent arising from or relating to any Indebtedness or Transaction Expenses of the Company and its Subsidiaries as of the Closing Date that is not fully paid as of the Closing Date (other than Indebtedness or Transaction Expenses of the Company and its Subsidiaries to the extent set forth in the certificate delivered pursuant to Section 2.3(c)), (iv) Losses to the extent arising from or relating to any and all Taxes imposed on the Company and its Subsidiaries, including the Canadian Subsidiary, for any Pre-Closing Tax Period and Pre-Closing Straddled Period, (v) Losses to the extent arising from or relating to environmental conditions at the Transferred Real Property, (vi) Losses to the extent

arising from or relating to Audit Claims and (vii) Losses to the extent arising from or relating to Indemnified Joplin Environmental Conditions.

(b) To provide a fund against which a Buyer Indemnified Party may first assert a claim for a Loss, the Escrow Amount shall be deposited with the Escrow Agent in accordance with Section 2.2(c). A Buyer Indemnified Party shall first look to the Escrow Amount for the satisfaction of any claims for indemnification they may have under Sections 8.2(a)(i), (ii) or (vii) of this Agreement before proceeding against the Seller. A Buyer Indemnified Party shall not be obligated to first look to the Escrow Amount for satisfaction of a claim pursuant to any other clause of Section 8.2(a).

(c) To provide a fund against which a Buyer Indemnified Party may first assert a claim for a Loss with respect to an Audit Claim, the Audit Escrow Amount shall be deposited with the Escrow Agent in accordance with Section 2.2(c). A Buyer Indemnified Party shall first look to the Audit Escrow Amount for the satisfaction of any Audit Claims. If the amount of Audit Claims (whether pending or resolved) exceed the Audit Escrow Amount or the Audit Escrow Amount is otherwise unavailable, the Buyer Indemnified Parties shall be entitled to look to the Escrow Amount and/or the Seller with respect to such excess amount up to the Audit Claim Cap.

Section 8.3 Indemnification by the Buyer. The Buyer shall save, defend, indemnify, and hold harmless the Seller and its Affiliates, officers, directors, members, managers, employees, agents, successors, and assigns (collectively, the “Seller Indemnified Parties”) from and against any and all Losses to the extent resulting from or relating to:

(a) any breach of any representation or warranty set forth in the Agreement made by the Buyer; and

(b) any breach of any covenant set forth in this Agreement made by the Buyer or, after the Closing, the Company.

Section 8.4 Procedures.

(a) In order for a Buyer Indemnified Party or Seller Indemnified Party (the “Indemnified Party”) to be entitled to any indemnification provided for under this Agreement as a result of a Loss or a claim or demand made by any Person against the Indemnified Party (a “Third Party Claim”), such Indemnified Party shall deliver notice thereof to the party against whom indemnity is sought (the “Indemnifying Party”) promptly after receipt by such Indemnified Party of written notice of the Third Party Claim, describing in reasonable detail the facts available to the Indemnified Party giving rise to any claim for indemnification hereunder, the amount or method of computation of the amount of such claim (if known) and such other information with respect thereto as the Indemnifying Party may reasonably request. The failure to provide such notice, however, shall not release the Indemnifying Party from any of its obligations under this Article VIII except to the extent that the Indemnifying Party is prejudiced by such failure.

(b) The Indemnifying Party shall have the right, upon written notice to the Indemnified Party within 30 days of receipt of notice from the Indemnified Party of the

