10-K

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, 2007 Commission file number 001-12515

OR

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	52-1736882
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
127 Public Square, 1500 Key Tower, Cleveland, Ohio	44114-1221
(Address of principal executive offices)	(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 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.  x

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	Smaller reporting Company o
(Do not check if a smaller reporting company)

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 29, 2007 was approximately $1,589.3 million.

As of January 31, 2008 there were 30,067,780 shares of Common Stock, par value $.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s Proxy Statement for the 2008 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	8
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	14
Item 3.	Legal Proceedings	15
Item 4.	Submission of Matters to a Vote of Security Holders	15
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 8.	Financial Statements and Supplementary Data	36
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	80
Item 9A.	Controls and Procedures	80
Item 9B.	Other Information	81
PART III
Item 10.	Directors and Executive Officers of the Registrant and Corporate Governance	82
Item 11.	Executive Compensation	82
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	82
Item 13.	Certain Relationships and Related Transactions, Director Independence	83
Item 14.	Principal Accountant Fees and Services	83
PART IV
Item 15.	Exhibits and Financial Statement Schedules	84
	Signatures	89
EX-3.2
EX-10.4
EX-10.5
EX-10.8
EX-12
EX-21
EX-23
EX-24
EX-31.1
EX-31.2
EX-32

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PART I

Item 1.   Business

General

OM Group, Inc. (the “Company”) is a diversified global developer, producer and marketer of value-added specialty chemicals and advanced materials that are essential to complex chemical and industrial processes. The Company believes it is the world’s largest refiner of cobalt and producer of cobalt-based specialty products, and the largest producer of electroless nickel plating chemistry for memory disk applications.

The Company is executing a deliberate and aggressive strategy to grow its value-added Specialties businesses 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. During 2007, the Company completed three important transactions in connection with its long-term strategy:

•  On March 1, 2007, the Company completed the sale of its Nickel business

•  On October 1, 2007, the Company completed the acquisition of Borchers GmbH (“Borchers”)

•  On December 31, 2007, the Company completed the acquisition of the Electronics businesses (“REM”) of Rockwood Specialties Group, Inc.

The REM and Borchers acquisitions represent an important step in the Company’s effort to transform itself into a diversified, market-facing global provider of specialty chemicals and advanced materials. These events are discussed further in the “2007 Events” section below.

As a result of the acquisition of REM, beginning January 1, 2008, the Company reorganized its management structure and external reporting around two segments: Specialty Chemicals and Advanced Materials (as set forth at the end of the products description below). However, the Company operated only one business segment throughout 2007: Specialties. Since the acquisition of REM was completed on December 31, 2007, the Company’s results of operations for 2007 do not include the results of the REM businesses. Unless indicated otherwise, the discussion contained in Item 1 of this Form 10-K relates solely to the Company’s Specialties business and does not include REM.

The Specialties business produces products using unrefined cobalt and other metals including nickel, copper, zinc, manganese and calcium. The Company’s products are essential components in numerous complex chemical and industrial processes, and are used in many end markets, such as rechargeable batteries, coatings, custom catalysts, liquid detergents, lubricants and fuel additives, plastic stabilizers, polyester promoters, adhesion promoters for rubber tires, colorants, petroleum additives, magnetic media, metal finishing agents, cemented carbides for mining and machine tools, diamond tools used in construction, stainless steel, alloy and plating applications. The Company’s products are sold in various forms such as solutions, crystals, cathodes and powders.

The Company’s Specialties business is critically connected to both the price and availability of raw materials. The primary raw material used by the Company is unrefined cobalt. Cobalt raw materials include ore, concentrate, slag and scrap. The Company attempts to mitigate changes in availability by maintaining adequate inventory levels and long-term supply relationships with a variety of suppliers. 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 reference price and changes in availability from suppliers. Fluctuations in the prices of cobalt have been significant in the past and the Company believes that cobalt price fluctuations are likely to continue in the future. The Company attempts to pass increases in raw material prices through to its customers by increasing the prices of its products. The Company’s profitability is largely dependent on the Company’s ability to maintain the differential between its product prices and product costs. 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

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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 could also result in the Company’s inventory carrying value being written down to a lower market value.

The Company has manufacturing and other facilities in North America, Europe, Africa and Asia-Pacific, and markets its products worldwide. Although most 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 a 55% interest in a smelter joint venture (“GTL”) in the Democratic Republic of Congo (the “DRC”). The GTL smelter is a primary source for cobalt raw material feed. GTL is consolidated in the Company’s financial statements because the Company has a controlling interest in the joint venture.

2007 Events

REM Acquisition:  On December 31, 2007, the Company acquired the Electronic businesses of Rockwood Specialties Group, Inc., which consist of its Printed Circuit Board (“PCB”) business, its Ultra-Pure Chemicals (“UPC”) business, and its Compugraphics 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. REM employs approximately 700 people, has locations in the United States, the United Kingdom, France, Taiwan, Singapore and China and had combined sales of approximately $200 million in 2007.

Borchers Acquisition:  On October 1, 2007, the Company acquired Borchers GmbH, a European-based specialty coatings additive supplier, with locations in France and Germany. Borchers had sales in the first nine months of 2007 of approximately $42 million.

