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LEGAL PROCEEDINGS AND CONTINGENCIES

We are involved in claims, litigation, administrative proceedings and investigations of various types in a number of jurisdictions. A number of such matters involve, or may involve, claims for a material amount of damages and relate to or allege environmental liabilities, including clean-up costs associated with hazardous waste disposal sites, natural resource damages, property damage and personal injury.

As a result of the Chapter 11 cases, substantially all pre-petition litigation and claims against Chemtura and our subsidiaries that were Debtors in the Chapter 11 cases have been discharged and permanently enjoined from further prosecution and are described under the subheading “Prepetition Litigation and Claims Discharged under the Plan” below.

Claims and legal actions asserted against non-Debtors or relating to events occurring after the Effective Date, certain regulatory and administrative proceedings and certain contractual and other claims assumed with the authorization of the Bankruptcy Court, were not discharged in the Chapter 11 cases and are described under the subheading “Litigation and Claims Not Discharged Under the Plan” below.

Prepetition Litigation and Claims Discharged Under the Plan

Chapter 11 Plan and Establishment of Claims Reserves

On March 18, 2009, the Debtors filed voluntary petitions in the Bankruptcy Court seeking relief under Chapter 11. The Debtors’ Chapter 11 cases have been assigned to the Honorable Robert E. Gerber and are being jointly administered as Case No. 09-11233. The Debtors continued to operate their business as debtors in possession under the jurisdiction of the Bankruptcy Court until their emergence from Chapter 11 on November 10, 2010.

Pursuant to the Plan, and by orders of the Bankruptcy Court dated September 24, 2010, October 19, 2010 and October 29, 2010, the Debtors established the Diacetyl Reserve, the Environmental Reserve and the Disputed Claims Reserve, each as defined in the Plan, on account of claims that were not yet allowed in the Chapter 11 cases as of the Effective Date, including proofs of claim asserted against the Debtors that were subject to objection as of the Effective Date (the “Disputed Claims”). The Diacetyl Reserve was approved by the Bankruptcy Court in the amount of $7 million, comprised of separate segregated reserves, and has since been reduced as settlement agreements have been approved by the Bankruptcy Court. The Environmental Reserve was approved by the Bankruptcy Court in the amount of $38 million, a portion of which was further segregated into certain separate reserves established to account for settlements that were pending Bankruptcy Court approval, and has since been reduced as settlement agreements have been approved by the Bankruptcy Court. The Disputed Claims Reserve was approved by the Bankruptcy Court in the amount of $42 million, plus additional segregated individual reserves for certain creditors' claims in the aggregate amount of approximately $30 million, all of which have been reduced as settlement agreements have been approved by the Bankruptcy Court.

On June 24, 2011, we resolved the last disputed Environmental Claim. As a result, under the Plan, the amounts remaining in the Environmental Reserve were transferred to the Disputed Claims Reserve. Any remaining Disputed Claims, to the extent they are ultimately allowed by the Bankruptcy Court, will be satisfied (to the extent allowed and not covered by insurance) from the Disputed Claims Reserve, and holders of the Disputed Claims are permanently enjoined under the Plan from pursuing their claims against us. As of December 31, 2011, as a result of distributions pursuant to the Plan, there were no remaining undisbursed amount in the Environmental Reserve, the Diacetyl Reserve or the segregated reserves, and the remaining undisbursed amount in the Disputed Claims Reserve was $29 million.

As we complete the process of evaluating and/or resolving the Disputed Claims, appropriate adjustments to our Consolidated Financial Statements will be made. Adjustments may also result from actions of the Bankruptcy Court, settlement negotiations, and other events. For additional information, see Note 18 – Emergence from Chapter 11 in our Notes to Consolidated Financial Statements.

Certain Prepetition Litigation Against the Debtors

Tricor: Our litigation with Tricor Refining, LLC (“Tricor”) pending in the California Superior Court, Kern County, was settled during the Chapter 11 cases pursuant to a stipulation by which Tricor agreed to convey certain property and assets to us and, in return, Tricor was granted a general unsecured claim in the Chapter 11 cases in the amount of approximately $2 million.