commencement of such Third Party Claim, to assume the defense thereof at the expense of the Indemnifying Party with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party; provided, however, that (i) the Indemnifying Party has sufficient financial resources to satisfy the amount of any adverse monetary judgment that is reasonably likely to result (it being agreed that the Seller shall, among other reasons, be deemed to have sufficient financial resources as aforesaid as long as the Escrow Amount is sufficient to satisfy the amount of the adverse monetary judgments reasonably likely to result from outstanding Third Party Claim), (ii) the Third Party Claim solely seeks (and continues to solely seek) monetary damages and (iii) the Indemnifying Party expressly agrees in writing that as between the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be solely obligated to satisfy and discharge the Third Party Claim in accordance with the terms set forth in this Agreement. If the Indemnifying Party assumes the defense of such Third Party Claim, the Indemnified Party shall have the right to employ separate counsel and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnified Party; provided, that if in the reasonable opinion of counsel for the Indemnified Party, there is a conflict of interest between the Indemnified Party and the Indemnifying Party, the Indemnifying Party shall be responsible for the reasonable fees and expenses of one counsel to such Indemnified Party in connection with such defense. If the Indemnifying Party does not assume the defense of such Third Party Claim, the Indemnifying Party shall have the right to employ separate counsel and to participate (but not control) in the defense thereof at the expense of the Indemnifying Party. The Party that assumes the defense of a Third Party Claim shall promptly inform the other Party of material developments with respect to such Claim. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party. Whether or not the Indemnifying Party assumes the defense of a Third Party Claim, neither the Indemnifying Party nor the Indemnified Party shall admit any liability with respect to, or settle, compromise or discharge, or offer to settle, compromise or discharge, such Third Party Claim without the prior written consent (which consent shall not be unreasonably withheld or delayed) of the Indemnified Party or the Indemnifying Party, as applicable.

(c) In the event any Indemnified Party should have a claim against any Indemnifying Party hereunder that does not involve a Third Party Claim being asserted against or sought to be collected from such Indemnified Party, the Indemnified Party shall deliver notice of such claim promptly to the Indemnifying Party, describing in reasonable detail the facts giving rise to any claim for indemnification hereunder, the amount or method of computation of the amount of such claim (if known) and such other information with respect thereto as the Indemnifying Party may reasonably request. The failure to provide such notice, however, shall not release the Indemnifying Party from any of its obligations under this Article VIII except to the extent that the Indemnifying Party is prejudiced by such failure. The Indemnified Party shall reasonably cooperate and assist the Indemnifying Party in determining the validity of any claim for indemnity by the Indemnified Party and in otherwise resolving such matters. Such assistance and cooperation shall include providing reasonable access to and copies of information, records and documents relating to such matters, furnishing employees to assist in the investigation,

defense and resolution of such matters and providing legal and business assistance with respect to such matters.

(d) The Indemnifying Party shall have 30 days after the giving of any notice of an indemnification claim pursuant to this Article VIII to provide the Indemnified Party with notice that it disagrees with the amount or method of determination set forth in the notice (the “Disagreement Notice”). If a timely Disagreement Notice is not received or to the extent an item is not objected to in the Disagreement Notice, the claim notice shall be deemed to have been accepted and final and binding on the parties, absent manifest error. If the Indemnifying Party delivers a timely Disagreement Notice, the parties shall resolve such conflict in accordance with the procedures set forth in Section 8.4(e)

(e) If the Indemnifying Party shall have provided a Disagreement Notice, the parties will attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims. If the parties should so agree, a memorandum setting forth such agreement will be prepared and signed by the parties. In the event the parties shall fail to reach an agreement within 30 days after the date on which the Indemnifying Party provided a Disagreement Notice, the dispute shall be resolved in accordance with the provisions of Section 8.7.

(f) With regard to environmental conditions subject to indemnification under Section 8.2, Buyer shall undertake investigation, containment, corrective action and/or remediation (“Remedial Action”) in a commercially reasonable fashion in compliance with Environmental Laws such that any Remedial Action complies with the requirements of Environmental Laws applicable to the continued use of the facility for purposes similar to those of its use at the time of the Remedial Action. The Buyer shall promptly provide copies to the Seller of all notices, correspondence, draft reports, submissions, work plans, and final reports and shall give the Seller a reasonable opportunity (at the Seller’s own expense) to comment on any submissions the Buyer intends to deliver or submit to the appropriate regulatory body prior to said submission provided, however, the Buyer shall not make such submission to the appropriate regulatory body without a prior approval of the Seller (which consent shall not be unreasonably withheld or unduly delayed).

Section 8.5 Limits on Indemnification.