Sale of the Nickel business:  On March 1, 2007, the Company completed the sale of its Nickel business to Norilsk Nickel (“Norilsk”). The Nickel business consisted of the Harjavalta, Finland nickel refinery, the Cawse, Australia nickel mine and intermediate refining facility, a 20% equity interest in MPI Nickel Pty. Ltd. and an 11% ownership interest in Talvivaara Mining Company, Ltd. The Company received cash proceeds of $490.0 million, net of transaction costs, for the Nickel business, including a final purchase price adjustment primarily related to working capital for the net assets sold. In connection with the sale of the Nickel business, the Company entered into five-year supply agreements with Norilsk for cobalt and nickel raw materials, as described under “Raw Materials” below.

Redemption of Senior Subordinated Notes:  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.

Products

Specialties Business

The Company’s Specialties business develops, processes, manufactures and markets specialty chemicals, powders, metals and related products from various base metals feeds, primarily cobalt. The Company offers more than 1,300 Specialties products to customers in more than 40 industries, including aerospace, hard metal tools, appliance, rubber, automotive, ceramics, coatings and ink, catalysts, electronics, petrochemicals, magnetic media, rechargeable battery chemicals and other manufacturers who use specialty chemicals. Key technology-based end-use applications include affordable energy, portable power, clean air, clean water and proprietary products and services for the microelectronics industry. The Company’s Specialties 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

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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 Specialties products are sold in various forms such as solutions, crystals, cathodes and powders.

The Specialties business includes products manufactured using cobalt and other metals such as copper, zinc, manganese and calcium. The Specialties business is made up of three business units that represent product line groupings around end markets: Advanced Organics, Inorganics and Electronic Chemicals. Advanced Organics offers products for the tire, coatings and inks, additives and chemical markets. Inorganics serves the battery, powder metallurgy, ceramics and chemicals markets. Electronic Chemicals develops products for the electronic packaging, memory disk, general metal finishing and printed circuit board finishing markets. The Specialties business also includes certain other operations, primarily the DRC smelter operations, which are not classified into one of these groupings.

The following table sets forth key applications for the Company’s products in the Specialties business:

	Product Line
Applications	Grouping	Metals Used	Product Attributes
Rechargeable Batteries	Inorganics	Cobalt, Nickel	Improves the electrical conduction of rechargeable batteries used in cellular phones, video cameras, portable computers, power tools and hybrid electric vehicles
Coatings and paints	Advanced Organics	Cobalt, Manganese, Calcium, Zirconium, Aluminum	Promotes faster drying and other performance characteristics in such products as house paints (exterior and interior) and industrial and marine coatings
Printing Inks	Advanced Organics	Cobalt, Manganese	Promotes faster drying in various printing inks
Tires	Advanced Organics	Cobalt	Promotes bonding of metal-to-rubber in radial tires
Construction Equipment and Cutting Tools	Inorganics	Cobalt	Strengthens and adds durability to diamond and machine cutting tools and drilling equipment used in construction, oil and gas drilling, and quarrying
Petrochemical Refining	Advanced Organics	Cobalt, Nickel	Catalyzes reduction of sulfur dioxide and nitrogen emissions
Ceramics and Glassware	Inorganics	Cobalt, Nickel	Provides color for pigments, earthenware and glass and facilitates adhesion of porcelain to metal
Polyester Resins	Advanced Organics	Cobalt, Copper, Zinc	Accelerates the curing of polyester resins found in reinforced fiberglass boats, storage tanks, bathrooms, sports equipment, automobile and truck components
Memory Disks	Electronic Chemicals	Nickel	Enhances information storage on disks for computers and consumer electronics

In addition, Borchers, which is included in the Advanced Organics product line grouping, offers products to enhance the performance of coatings and ink systems from the production stage through customer end use. The Borchers business supplies customers with antiskinning agents/antioxidants, catalysts/accelerators, deaeration/antifoaming agents, specialties (moisture scavengers and adhesion promoters), driers, rheological additives, silicone additives, stabilizers and wetting and dispersing agents. These products improve processing options, free-flowing properties, consistency and gloss, control surface drying and drying-out properties, enhance rheology and dispersency, optimize resistance to the most diverse range of stresses and shape the environmental compatibility of contemporary surface hardening.

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REM Businesses

The REM businesses supply customers with chemicals used in the manufacture of printed circuit boards and semiconductors as well as photo-imaging masks primarily for semiconductor and photovoltaic manufacturers. Key products of the REM businesses are described below.

Printed Circuit Boards:  The PCB business, operated as Electrochemicals, Inc., produces specialty and proprietary chemicals used in the manufacture of printed circuit boards widely used in computers, communications, military/aerospace, automotive, industrial and consumer electronics applications. The PCB business develops and manufactures chemicals for the printed circuit board industry, such as oxide treatments, electroplating additives, etching technology, electroless copper processes, Co-Bra Bond^®, the newer oxide replacement technology and a proprietary direct metallization process known as Shadow^®.