Conyers: Three putative class action lawsuits pending in the Superior Court of Rockdale County, Georgia pertaining to the fire at our Conyers, Georgia warehouse on May 25, 2004 captioned James and Carla Brown v. Bio-Lab, Inc., et al., Don Chapman et al. v. Bio-Lab, Inc., et al. and Deborah Davis, et al. v. Bio-Lab, Inc., et al., one putative federal class action lawsuit captioned Bill Martin, et al. v. Bio-Lab, Inc., et al. and several remaining individual lawsuits, including the lawsuit captioned Billy R. Brown, et al. v. Bio-Lab, Inc., et al., pending in the Superior Court of Rockdale County, Georgia will be resolved under a Class Action Settlement Agreement (the “Settlement Agreement”) entered into on August 25, 2010. The Settlement Agreement provides for a settlement fund of $7 million to be paid out to settlement class members on a claim-by-claim basis pursuant to certain procedures and a distribution formula set forth in the Settlement Agreement. Those persons who have opted out of the settlement class and have filed a proof of claim during the Chapter 11 cases may continue to pursue such claim in the Bankruptcy Court. We believe those persons who have opted out of the Settlement Class and have not filed a proof of claim during the Chapter 11 cases will be barred by the Plan and discharge injunction from pursuing their claims against us. By order dated September 10, 2010, the Bankruptcy Court approved the Debtors’ entry into the Class Action Settlement Agreement, and preliminarily approved the class action settlement. In January 2011, the Bankruptcy Court entered a final order approving the Settlement Agreement as fair, adequate and reasonable.

Diacetyl: Beginning before 2001, food industry factory workers began alleging that exposure to diacetyl, a butter flavoring ingredient widely used in the food industry between 1982 and 2005, caused respiratory illness.

During the Chapter 11 cases, approximately 373 non-duplicative proofs of claim involving diacetyl were filed against us, approximately 366 of which were filed by individual claimants, and approximately 7 of which were filed by corporate re-sellers or users of diacetyl seeking contribution or indemnity (the “Corporate Claimants”). The diacetyl claims included the claims of plaintiffs in 23 diacetyl lawsuits that were then pending against us and/or Chemtura Canada, our wholly owned subsidiary.

We have entered into, and obtained Bankruptcy Court approval of, settlement agreements to resolve all of the diacetyl claims filed by the individual claimants and the Corporate Claimants, except for those claims that have been expunged by order of the Bankruptcy Court. We have also entered into and obtained Bankruptcy Court approval of a settlement agreement with a key insurance carrier, AIG, with respect to the diacetyl claims, which provides for payment of 50% of the diacetyl settlements entered into during the Chapter 11 cases. Claims subject to approved settlements have been treated as allowed claims and satisfied pursuant to the Plan.

Australian Civil Antitrust Matters

On September 27, 2007, Chemtura and one of our subsidiaries who did not file a Chapter 11 case, as well as Bayer AG and Bayer Australia Ltd., were sued by Wright Rubber Products Pty Ltd. (“Wright”) in the Federal Court of Australia for alleged price fixing violations with respect to the sale of rubber chemicals in Australia. On November 21, 2008, Wright filed an amended Statement of Claim and further amended its Statement of Claim on August 2, 2010. On May 25, 2011, Chemtura and our subsidiary entered into a settlement agreement to resolve the litigation for an agreed allowed unsecured claim of approximately $1 million which was paid from the Disputed Claim Reserve pursuant to the Plan.

Appeals Relating to the Chapter 11 Cases

During the Chapter 11 cases, a creditor, Pentair Water Pool & Spa, Inc. (“Pentair”), appealed three orders of the Bankruptcy Court: (i) the Bankruptcy Court’s order establishing the Disputed Claims Reserve; (ii) an order partially disallowing the claims asserted by Pentair; and (iii) an order overruling the late-filed objection of Kurt and Amy Stetler to the Debtors’ motion seeking the establishment of the Disputed Claims Reserve. On March 24, 2011, we entered into a term sheet for a cost-sharing agreement with Pentair that provides, among other things, for the sharing of costs in relation to a settlement of the claims of Kurt and Amy Stetler and the dismissal of the appeals upon our payment of the agreed share of the settlement costs. The parties subsequently negotiated definitive documentation of the agreements and, on June 23, 2011, we filed a motion with the Bankruptcy Court to approve the cost-sharing agreement and the settlement of the claims of Kurt and Amy Stetler. The Bankruptcy Court approved the settlement on July 14, 2011. The District Court for the Southern District of New York dismissed the appeals on December 1, 2011.

Litigation and Claims Not Discharged Under the Plan

Chemtura Manufacturing UK Limited (“CMUK”) is the principal employer of the Great Lakes UK Limited Pension Plan (the “UK Pension Plan”), an occupational pension scheme that was established in the UK to provide pensions and other benefits for its employees. Under the UK Pension Plan, certain employees and former employees are entitled to pension benefits, most of which are defined benefits in nature, based on pensionable salary. The UK Pension Plan has approximately 580 pensioners and 690 members entitled to deferred benefits under the defined benefit section. The estimated funding deficit of the UK Pension Plan as of December 31, 2008, as measured in accordance with Section 75 of the Pension Act of 1995 (UK), was approximately £95 million.