(a) If a claim pursuant to Article VIII relates to a breach by a party of any representation or warranty set forth herein or Section 6.1, it must be received by such party on or prior to the date on which the representation, warranty or covenant on which such claim is based ceases to survive as set forth in Section 8.1, in which case such representation, warranty or covenant shall survive as to such claim until such claim has been finally resolved. Claims pursuant to Article VIII relating to a breach by a party of any covenant (other than Section 6.1) set forth herein are not subject to time limitations. Notwithstanding anything herein to the contrary, no claim may be asserted against the Seller pursuant to Section 8.2(a)(iv) with respect to Taxes unless written notice of such claim is received by the Seller prior to the expiration of the 30 day period immediately following the expiration of the applicable statute of Tax limitations. Notwithstanding anything herein to the contrary, no claim may be asserted against the Seller pursuant to Section 8.2(a)(vii) with respect to the Indemnified Joplin Environmental Conditions

unless written notice of such claim is received by the Seller prior to the date that is 24 months after the Closing Date. Notwithstanding anything herein to the contrary, no claim may be asserted against the Seller pursuant to Section 8.2(a)(vi) with respect to Audit Claims unless written notice of such claim is received by the Seller, prior to the 36 month anniversary of the Closing Date.

(b) Notwithstanding anything to the contrary contained in this Agreement:

(i) the maximum aggregate amount of indemnifiable Losses that may be recovered from the Seller by Buyer Indemnified Parties pursuant to Sections 8.2(a)(i), (ii), (vi) and (vii) shall in no event exceed $20,000,000 (the “Cap”) and the maximum aggregate amount of indemnifiable Losses that may be recovered from the Seller by Buyer Indemnified Parties pursuant to Section 8.2(a)(vi) shall in no event exceed $3,700,000 (the “Audit Claim Cap”);

(ii) the Seller shall not be liable to any Buyer Indemnified Party for any claim for indemnification under Sections 8.2(a)(i) and (vii) unless and until the aggregate amount of indemnifiable Losses that may be recovered from the Seller equals or exceeds $1,500,000 (the “Basket Amount”), in which case the Seller shall be liable only for the Losses in excess of the Basket Amount; provided, however, that no such Losses may be claimed by any Buyer Indemnified Party or shall be reimbursable by the Seller or shall be included in calculating the aggregate Losses for purposes of this clause (ii) other than Losses in excess of $10,000 (the “Minimum Loss Amount”) resulting from any single claim or aggregated claims arising out of the same facts, events, or circumstances; provided, further, that this clause (ii) shall not apply to Losses arising out of or relating to the untruth or breach of any representation or warranty made in any Core Representation;

(iii) the Seller shall not be obligated to indemnify any Buyer Indemnified Party with respect to any Loss or claim under (x) Section 8.2(a)(vii) to the extent of the specific accrual for such specific Loss as set forth on Schedule 8.5(b)(iii) of the Disclosure Schedules or (y) any other Section in Section 8.2(a) to the extent such Loss or claim was actually included in Closing Working Capital as finally determined pursuant to Section 2.5.

(iv) no party hereto shall have any liability under any provision of this Agreement for any punitive, incidental, consequential, special, or indirect damages, including business interruption, loss of future revenue, profits or income, or loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement unless such punitive, incidental, consequential, special, or indirect damages are awarded and required to be paid to a third party pursuant to a Law or Order; and

(v) for purposes of determining whether there has been a breach of any representation or warranty under this Agreement (other than Section 4.18), such representations and warranties shall be interpreted without giving effect to any limitations or qualifications such as “materiality,” “material,” “in all material respects,” or “Material Adverse Effect” set forth in any such representation or warranty.

(c) For all purposes of this Article VIII, “Losses” shall be net of (i) any insurance or other recoveries payable to the Indemnified Party or its Affiliates in connection with the facts giving rise to the right of indemnification and (ii) any actual reduction in cash Taxes paid by the Indemnified Party or its Affiliates directly resulting from the incurrence or payment of any such Losses.

(d) The Buyer and the Seller shall cooperate with each other with respect to resolving any claim, liability, or Loss for which indemnification may be required hereunder. In the event that an Indemnifying Party is obligated to indemnify an Indemnified Party pursuant to this Article VIII, the Indemnifying Party will, upon payment of such indemnity, be subrogated to all of the rights of the Indemnified Party with respect to the claims to which such indemnification relates.