Ultra-Pure Chemicals:  The UPC business 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. 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. The UPC business also develops and manufactures a broad range of chemicals used in the manufacture of photomasks and provides a range of analytical, logistical and development support services to the semiconductor industry. These include total chemicals management, primarily offered in Singapore, under which the Company manages the clients’ entire electronic process chemicals operations including providing logistics services, development of application-specific chemicals, analysis and control of customers’ chemical distribution systems and quality audit and control of all inbound chemicals, including third party products.

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 enabling technology to the semiconductor and integrated circuit industries, and perform a function similar to that of a negative in conventional photography.

Financial information, including reportable segment and geographic data, is contained in Note 18 to the consolidated financial statements contained in Item 8 of this Annual Report.

2008 Business Segments:  As a result of the acquisition of REM, beginning January 1, 2008, the Company reorganized its management structure and external reporting around two reportable segments: Specialty Chemicals and Advanced Materials.

The Specialty Chemicals segment will consist of the Electronic Chemicals, Ultra Pure Chemicals, Photomasks and Advanced Organic product line groupings. The Electronic Chemicals product line grouping will include the PCB business.

The Advanced Materials segment will consist of the Inorganics product line grouping and the DRC smelter operations.

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. For 2007, the Company believes that it was the largest refiner of cobalt and producer of cobalt-based specialty products and the largest producer of electroless nickel plating chemistry for memory disk applications in the world. 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.

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Customers

The Company’s Specialties business serves approximately 1,800 customers, excluding REM customers. During 2007, approximately 48% of the Company’s net sales were in Asia, 31% in Europe and 21% in the Americas. Sales to Nichia Chemical Corporation represented approximately 23%, 19% and 19% of net sales in 2007, 2006 and 2005, respectively. Sales to Luvata Pori Oy were approximately 11% of net sales in 2006. Sales to the Company’s top five customers represented approximately 40% of net sales in 2007. 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 Specialties 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, revenues during July and August have been lower than other months due to the summer holiday season in Europe. Furthermore, the Company uses the summer season to perform its annual maintenance shut-down at its refinery in Finland.

Raw Materials

The primary raw material used by the Specialties business in manufacturing its products is unrefined cobalt. Cobalt raw materials include ore, concentrates, slag and scrap. The cost of the Company’s raw materials fluctuates due to actual or perceived changes in supply and demand of raw materials, changes in the cobalt reference price and changes in availability from suppliers. 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.

A significant portion of the Company’s supply of cobalt historically has been sourced from the DRC, Australia and Finland. Upon closing the transaction to sell the Company’s Nickel business to Norilsk in the first quarter of 2007, the Company entered into five-year supply agreements with Norilsk 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. In addition, the Company entered into two-year agency and distribution agreements for nickel salts. The Norilsk agreements strengthen the Company’s supply chain and secure a consistent source of raw materials for its Specialties business. These agreements provide the Company with a stable supply of cobalt metal through the long-term supply agreements. 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 Specialties business will continue to sell Nickel-based specialty products to end markets in the electronic chemicals industry.

Production problems and political and civil instability in supplier countries, as well as increased demand in developing countries, have affected and may continue to affect the supply and market price of raw materials. During 2007, the reference price of low grade (formerly 99.3%) cobalt listed in the trade publication, Metal Bulletin, continued the increase which began in 2006, increasing from an average of $25.82 per pound in the first quarter of 2007 to an average of $32.68 per pound in the fourth quarter of 2007.

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A graph of the end of the month reference price of low grade (formerly 99.3%) cobalt (as published in Metal Bulletin magazine) per pound for 2002 through 2007 is as follows:

GTL shut down its smelter as scheduled during January of 2005 for approximately four months for maintenance and production improvements. The smelter was re-opened in May of 2005. The Company expects the next maintenance shut-down will occur in late 2008 or early 2009.

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 for the Company’s Specialties business were approximately $8.2 million in 2007, $8.1 million for 2006 and $8.3 million for 2005.

The Company’s research staff conducts research and development in laboratories located in Westlake, Ohio; South Plainfield, New Jersey; Kuching, Malaysia; Manchester, England; Singapore; Lagenfeld, Germany and Kokkola, Finland. REM has research facilities in Riddings, England; Glenrothes, England; Chung Li, Taiwan; Los Gatos, California and Saint Fromond, France.

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 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 will supply QSI with raw materials and 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. The Company 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,

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operated or used by the Company. At December 31, 2007 and 2006, the Company had environmental reserves of $4.9 million and $8.0 million, respectively.

Ongoing environmental compliance costs, which are expensed as incurred, were approximately $8.0 million in 2007 and $7.1 million in 2006 and included costs relating to waste water analysis, treatment, and disposal; hazardous and non-hazardous solid waste analysis and disposal; air emissions control; groundwater monitoring 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.

The Company’s Specialties business also incurred capital expenditures of approximately $1.9 million and $0.8 million in 2007 and 2006, respectively, in connection with ongoing environmental compliance. The Company anticipates that capital expenditure levels for these purposes will increase to approximately $6.0 million in 2008, as it continues to modify certain processes that may have an environmental impact and undertakes new pollution prevention and waste reduction projects, including relating to the REM businesses.

The European Union’s Registration, Evaluation and Authorization of Chemicals (“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.