The UK Pension Trustees filed 27 contingent, unliquidated Proofs of Claim against each of the Debtors (other than Chemtura Canada) in the Chapter 11 cases. By agreement with the UK Pension Trustees, the proofs of claim were disallowed on the condition that no party may later assert that the Chapter 11 cases operate as a bar to the UK Pension Trustees asserting claims against any of the Debtors in an appropriate non-bankruptcy forum. Also as previously disclosed, CMUK had been engaged with the UK Pension Trustees over the terms of a “recovery plan” to reduce the underfunded deficit in the UK Pension Plan and the applicable regulatory authority, in this case the UK Pensions Regulator (the “Regulator”), had issued a “warning notice” to CMUK and five other Chemtura affiliates, including Chemtura, stating their intent to request authority to issue a “financial support direction” against each of them for the support of the benefit obligations under the UK Pension Plan, potentially up to the amount of the funding deficit. Definitive agreements have now been entered into between CMUK and the UK Pension Trustees over the terms of a “recovery plan” to reduce the underfunded deficit in the UK Pension Plan and the Regulator has withdrawn the “warning notice” issued against CMUK and the five other Chemtura affiliates, including Chemtura. The definitive agreements provide, among other things, for CMUK to make cash contributions of £60 million (approximately $95 million) in just over a three year period starting with an initial contribution of £30 million ($49 million) that we made in the second quarter of 2011. The agreements also provide for the granting of both a security interest and a guarantee to support certain of the liabilities under this pension plan.

There is also an evaluation being undertaken as to whether additional benefit obligations exist in connection with the equalization of certain benefits under the UK Pension Plan that occurred in the early 1990s. Based on the results of the evaluation to date, $8 million of expense has been recorded in the fourth quarter of 2011, which may be subject to adjustment as further information is gathered as part of the evaluation. Upon completion of the evaluation and the finalization of the liability with respect to additional benefit obligations, additional cash contributions to the UK Pension Plan may be required starting in 2013

Environmental Liabilities

We are involved in environmental matters of various types in a number of jurisdictions. A number of such matters involve claims for material amounts of damages and relate to or allege environmental liabilities, including clean up costs associated with hazardous waste disposal sites and natural resource damages.

The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), and comparable state statutes impose strict liability upon various classes of persons with respect to the costs associated with the investigation and remediation of waste disposal sites. Such persons are typically referred to as “Potentially Responsible Parties” or PRPs. Chemtura and several of our subsidiaries have been identified by federal, state or local governmental agencies or by other PRPs, as a PRP at various locations in the United States. Because in certain circumstances these laws have been construed to authorize the imposition of joint and several liability, the Environmental Protection Agency (“EPA”) and comparable state agencies could seek to recover all costs involving a waste disposal site from any one of the PRPs for such site, including Chemtura, despite the involvement of other PRPs. In many cases, we are one of a large number of PRPs with respect to a site. In a few instances, we are the sole or one of only a handful of PRPs performing investigation and remediation. Where other financially responsible PRPs are involved, we expect that any ultimate liability resulting from such matters will be apportioned between us and such other parties. In addition, we are involved with environmental remediation and compliance activities at some of our current and former sites in the United States and abroad. As described below, certain environmental liabilities against us have been discharged or settled during the Chapter 11 cases.

Discharged and/or Settled Environmental Liabilities

As part of the Chapter 11 cases, under the Plan, the Debtors retained responsibility for environmental cleanup liabilities relating to currently owned or operated sites (i.e. sites that were part of the Debtors’ estates) and, with certain exceptions, discharged or settled liabilities relating to formerly owned or operated sites (i.e. sites that were no longer part of the Debtors’ estates) and third-party sites (i.e. sites that never were part of the Debtors’ estates).

As of December 31, 2011, we had obtained Bankruptcy Court approval of environmental settlements with the United States Department of Justice, the EPA and the Connecticut Commissioner of Environmental Protection, the Indiana Department of Environmental Management, the Florida Department of Environmental Protection, the North Carolina Division of Waste Management, the New York Environmental Protection and Spill Compensation Fund, the Georgia Department of Natural Resources, the Louisiana Department of Environmental Quality, the Texas Commission on Environmental Quality, the Ohio Environmental Protection Agency, the State of New York and the New York State Department of Environmental Conservation, the Pennsylvania Department of Environmental Protection, the California Department of Toxic Substances Control, and the New Jersey Department of Environmental Protection, the California Regional Water Quality Control Board, Santa Ana Region, the California Regional Water Quality Control Board, San Francisco Bay Region, and the State Water Resources Board for the State of California. The settlement with the EPA resolved alleged violations of the Clean Air Act, CERCLA, the Emergency Planning and Community Right to Know Act, and the Clean Water Act, with respect to our Conyers facility, which we had previously reported in our periodic reports.