(e) The Escrow Agreement shall have a two year term and shall contain other customary terms for similar escrows utilized in transactions of this nature, including terms providing that the fees, costs and expenses of the Escrow Agent thereunder, and the indemnification of the Escrow Agent pursuant thereto, shall be borne equally by the Buyer and the Seller. In addition, the Escrow Agreement shall provide that (i) the Escrow Amount and the Audit Escrow Amount shall only be released from the escrow under the Escrow Agreement upon written mutual agreement of Seller and Buyer or pursuant to an order of a court of competent jurisdiction and (ii) any portion of the Escrow Amount and the Audit Escrow Amount in respect of claims made against the Escrow Agreement by a Buyer Indemnified Party in accordance with this Article VIII that are unresolved prior to the 24 month anniversary of the Closing Date shall continue to remain therein until released pursuant to the foregoing clause (i).

Section 8.6 Exclusive Remedy. Except as specifically set forth in this Agreement, effective as of the Closing, in the absence of fraud by EPC, the Seller or the Company (to the extent determined by a final judgment by a court of competent jurisdiction), the Buyer, on behalf of itself and the other Buyer Indemnified Parties, waives any rights and claims any Buyer Indemnified Party may have against the Seller, whether in law or equity, in contract or in tort, relating to the Company or its Subsidiaries and/or the transactions contemplated by this Agreement. The rights and claims waived by the Buyer, on behalf of itself and the other Buyer Indemnified Parties, include claims for contribution or other rights of recovery arising out of or relating to any Environmental Laws, claims for breach of contract, breach of representation or warranty, negligent misrepresentation and all other claims for breach of duty. After the Closing, subject to the foregoing, this Article VIII will provide the exclusive remedy against the Seller for any breach of any representation, warranty, covenant or other claim arising out of or relating to this Agreement and/or the transactions contemplated hereby; provided that nothing in this Section 8.6 shall limit either party’s right to claim or bring an Action against the other party based on fraud of the other party and equitable remedies consisting of specific performance or injunctive relief in respect of any breach of any covenant or agreement to be performed after Closing. The Seller has specifically relied on this Section 8.6, together with Section 8.5 and the other provisions of this Article VIII and Section 10.17 in agreeing to the Purchase Price and in agreeing to provide the specific representations and warranties set forth herein.

Section 8.7 Dispute Resolution. Each party agrees to submit monetary claims, disputes, controversies, or other matters in question arising out of the matters covered by Article VIII (“Disputes”), to an independent expert appointed in accordance with this Section 8.7 (the “Independent Expert”), who shall serve as sole mediator for non-binding mediation. The Independent Expert shall be appointed by mutual agreement of the Seller and the Buyer from among candidates with experience and expertise in the area that is the subject of such Dispute. If Disputes to be resolved by the parties with assistance of the Independent Expert are not resolved within 45 days after appointment of the Independent Expert to the satisfaction of either party, then either party shall be entitled to immediately terminate such non-binding mediation and may seek relief in accordance with Article X with respect to such Disputes. The fees and expenses of the Independent Expert shall be borne equally by the parties. For the avoidance of doubt, any Disputes resolved in writing between the Seller and the Buyer within such 45 day period shall be final and binding on the parties for all purposes hereunder, however, the Independent Expert shall not be authorized to resolve any Disputes between the parties and no determination of the Independent Expert shall resolve any Dispute, be binding on the parties or be entered in any court of competent jurisdiction.

ARTICLE IX
TERMINATION

Section 9.1 Termination. This Agreement may be terminated at any time prior to the Closing:

(a) by mutual written consent of the Buyer and the Seller;

(b) (i) by the Seller, if the Buyer breaches or fails to perform in any respect any of its representations, warranties, or covenants contained in this Agreement and such breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 7.2, (B) cannot be or has not been cured within 15 days following delivery of written notice of such breach or failure to perform, and (C) has not been waived by the Seller or (ii) by the Buyer, if the Seller or the Company breaches or fails to perform in any respect any of its respective representations, warranties, or covenants contained in this Agreement and such breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 7.3, (B) cannot be or has not been cured within 15 days following delivery of written notice of such breach or failure to perform, and (C) has not been waived by the Buyer;