Employees

At December 31, 2007, the Company had 2,096 full-time employees, of which 372 were located in North America, 808 in Europe, 392 in Africa and 524 in Asia-Pacific, including 719 REM employees. Employees at the Company’s production facilities in Franklin, Pennsylvania and Kuching, Malaysia are non-unionized. Employees at the Company’s facility in Kokkola, Finland are members of several national workers’ unions under various union agreements. Generally, these union agreements have two-year terms. Employees at the Company’s facility in Manchester, England are members of various trade unions under a recognition agreement. This recognition agreement has an indefinite term. Employees at the Belleville, Canada facility are members of the Communications, Energy and Paperworkers Union of Canada. The current Belleville union agreement was entered into in February 2008 and has a term extending until December 31, 2008. Employees in the DRC are members of various trade unions. The union agreements have a term of three years expiring in April 2008. The Company expects to enter into new agreements covering those employees upon expiration of the current agreements. Some REM and Borchers international employees are represented by either a labor union or a statutory work 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 report.

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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 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 interfering with the operation of these facilities would have a material adverse effect on our business, financial position and results of operations. Our insurance coverage may not be adequate to fully cover the potential risks described above. 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, Australia, Finland and Russia, may affect the supply and market price 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.

OUR SUBSTANTIAL INTERNATIONAL OPERATIONS SUBJECT US TO RISKS, WHICH MAY INCLUDE UNFAVORABLE SOCIAL, LEGAL, POLITICAL, REGULATORY AND ECONOMIC CONDITIONS IN OTHER COUNTRIES.

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 and contracts and agreements may be subject to government renegotiation;

•  receivables may be difficult to collect through a foreign country’s legal system;

•  foreign customers 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;

•  general economic conditions in the countries in which we operate could have an adverse effect on our earnings from operations in those countries;

•  unexpected adverse changes in foreign laws or regulatory requirements may occur, including with respect to export duties and quotas; and

•  compliance with a variety of foreign laws and regulations may be difficult.

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

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

Unrefined cobalt is the principal raw material we use in manufacturing base metal chemistry products, and the cost of cobalt fluctuates due to actual or perceived changes in supply and demand, changes in the reference price and changes in availability from suppliers. Fluctuations in the prices of cobalt have been significant in the past and we believe price fluctuations are likely to occur in the future. Our ability to pass increases in raw material prices through to our customers by increasing the prices of our products is an important factor in our business. The extent of our profitability depends, in part, on our ability to maintain the differential between our product prices and raw material prices, and 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 price of our finished products, inventory carrying values could exceed the amount we could realize on sale, resulting in a charge against inventory that could adversely affect our operating results.

WE MAY EXPERIENCE DIFFICULTIES INTEGRATING REM AND BORCHERS.

The integration of the operations of REM and Borchers involves consolidating products, operations and administrative functions. Achieving the anticipated benefits of the acquisitions will depend in part upon our ability to integrate the businesses in an efficient and effective manner. The integration of the businesses faces significant challenges, and we may be unable to accomplish the integration successfully.

In particular, the need to coordinate geographically dispersed organizations, the addition of lines of business in which we have not historically engaged and possible differences in corporate cultures and management philosophies may increase the difficulties of the integration. Additionally, we may incur substantial expense in our efforts to integrate general and administrative services and the key information processing systems of REM and Borchers into our pre-existing services and systems, and these efforts may not prove successful. The integration may take longer than planned and may be subject to unanticipated difficulties and expenses. The integration of these acquisitions 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 integration process may also disrupt our businesses. We may lose key personnel from the acquired organizations and employees in the acquired organizations may be resistant to change and may not adapt well to our corporate structure. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of our businesses.

Any inability of management to successfully integrate the operations of REM and Borchers with our other businesses could result in our not achieving the projected profitability and efficiencies of these transactions and could adversely affect our results of operations and financial condition.

In addition, there may be liabilities of the acquired companies 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 ARE UNDERGOING A STRATEGIC TRANSFORMATION.

As a result of changes to our strategic direction, we are currently in a transformational period in which we have made and may continue to make changes that could be material to our business, financial condition and results of operations. These changes have included the sale of our Nickel business and the REM and Borchers acquisitions. It is impossible to predict what additional changes will occur and the impact they will have on our future results of operations.

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WE INTEND TO CONTINUE TO SEEK ADDITIONAL ACQUISITIONS, WHICH COULD DIVERT MANAGEMENT’S ATTENTION, RESULT IN DIFFICULTIES INTEGRATING THE ACQUIRED OPERATIONS AND EXPOSE US TO UNANTICIPATED COSTS AND LIABILITIES.

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. It is also possible that expected synergies from future acquisitions may not materialize. We may also 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.

THE RAPID INCREASE IN COBALT PRICES MAY CAUSE OUR CUSTOMERS TO LOOK FOR ALTERNATIVES TO COBALT IN THEIR PRODUCTS.

The average reference price for cobalt increased from an average of $12.43 per pound in the first quarter of 2006 to an average of $32.68 in the fourth quarter of 2007. If prices for cobalt are sustained at this level or continue to increase, new markets and application opportunities for cobalt may diminish as the use of cobalt becomes too costly for some manufacturers. In addition, manufacturers that currently use cobalt for their products may look for less expensive alternatives for cobalt in existing products and applications. If these events were to occur, our sales and operating results could decrease substantially, resulting in decreased profitability.