All of the above-described settlements have been paid from the Debtors’ estates or the Environmental Reserve established under the Plan. As of December 31, 2011, $36 million has been paid on account of such environmental settlements. As a result of these settlements, we have voluntarily dismissed an adversary proceeding that the Debtors initiated during the Chapter 11 cases against the United States and various States seeking a ruling from the Bankruptcy Court that all of the Debtors’ liabilities with respect to formerly owned or operated sites and third-party sites are dischargeable claims in the Chapter 11 cases.

In view of the offers made to settle environmental liabilities and the settlements that have been reached with respect to environmental liabilities, estimates relating to environmental liabilities with respect to formerly owned or operated sites and third-party sites are now classified as accrued expenses and other liabilities in our Consolidated Balance Sheet at December 31, 2011 and 2010.

Environmental Liabilities that Have Not Been Discharged or Settled

Each quarter, we evaluate and review estimates for future remediation and other costs to determine appropriate environmental reserve amounts. For each site where the cost of remediation is probable and reasonably estimable, we determine the specific measures that are believed to be required to remediate the site, the estimated total cost to carry out the remediation plan, the portion of the total remediation costs to be borne by us and the anticipated time frame over which payments toward the remediation plan will occur. At sites where we expect to incur ongoing operation and maintenance expenditures, we accrue on an undiscounted basis for a period of generally 10 years those costs which we believe are probable and reasonably estimable.

On June 6, 2011, our subsidiary Great Lakes Chemical Corporation, received a proposed Consent Administrative Order (“CAO”) from the Arkansas Department of Environmental Quality alleging violations of the Resource Conservation and Recovery Act in conjunction with its facility located in El Dorado, Arkansas. The proposed CAO included a civil penalty. While we believe that a mutually acceptable settlement amount will be negotiated with the agency, a reasonable estimate of the settlement amount cannot be made at this time. In any event, the ultimate settlement with the agency will not have a material effect on our results of operations, financial condition or cash flows.

The total amount accrued for environmental liabilities as of December 31, 2011 and December 31, 2010, was $88 million and $119 million (which includes $27 million related to disputed claims), respectively. At December 31, 2011 and December 31, 2010, $18 million and $43 million, respectively, of these environmental liabilities were reflected as accrued expenses and $70 million and $76 million, respectively, were reflected as other liabilities in our Consolidated Balance Sheets. We estimate that ongoing environmental liabilities could range up to $107 million at December 31, 2011. Our accruals for environmental liabilities include estimates for determinable clean-up costs. We recorded a pre-tax charge of $6 million in 2011, $54 million in 2010, and $20 million in 2009, to increase our environmental liabilities and made payments of $37 million in 2011 (which included $27 million related to pre-petition liabilities) and $52 million in 2010 (which included $42 million related to pre-petition liabilities) for clean-up costs, which reduced our environmental liabilities. At certain sites, we have contractual agreements with certain other parties to share remediation costs. We have a receivable of $10 million at December 31, 2011 and $11 million at December 31, 2010 to reflect probable recoveries. At a number of these sites, the extent of contamination has not yet been fully investigated or the final scope of remediation is not yet determinable. We intend to assert all meritorious legal defenses and will pursue other equitable factors that are available with respect to these matters. However, the final cost of clean-up at these sites could exceed our present estimates, and could have, individually or in the aggregate, a material adverse effect on our financial condition, results of operations or cash flows. Our estimates for environmental remediation liabilities may change in the future should additional sites be identified, further remediation measures be required or undertaken, current laws and regulations be modified or additional environmental laws and regulations be enacted, and as negotiations with respect to certain sites continue or as certain liabilities relating to such sites are resolved as part of the Chapter 11 cases.