(c) (i) by the Seller, if any of the conditions set forth in Section 7.1 or Section 7.2 shall have become incapable of fulfillment prior to March 31, 2010 (the “Termination Date”) or (ii) by the Buyer, if any of the conditions set forth in Section 7.1 or Section 7.3 shall have become incapable of fulfillment prior to the Termination Date; provided, that the right to terminate this Agreement pursuant to this Section 9.1(c) shall not be available if the failure of the party (in the case of the Seller, including for this purpose the Company) so requesting termination to fulfill any obligation under this Agreement shall have been the cause of the failure of such condition to be satisfied on or prior to such date;

(d) by either the Seller or the Buyer if the Closing shall not have occurred by the Termination Date; provided, that the right to terminate this Agreement under this

Section 9.1(d) shall not be available if the failure of the party (in the case of the Seller, including for this purpose the Company) so requesting termination to fulfill any obligation under this Agreement shall have been the cause of the failure of the Closing to occur on or prior to such date; or

(e) by either the Seller or the Buyer in the event that any Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; provided, that the party so requesting termination shall have complied with Section 6.8.

The party seeking to terminate this Agreement pursuant to this Section 9.1 (other than Section 9.1(a)) shall give prompt written notice of such termination to the other parties.

Section 9.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 9.1, this Agreement shall forthwith become void and there shall be no liability on the part of any party except (a) for the provisions of Sections 3.5 and 5.5 relating to broker’s fees and finder’s fees, Section 6.5 relating to solicitation of Company employees, Section 6.6(a) relating to confidentiality, Section 6.8 relating to public announcements, Article X and this Section 9.2 and (b) that nothing herein shall relieve any party from liability for any damages resulting from any material breach prior to such termination of any of its representations, warranties, covenants or agreements set forth in this Agreement or to impair the right of either party to compel specific performance by the other party of its obligations under this Agreement.

ARTICLE X
GENERAL PROVISIONS

Section 10.1 Fees and Expenses; Conveyance Taxes.

(a) Except as otherwise provided herein, all fees and expenses incurred in connection with or related to this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees or expenses, whether or not such transactions are consummated. In the event of termination of this Agreement, the obligation of each party to pay its own expenses will be subject to any rights of such party arising from a breach of this Agreement by the other.

(b) Any and all sales, use, value added, transfer, stamp, registration, real property transfer or gains and similar Taxes (including all penalties, interest, and additions to such Taxes) payable in connection with the purchase of the Equity Interests and the transfer of the assets of the Company (“Conveyance Taxes”) shall be borne by the Buyer. The Buyer, at its own expense, shall file or cause to be filed all necessary Tax Returns and other documentation with respect to such Conveyance Taxes and fees.

Section 10.2 Amendment and Modification. This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each party.

Section 10.3 Waiver. No failure or delay of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder. Any agreement on the part of any party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such party.

Section 10.4 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by facsimile, upon written confirmation of receipt by facsimile, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

(i) if to the Seller or, prior to the Closing, the Company, to:

EaglePicher Technologies Holdings, LLC
5850 Mercury Dr., Suite 250
Dearborn, MI 48126
Attention: David L. Treadwell
Facsimile: (313) 749-5501

with a copy (which shall not constitute notice) to:

Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue N.W.
Washington, DC 20036-5306
Attention: Stephen I. Glover, Esq.
Facsimile: (202) 467-0539

(ii) if to the Buyer or, after the Closing, the Company, to:

OM Group, Inc.
127 Public Square
1500 Key Tower
Cleveland, OH 44114
Attention: Valerie Gentile Sachs, Esq.
Facsimile: (216) 263-7757

with a copy (which shall not constitute notice) to:

Jones Day
901 Lakeside Avenue
Cleveland, OH 44114
Attention: James P. Dougherty
Facsimile: (216) 579-0212

Section 10.5 Interpretation. When a reference is made in this Agreement to a Section, Article, Schedule, or Exhibit such reference shall be to a Section, Article, Schedule, or Exhibit of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement or in any Exhibit are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Any capitalized terms used in any Exhibit but not otherwise defined therein shall have the meaning as defined in this Agreement. All Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein. The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other things extends, and such phrase shall not simply mean “if.”