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 most 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 (particularly the Euro) 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 $8.0 million in 2007. In addition, we made capital expenditures of approximately $1.9 million in 2007 in connection with environmental compliance.

As of December 31, 2007, we had reserves of $4.9 million for environmental liabilities. However, given the many uncertainties involved in assessing liability for environmental claims, our current reserves may prove to be insufficient. We continually evaluate the adequacy of our reserves and adjust reserves when determined to be appropriate. 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.

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CHANGES IN ENVIRONMENTAL, HEALTH AND SAFETY REGULATORY REQUIREMENTS COULD AFFECT SALES OF THE COMPANY’S PRODUCTS.

New or revised governmental regulations relating to health, safety and the environment may affect demand for our products. The European Union’s REACH legislation, for example, could affect our ability to sell certain products. REACH establishes 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. 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. The regulations likely will require us to incur significant additional compliance costs.

IMPLEMENTATION OF AN ENTERPRISE RESOURCE PLANNING (“ERP”) PROJECT HAS THE POTENTIAL FOR BUSINESS INTERRUPTION AND ASSOCIATED ADVERSE IMPACT ON OPERATING RESULTS.

We have initiated a multi-year ERP project that is expected to be implemented worldwide to achieve increased efficiency and effectiveness in supply chain, financial processes and management reporting. During 2007, we began the implementation at several locations. We will continue to implement the ERP system in a phased approach through 2009. The implementation of the ERP system has the potential to disrupt our business by delaying the processing of key business transactions. In addition, the implementation of the ERP system may take longer than anticipated or be more costly than originally estimated.

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 an 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 2007, the top five customers accounted for 40% of net sales. Sales to Nichia Chemical Corporation represented approximately 23% of net sales in 2007. 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, would adversely affect our operating results. 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.

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. In addition, we may encounter increased competition in the future, which could have a material

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adverse effect on our business. Since we conduct our business mainly on a purchase order basis, with few long-term commitments from our customers, this competitive environment could give rise to a sudden loss of business.

INDUSTRY CONSOLIDATION 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 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, operating results, and financial condition.

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 RESULTS.

Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates, higher than anticipated in countries where we have higher statutory rates, or if we incur losses for which no corresponding tax benefit can be realized, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles or interpretations thereof. In addition, we are subject to examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these examinations will not have an adverse effect on our operating results and financial condition.

INADEQUATELY PROTECTING OUR INTELLECTUAL PROPERTY RIGHTS MAY ALLOW OTHER COMPANIES TO COMPETE DIRECTLY AGAINST US, OR WE MIGHT BE FORCED TO DISCONTINUE SELLING CERTAIN PRODUCTS.

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 affected the market price of equity securities of many companies. This volatility has often been unrelated to the operating performance of those companies. These broad market fluctuations may adversely affect the market price of our common stock.

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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 2007 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 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	Segment	Approximate
Location	Function*	(at December 31, 2007)	Square Feet		Leased/Owned
Africa:
Lubumbashi, DRC	M	Specialties		116,000	joint venture (55% owned)
North America:
Cleveland, Ohio	A	Corporate		24,500	Leased
Westlake, Ohio	A, R	Specialties		35,200	Owned
Belleville, Ontario	M	Specialties		38,000	Owned
Franklin, Pennsylvania	M	Specialties		331,500	Owned
Newark, New Jersey	Held for sale	Specialties		32,000	Owned
South Plainfield, New
Jersey	A, R	Specialties		18,400	Leased
Los Gatos, California	M, A	(a)		24,912	Leased
Fremont, California	M, A	(a)		16,000	Leased
Maple Plain, Minnesota	M, A, R	(a)		65,000	Owned
Asia-Pacific:
Kuching, Malaysia	M, R	Specialties		55,000	Leased
Tokyo, Japan	A	Specialties		2,300	Leased
Taipei, Taiwan	A	Specialties		2,350	Leased
Chung-Li, Taiwan	M, A, R	(a)		37,000	Leased
Suzhou, China	M	Specialties		85,530	Owned
Suzhou, China	M, A	(a)		30,000	Leased
Shenzen, China	A, W	(a)		25,000	Leased
Singapore	M, A, R	Specialties		5,375	Leased
Singapore	A, W	(a)		70,000	Leased
Europe:
Manchester, England	M, A, R	Specialties		73,300	Owned
Kokkola, Finland	M, A, R	Specialties		470,000	Owned
Glenrothes, England	M,, A	(a)		80,000	Owned
Riddings, England	M, A, R	(a)		30,000	Leased
Saint Cheron, France	W	(a)		42,030	Owned
Saint Fromond, France	M, A, R	(a)		99,207	Owned
Rousset Cedex, France	A, W	(a)		14,400	Leased
Castres, France	M, A	Specialties		43,000	Owned
Lagenfeld, Germany	A, R	Specialties		47,430	Leased

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

• (a) Location acquired with the REM acquisition. As a result of the acquisition, beginning January 1, 2008, the Company reorganized its management structure and external reporting around two segments: Specialty Chemicals and Advanced Materials (as set forth in the products description section below).