Other

We are routinely subject to other civil claims, litigation and arbitration, and regulatory investigations, arising in the ordinary course of our business, as well as in respect of our divested businesses. Some of these claims and litigations relate to product liability claims, including claims related to our current and historic products and asbestos-related claims concerning premises and historic products of our corporate affiliates and predecessors. We believe the claims relating to the period before the filing of the Chapter 11 cases are subject to discharge pursuant to the Plan and will be satisfied, to the extent they were timely filed in the Chapter 11 cases and allowed by the Bankruptcy Court, solely from the Disputed Claims Reserve. Further, we believe that we have strong defenses to these claims. These claims have not had a material impact on us to date and we believe the likelihood that a future material adverse outcome will result from these claims is remote. However, we cannot be certain that an adverse outcome of one or more of these claims, to the extent not discharged in the Chapter 11 cases, would not have a material adverse effect on our financial condition, results of operations or cash flows.

Internal Review of Customer Incentive, Commission and Promotional Payment Practices

Our previously disclosed review of various customer incentive, commission and promotional payment practices of the Chemtura AgroSolutions segment in the Europe, Middle East and Africa region (the “EMEA Region”), was completed in 2010. The review was conducted under the oversight of the Audit Committee of the Board of Directors and with the assistance of outside counsel and forensic accounting consultants. As disclosed previously, the review found evidence of various suspicious payments made to persons in certain Central Asian countries and of activity intended to conceal the nature of those payments. The amounts of these payments were reflected in our books and records but were not recorded appropriately or in a transparent manner, including payments that were redirected to persons other than the customer, distributor or agent in the particular transaction. None of these payments were subject to adequate internal control. We have strengthened our worldwide internal controls relating to customer incentives and sales agent commissions and enhanced our global policy prohibiting improper payments, which contemplates, among other things, that we monitor our international operations. Such monitoring may require that we investigate allegations of possible improprieties relating to transactions and the way in which such transactions are recorded. We have severed our relationship with all of the sales agents and the employees responsible for the suspicious payments. We are currently in discussions with the Securities and Exchange Commission regarding a possible resolution of this matter. We cannot reasonably estimate the nature or amount of monetary or other sanctions, if any, that might be imposed as a result of the review. We have concluded that there is no matter connected with the review that would lead to a material change to the financial statements presented in this Annual Report on Form 10-K.

Guarantees

In addition to the letters of credit of $15 million and $12 million outstanding at December 31, 2011 and 2010, respectively, we have guarantees that have been provided to various financial institutions. At December 31, 2011 and 2010, we had $10 million and $6 million, respectively. The letters of credit and guarantees were primarily related to insurance obligations, environmental obligations, banking credit facilities, vendor deposits and European value added tax (“VAT”) obligations.

We have applied the disclosure provisions of ASC Topic 460, Guarantees (“ASC 460”), to our agreements that contain guarantee or indemnification clauses. We are a party to several agreements pursuant to which we may be obligated to indemnify a third party with respect to certain loan obligations of joint venture companies in which we have an equity interest. These obligations arose to provide initial financing for a joint venture start-up, fund an acquisition and/or provide project capital. Such obligations mature through August 2016. In the event that any of the joint venture companies were to default on these loan obligations, we would indemnify the other party up to its proportionate share of the obligation based upon its ownership interest in the joint venture. At December 31, 2011, the maximum potential future principal and interest payments due under these guarantees were $8 million. At December 31, 2010, the maximum potential future payments due under these guarantees were $15 million in principal and $1 million in interest. In accordance with ASC 460, we have accrued $1 million and $2 million in reserves, which represents the probability weighted fair value of these guarantees at December 31, 2011 and 2010, respectively. The reserve has been included in long-term liabilities on our Consolidated Balance Sheet at December 31, 2011 and 2010 with an offset to the investment included in other assets.

We also have a customer guarantee, in which we have contingently guaranteed certain debt obligations of one of our customers. The amount of this guarantee was $2 million at December 31, 2011 and December 31, 2010. Based on past experience and on the underlying circumstances, we do not expect to have to perform under this guarantee.

At December 31 2011, unconditional purchase obligations primarily for commitments to purchase raw materials and tolling arrangements with outside vendors, amounted to $2 million (2012), $2 million (2013), $1 million (2014), $1 million (2015) and $6 million in the aggregate.

In addition, the Company has a financing agreement with a bank in Brazil for certain customers under which the Company receives funds from the bank at invoice date, and in turn, the customer agrees to pay the bank on the due date. The Company provides a full recourse guarantee to the bank in the event of customer non-payment.

In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify a third party to such arrangement from any losses incurred relating to the services they perform on our behalf or for losses arising from certain events as defined within the particular contract, which may include, for example, litigation, claims or environmental matters relating to our past performance. For any losses that we believe are probable and estimable, we have accrued for such amounts in our Consolidated Balance Sheets.