Section 10.6 Entire Agreement. This Agreement (including the Exhibits and Schedules hereto), the Escrow Agreement and the Confidentiality Agreement constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications, and understandings among the parties with respect to the subject matter hereof and thereof. This Agreement shall not be deemed to contain or imply any restriction, covenant, representation, warranty, agreement, or undertaking of any party with respect to the transactions contemplated hereby or thereby other than those expressly set forth herein or therein or in any document required to be delivered hereunder or thereunder, including, without limitation, any implied covenants regarding noncompetition or nonsolicitation, and none shall be deemed to exist or be inferred with respect to the subject matter hereof.

Section 10.7 No Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement.

Section 10.8 Governing Law. This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of New York (other than Section 5-1401 of the New York General Obligations Law).

Section 10.9 Submission to Jurisdiction. Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any other

party or its successors or assigns shall be brought and determined in any New York State or federal court sitting in the Borough of Manhattan in The City of New York (or, if such court lacks subject matter jurisdiction, in any appropriate New York State or federal court), and each of the parties hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in New York, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in New York as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in New York as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper, or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

Section 10.10 Disclosure Generally. Notwithstanding anything to the contrary contained in the Disclosure Schedules or in this Agreement, the information and disclosures contained in any Disclosure Schedule shall be deemed to be disclosed and incorporated by reference in any other Disclosure Schedule as though fully set forth in such Disclosure Schedule for which applicability of such information and disclosure is reasonably apparent on its face. The fact that any item of information is disclosed in any Disclosure Schedule shall not be construed to mean that such information is required to be disclosed by this Agreement. Such information and the dollar thresholds set forth herein shall not be used as a basis for interpreting the terms “material” or “Material Adverse Effect” or other similar terms in this Agreement.

Section 10.11 Personal Liability. Except as provided in Section 10.17, this Agreement shall not create or be deemed to create or permit any personal liability or obligation on the part of any direct or indirect stockholder of the Seller or the Buyer or any officer, director, employee, Representative, or investor of any party hereto.

Section 10.12 Assignment; Successors. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any party without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void; provided, however, that the Buyer may assign this Agreement to any Subsidiary of the Buyer without the prior consent of the Seller or the Company; provided further, that the Seller may assign any of its rights under this Agreement, including the right to receive the Purchase Price, to one or more Affiliates of the Seller without the consent of the Buyer or the Company; provided still further, that no assignment shall limit the assignor’s obligations hereunder. Subject to the

preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.

Section 10.13 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any New York State or federal court sitting in the Borough of Manhattan in the City of New York (or, if such court lacks subject matter jurisdiction, in any appropriate New York State or federal court), this being in addition to any other remedy to which such party is entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief.

Section 10.14 Currency. All references to “dollars” or “$” or “US$” in this Agreement refer to United States dollars, which is the currency used for all purposes in this Agreement.

Section 10.15 Severability. If any provision hereof shall be held invalid or unenforceable by any court of competent jurisdiction or as a result of future legislative action, so long as the economic and legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party, such holding or action shall be strictly construed and shall not affect the validity or effect of any other provision hereof, as long as the remaining provisions, taken together, are sufficient to carry out the overall intentions of the parties as evidenced hereby.

Section 10.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAVERS AND CERTIFICATIONS IN THIS SECTION 10.16.

Section 10.17 Guarantees.

(a) EPC hereby guarantees to the Buyer the prompt and complete performance of the Seller’s pre-Closing and post-Closing obligations, under this Agreement (including pursuant to Article VIII), in each case, subject to, and in accordance with, this Agreement.

(b) OMG hereby guarantees to the Seller the prompt and complete performance of the Buyer’s pre-Closing obligations, including payment of the Purchase Price, under this Agreement, in each case, subject to, and in accordance with, this Agreement.

Section 10.18 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

Section 10.19 Facsimile Signature. This Agreement may be executed by facsimile signature and a facsimile signature shall constitute an original for all purposes.

Section 10.20 Time of Essence. Time is of the essence with regard to all dates and time periods set forth or referred to in this Agreement.