Item 3.   Legal Proceedings

The Company is a party to various legal and administrative proceedings incidental to its business. In the opinion of the Company, 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 2007 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 — 54

•  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 — 57

•  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 — 52

•  Vice President, General Counsel and Secretary, September 2005

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

•  General Counsel, Marconi plc, 2002-2003.

•  Executive Vice President and General Counsel, Marconi Communications, Inc., the operating company for Marconi, plc in the Americas, April 2001 to March 2002, and Vice President and General Counsel, November 2000 to April 2001.

Stephen D. Dunmead — 44

•  Vice President and General Manager, Specialties Group, January 2006

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

•  Corporate Vice President of Technology, 2000 — August 2003

Gregory J. Griffith — 52

•  Vice President, Strategic Planning and Business Development, February 2007

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

•  Director of Investor Relations, July 2002 — October 2005

•  Director, Corporate Communications, Great Lakes Chemical Corporation 1999-2002

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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, 2007, the approximate number of record holders of the Company’s common stock was 1,417.

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:

	2007						2006
	Sales Price				Cash		Sales Price				Cash
	High		Low		Dividend		High		Low		Dividend
First quarter	$	53.83	$	39.36	$	—	$	23.85	$	17.12	$	—
Second quarter	$	63.73	$	43.35	$	—	$	34.32	$	23.14	$	—
Third quarter	$	56.03	$	36.22	$	—	$	44.70	$	30.13	$	—
Fourth quarter	$	61.42	$	43.90	$	—	$	59.75	$	43.28	$	—

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Item 6.   Selected Financial Data

	Year Ended December 31,
	2007		2006			2005			2004			2003
(In millions, except per share data)
Income Statement Data:
Net sales	$	1,021.5	$	660.1		$	617.5		$	689.5		$	417.4
Cost of products sold		708.3		475.4			516.5			468.9			304.4
Gross profit		313.2		184.7			101.0			220.6			113.0
Selling, general and administrative expenses		117.0		109.4			75.9			116.2			185.6
Income (loss) from operations	$	196.2	$	75.3		$	25.1		$	104.4		$	(72.6	)
Income (loss) from continuing operations before cumulative effect of change in accounting principle	$	111.5	$	23.6		$	(12.4	)	$	40.1		$	(102.6	)
Income of discontinued operations, net of tax		63.1		192.2			49.0			88.5			186.3
Gain on sale of discontinued operations, net of tax		72.3		—			—			—			—
Cumulative effect of a change in accounting principle		—		0.3			2.3			—			—
Net income	$	246.9	$	216.1		$	38.9		$	128.6		$	83.7
Net income (loss) per common share — basic:
Continuing operations	$	3.73	$	0.80		$	(0.43	)	$	1.41		$	(3.62	)
Discontinued operations		4.52		6.55			1.71			3.11			6.57
Cumulative effect of change in accounting principle		—		0.01			0.08			—			—
Net income	$	8.25	$	7.36		$	1.36		$	4.52		$	2.95
Net income (loss) per common share — assuming dilution:
Continuing operations	$	3.68	$	0.80		$	(0.43	)	$	1.40		$	(3.62	)
Discontinued operations		4.47		6.50			1.71			3.09			6.57
Cumulative effect of a change in accounting principle		—		0.01			0.08			—			—
Net income	$	8.15	$	7.31		$	1.36		$	4.49		$	2.95
Dividends declared and paid per common share	$	—	$	—		$	—		$	—		$	—
Ratio of earnings to fixed charges(a)		n/a		2.5	x		—			2.5	x		—
Balance Sheet Data:
Total assets	$	1,469.2	$	1,618.2		$	1,220.3		$	1,334.7		$	1,211.4
Long-term debt, excluding current portion(b)	$	1.1	$	1.2		$	416.1		$	24.7		$	430.5

(a)

The ratio of earnings to fixed charges is not applicable for 2007 as a result of the redemption of the Notes on March 7, 2007. The ratio of earnings to fixed charges has been recalculated for all periods presented to reflect the Nickel business as discontinued operations. Earnings were inadequate to cover fixed charges by $16.6 million and $96.1 million in 2005 and 2003, respectively.

(b)

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 and, accordingly, the Notes were classified as a current liability at December 31, 2006. The Notes were redeemed on March 7, 2007. Amount in 2004 excludes the $400.0 million of Notes, which were then in default and classified as a current liability.

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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 charge ($14.1 million after tax) 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 common shares of Weda Bay Minerals, Inc. The net book value of the investment was zero due to a permanent impairment charge recorded in prior years. 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.

Results for 2004 include a charge of $7.5 million for the shareholder derivative lawsuits.

Results for 2003 include the sale of the Company’s Precious Metals Group (PMG) for cash proceeds of approximately $814 million, which resulted in a gain on sale of $145.9 million ($131.7 million after tax). Results for PMG are included in discontinued operations. In 2003, cost of products sold includes restructuring charges of $5.8 million. Selling, general and administrative expenses include restructuring charges of $14.2 million and a charge of $84.5 million related to the shareholder class action and derivative lawsuits. In addition, discontinued operations include $5.6 million of restructuring charges.

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.