Section 10.21 Legal Representation. In any dispute or proceeding arising under or in connection with this Agreement, the Seller shall have the right, at its election, to retain the firm of Gibson, Dunn & Crutcher LLP to represent it in such matter and each of the Buyer and the Company, for itself and for its successors and assigns, hereby irrevocably waives and consents to any such representation in any such matter. Each of the Buyer and the Company acknowledges that the foregoing provision shall apply whether or not Gibson, Dunn & Crutcher LLP provides legal services to the Company after the Closing Date. Each of the Buyer and the Company, for itself and its successors and assigns, hereby irrevocably acknowledges and agrees that all communications between the Seller and its counsel, including without limitation Gibson, Dunn & Crutcher LLP, made in connection with the negotiation, preparation, execution, delivery and closing under, or any dispute or proceeding arising under or in connection with, this Agreement, or any matter relating to any of the foregoing, are privileged communications between the Seller and such counsel and neither the Buyer nor the Company, nor any Person purporting to act on behalf of or through the Buyer or the Company, will seek to obtain the same by any process.

Section 10.22 No Presumption Against Drafting Party. Each of the Buyer, the Seller, and the Company acknowledges that each party to this Agreement has been represented by competent counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.

[The remainder of this page is intentionally left blank.]

IN WITNESS WHEREOF, the Seller, the Company, EPC the Buyer and OMG have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.


EAGLEPICHER TECHNOLOGIES HOLDINGS, LLC
By:	/s/ David L. Treadwell
	Name:	David L. Treadwell
	Title:	Chairman

EAGLEPICHER TECHNOLOGIES, LLC
By:	/s/ David L. Treadwell
	Name:	David L. Treadwell
	Title:	Chairman

EAGLEPICHER CORPORATION solely for the purpose of Section 10.17(a)
By:	/s/ David L. Treadwell
	Name:	David L. Treadwell
	Title:	President & CEO

OMG ENERGY HOLDINGS, INC.
By:	/s/ Valerie Gentile Sachs
	Name:	Valerie Gentile Sachs
	Title:	Secretary

OM GROUP, INC. solely for the purpose of Section 10.17(b)
By:	/s/ Kenneth Haber
	Name:	Kenneth Haber
	Title:	Chief Financial Officer

EX-21 3 l38672exv21.htm EX-21 exv21

Exhibit 21


NAME OF SUBSIDIARY		JURISDICTION OF ORGANIZATION
Compugraphics International Limited		United Kingdom
Compugraphics USA Inc.		Delaware
Cyantek Corporation		Delaware
Groupement Pour Le Traitement Du terril De Lubumbashi (55%)		Jersey, Channel Islands
Harko CV		Netherlands
Key Professional Services Ltd.		Gibraltar
O.M.G. Chemicals (S) Pte. Ltd		Singapore
OM Group (Suzhou) Electronic Chemicals Co. Ltd.		China
OM Group Ultra Pure Chemicals Limited		United Kingdom
OM Group Ultra Pure Chemicals Pte. Ltd.		Singapore
OM Group Ultra Pure Chemicals SAS		France
OM Group Ultra Pure Chemicals Sdn Bhd		Malaysia
OM Holdings, Inc.		Delaware
OMG (Asia) Electronic Chemicals Co., Ltd.		Taiwan
OMG (Suzhou) Electronic Chemicals Co., Ltd.		China
OMG Americas, Inc.		Ohio
OMG Asia-Pacific Co., Ltd.		Taiwan
OMG Belleville Limited		Canada
OMG Borchers GmbH		Germany
OMG Borchers SAS		France
OMG Electronic Chemicals (M) Sdn Bhd		Malaysia
OMG Electronic Chemicals Pte. Ltd.		Singapore
OMG Electronic Chemicals, Inc.		Delaware
OMG Europe GmbH		Germany
OMG Finland Oy		Finland
OMG Harjavalta Chemicals Holding BV		Netherlands
OMG Japan, Inc.		Japan
OMG Kokkola Chemicals Holding (Two) BV		Netherlands
OMG Kokkola Chemicals Oy		Finland
OMG UK Limited		United Kingdom
Societe Congolaise Pour le Traitement du Terril de Lubumbashi (49%)		Democratic Republic of Congo
OMG (Shanhai) Trading Company, Ltd.		China

EX-23 4 l38672exv23.htm EX-23 exv23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements of our reports dated February 25, 2010, with respect to the consolidated financial statements and schedule of OM Group, Inc. and Subsidiaries, and the effectiveness of internal control over financial reporting of OM Group, Inc. and Subsidiaries included in the Annual Report (Form 10-K) for the year ended December 31, 2009:


Registration
Statement	Description	Filing Date
333-07531	OM Group, Inc. Non-Employee Directors’ Equity Compensation Plan—Form S-8 Registration Statement—250,000 Shares	July 3, 1996

333-47230	OM Group, Inc. 1998 Long-Term Incentive Compensation Plan—Form S-8 Registration Statement—2,000,000 Shares	October 3, 2000

333-65852	OM Group, Inc. 1998 Long-Term Incentive Compensation Plan—Form S-8 Registration Statement—2,000,000 Shares	July 25, 2001

333-141033	OM Group, Inc. 2002 Stock Incentive Plan and Inducement Stock Option Grant to Joseph M. Scaminace—Form S-8 Registration Statement—1,488,934 Shares	March 2, 2007

333-145238	OM Group, Inc. 2007 Incentive Compensation Plan—Form S-8 Registration Statement —3,000,000 Shares	August 8, 2007

/s/ Ernst & Young LLP

Cleveland, Ohio
February 25, 2010

EX-24 5 l38672exv24.htm EX-24 exv24

POWER OF ATTORNEY

The undersigned director of OM Group, Inc. (the “Company”), a Delaware corporation, which anticipates filing with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the Company’s fiscal year ended December 31, 2009, hereby constitutes and appoints JOSEPH M. SCAMINACE and KENNETH HABER, with full power of substitution and resubstitution, as attorney to sign for the undersigned and in his or her name, place and stead, as director of said Company, said Annual Report and any and all amendments and exhibits thereto, and any and all applications and documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report, with full power and authority to do and perform any and all acts and things whatsoever requisite, necessary or advisable to be done in the premises, as fully and for all intents and purposes as the undersigned could do if personally present, hereby approving the acts of said attorney and any such substitute.

IN WITNESS WHEREOF, this Power of Attorney has been signed this 20th day of January, 2010.



		/s/ Richard W. Blackburn
		Richard W. Blackburn

POWER OF ATTORNEY

IN WITNESS WHEREOF, this Power of Attorney has been signed this 20th day of January, 2010.



		/s/ David L. Pugh
		David L. Pugh

POWER OF ATTORNEY

IN WITNESS WHEREOF, this Power of Attorney has been signed this 19th day of January, 2010.



		/s/ Gordon A. Ulsh
		Gordon A. Ulsh

POWER OF ATTORNEY

IN WITNESS WHEREOF, this Power of Attorney has been signed this 20th day of January, 2010.



		/s/ Steven J. Demetriou
		Steven J. Demetriou

POWER OF ATTORNEY

IN WITNESS WHEREOF, this Power of Attorney has been signed this 19th day of January, 2010.



		/s/ Katharine L. Plourde
		Katharine L. Plourde

POWER OF ATTORNEY

IN WITNESS WHEREOF, this Power of Attorney has been signed this 18th day of January, 2010.



		/s/ William J. Reidy
		William J. Reidy

EX-31.1 6 l38672exv31w1.htm EX-31.1 exv31w1

Exhibit 31.1

CERTIFICATION

I, Joseph M. Scaminace, certify that:


	1.	I have reviewed this report on Form 10-K of OM Group, Inc.;

	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


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


	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


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


	d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):


	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 25, 2010

/s/ Joseph M. Scaminace

Joseph M. Scaminace

Chairman of the Board and
Chief Executive Officer

EX-31.2 7 l38672exv31w2.htm EX-31.2 exv31w2

Exhibit 31.2

CERTIFICATION

I, Kenneth Haber, certify that:


	1.	I have reviewed this report on Form 10-K of OM Group, Inc.;

	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


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


	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


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


	d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):


	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 25, 2010

/s/ Kenneth Haber

Kenneth Haber

Chief Financial Officer

EX-32 8 l38672exv32.htm EX-32 exv32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SEC. 1350, AS ADOPTED PURSUANT TO
SEC. 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing with the Securities and Exchange Commission of the Annual Report on Form 10-K of OM Group, Inc. (the “Company”) for the year ended December 31, 2009 (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:


	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 25, 2010

/s/ Joseph Scaminace

Joseph M. Scaminace

Chairman of the Board and
Chief Executive Officer

/s/ Kenneth Haber

Kenneth Haber
Chief Financial Officer

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