Overview

The Company is a diversified global developer, producer and marketer of value-added specialty chemicals and advanced materials that are essential to complex chemical and industrial processes. The Company believes it is the world’s largest refiner of cobalt and producer of cobalt-based specialty products and the largest producer of electroless nickel plating chemistry for memory disk applications.

The Company is executing a deliberate and aggressive growth strategy to grow its value-added Specialties businesses 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. During 2007, the Company completed three important transactions in connection with this long-term strategy:

•  On March 1, 2007, the Company completed the sale of its Nickel business

•  On October 1, 2007, the Company completed the acquisition of Borchers

•  On December 31, 2007, the Company completed the acquisition of the REM businesses of Rockwood Specialties Group, Inc.

The REM and Borchers acquisitions represent an important step in the Company’s effort to transform itself into a diversified, market-facing global provider of specialty chemicals and advanced materials. These events are discussed further under “2007 Events” below.

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As a result of the acquisition of REM, beginning January 1, 2008, the Company reorganized its management structure and external reporting around two reportable segments: Specialty Chemicals and Advanced Materials. However, the Company operated only one business segment throughout 2007: Specialties. Since the REM acquisition was completed on December 31, 2007, the Company’s results of operations for 2007 do not include the results of the REM businesses. The assets and liabilities of REM are included in the Company’s consolidated balance sheet at December 31, 2007. Unless indicated otherwise, this Management’s Discussion and Analysis of Financial Condition and Results of Operations relates solely to the Company’s Specialties business and does not include REM.

The Specialties business produces products using unrefined cobalt and other metals including nickel, copper, zinc, manganese and calcium. The Company’s products are essential components in numerous complex chemical and industrial processes, and are used in many end markets, such as rechargeable batteries, coatings, custom catalysts, liquid detergents, lubricants and fuel additives, plastic stabilizers, polyester promoters, adhesion promoters for rubber tires, colorants, petroleum additives, magnetic media, metal finishing agents, cemented carbides for mining and machine tools, diamond tools used in construction, stainless steel, alloy and plating applications. The Company’s products are sold in various forms such as solutions, crystals, cathodes and powders.

The Company’s Specialties business is critically connected to both the price and availability of raw materials. The primary raw material used by the Company is unrefined cobalt. Cobalt raw materials include ore, concentrate, slag and scrap. The Company attempts to mitigate changes in availability by maintaining adequate inventory levels and long-term supply relationships with a variety of suppliers. 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 reference price and changes in availability from suppliers. Fluctuations in the prices of cobalt have been significant in the past and the Company believes that cobalt price fluctuations are likely to continue in the future. The Company attempts to pass through to its customer’s increases in raw material prices by increasing the prices of its products. The Company’s profitability is largely dependent on the Company’s ability to maintain the differential between its product prices and product costs. 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. Reductions in the price of raw materials or declines in the selling prices of the Company’s finished goods could also result in the Company’s inventory carrying value being written down to a lower market value.

The Company has manufacturing and other facilities in North America, Europe, Africa and Asia-Pacific, and markets its products worldwide. Although most 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.

2007 Events

REM Acquisition:  On December 31, 2007, the Company acquired the Electronics businesses of Rockwood Specialties Group, Inc., which consist of its PCB business, its UPC business, and its Compugraphics 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. REM employs approximately 700 people, has locations in the United States, the United Kingdom, France, Taiwan, Singapore and China and had combined sales of approximately $200 million in 2007. The purchase price was approximately $315.6 million in cash, subject to customary post-closing adjustments. The Company has incurred fees as of December 31, 2007 of approximately $4.9 million associated with this transaction.

Borchers Acquisition:  On October 1, 2007, the Company acquired Borchers GmbH, a European-based specialty coatings additive supplier, with locations in France and Germany, for approximately $20.7 million, net of cash

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acquired. The Company has incurred fees as of December 31, 2007 of approximately $1.2 million associated with this transaction. Borchers had sales in the first nine months of 2007 of approximately $42 million.

Sale of the Nickel business:  On March 1, 2007, the Company completed the sale of its Nickel business to Norilsk. The Nickel business consisted of the Harjavalta, Finland nickel refinery, the Cawse, Australia nickel mine and intermediate refining facility, a 20% equity interest in MPI Nickel Pty. Ltd. and an 11% ownership interest in Talvivaara Mining Company, Ltd. The Company received cash proceeds of $490.0 million for the Nickel business, net of transaction costs, including a final purchase price adjustment primarily related to working capital for the net assets sold. In connection with the sale of the Nickel business, the Company entered into five-year supply agreements with Norilsk for cobalt and nickel raw materials. The Nickel business has been reclassified to discontinued operations for all periods presented.

Redemption of Senior Subordinated Notes:  On March 7, 2007, the Company redeemed the entire $400.0 million of its outstanding 9.25% Senior Subordinated Notes due 2011 at a redemption price of 104.625% of the principal amount, or $418.5 million, plus accrued interest of $8.4 million.

Overall operating results for 2007, 2006 and 2005

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

(Millions of dollars & percent of net sales)	2007				2006				2005
Net sales	$	1,021.5			$	660.1			$	617.5
Cost of products sold		708.3				475.4				516.5
Gross profit		313.2		30.7%		184.7		28.0%		101.0		16.4%
Selling, general and administrative expenses		117.0		11.5%		109.4		16.6%		75.9		12.3%
Operating profit		196.2		19.2%		75.3		11.4%		25.1		4.1%
Other income (expense), net		2.0				(14.8	)			(42.9	)
Income tax expense		(76.3	)			(30.6	)			(1.7	)
Minority partners’ share of (income) loss		(10.4	)			(6.3	)			7.1
Income (loss) from continuing operations before cumulative effect of change in accounting principle		111.5				23.6				(12.4	)
Discontinued operations:
Income from discontinued operations, net of tax		63.1				192.2				49.0
Gain on sale of discontinued operations, net of tax		72.3				—				—
Total income from discontinued operations, net of tax		135.4				192.2				49.0
Income before cumulative effect of change in accounting principle		246.9				215.8				36.6
Cumulative effect of change in accounting principle		—				0.3				2.3
Net income	$	246.9			$	216.1			$	38.9
Net income (loss) per common share — basic:
Continuing operations	$	3.73			$	0.80			$	(0.43	)
Discontinued operations		4.52				6.55				1.71

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(Millions of dollars & percent of net sales)	2007		2006		2005
Cumulative effect of change in accounting principle		—		0.01		0.08
Net income	$	8.25	$	7.36	$	1.36
Net income (loss) per common share — assuming dilution:
Continuing operations	$	3.68	$	0.80	$	(0.43	)
Discontinued operations		4.47		6.50		1.71
Cumulative effect of change in accounting principle		—		0.01		0.08
Net income	$	8.15	$	7.31	$	1.36
Weighted average shares outstanding:
Basic		29,937		29,362		28,679
Assuming dilution		30,276		29,578		28,679

The Specialties segment is made up of three business units that represent product line groupings around end markets: Advanced Organics, Inorganics and Electronic Chemicals. Advanced Organics offers products for the tire, coatings and inks, additives and chemical markets. Inorganics serves the battery, powder metallurgy, ceramics and chemicals markets. Electronic Chemicals develops products for the electronic packaging, memory disk, general metal finishing and printed circuit board finishing markets. The Specialties business also includes certain other operations, primarily the DRC smelter operations, which are not classified into one of these groupings. Additional product information is contained in Item 1 of this Form 10-K.

2007 operating results compared to 2006

The following table reflects the sales for the product line groupings in the Specialties segment for the year ended December 31,

(thousands of dollars)	2007		%		2006		%
Net Sales
Inorganics	$	717,605		70%	$	422,496		64%
Advanced organics		194,620		19%		151,114		23%
Electronic chemicals		109,276		11%		86,494		13%
	$	1,021,501			$	660,104

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

	2007		2006
Volumes
Inorganics sales volume — metric tons*		25,432		27,435
Advanced organics sales volume — metric tons		30,272		27,524
Electronic chemicals sales volume — gallons (thousands)		7,278		6,635
Cobalt refining volume — metric tons		9,158		8,582

* Inorganics sales volume includes cobalt metal resale and copper by-product sales and excludes volume related to specialty nickel salts sales under the Norilsk distribution agreement, as explained below.

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

	2007			2006
Americas		21	%		22	%
Asia		48	%		44	%
Europe		31	%		34	%

The following table summarizes the percentage of sales dollars by end market:

	2007			2006
Batteries		31	%		25	%
Chemical		15	%		16	%
Electronic Chemical		11	%		13	%
Tire		7	%		8	%
Powder Metallurgy		9	%		9	%
Coatings		6	%		7	%
Other		21	%		22	%

The following table summarizes the average quarterly reference price of low grade (formerly referred to as 99.3%) cobalt:

	2007		2006		Change
First Quarter	$	25.82	$	12.43	$	13.39
Second Quarter	$	28.01	$	14.43	$	13.58
Third Quarter	$	25.84	$	15.59	$	10.25
Fourth Quarter	$	32.68	$	18.66	$	14.02
Full Year	$	27.99	$	15.22	$	12.77

Net sales increased $361.4 million to $1,021.5 million in 2007 from $660.1 million in 2006, primarily due to increased product selling prices ($291.0 million). The increase in product selling prices was primarily caused by the increase in the average cobalt reference price during 2007 compared with 2006. The resale of cobalt metal resulted in a $72.8 million increase to net sales in 2007 compared with 2006, and increased volume, primarily in the inorganics and electronic chemical product line groupings, contributed an additional $27.0 million. The acquisition of Borchers in October 2007 contributed an additional $12.7 million. These increases were partially offset by a $9.5 million decrease related to copper by-product sales and a $9.1 million unfavorable shift in product mix. The decrease in copper by-product sales was primarily due to a decrease in copper by-product volume partially offset by an increase in copper price. 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 the contracts, 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, through its Specialties business, was the primary obligor for these sales and recorded the revenue on a gross basis. This change resulted in a $23.5 million decrease in net sales in 2007 compared with 2006.

Gross profit increased to $313.2 million in 2007, compared with $184.7 million in 2006, and as a percentage of net sales increased to 30.7% from 28.0%. Gross profit in 2007 was higher due to the impact of both the higher cobalt reference price and the sale into a higher price environment of finished products that were manufactured using cobalt raw material that was purchased at lower prices ($121.7 million), increased volume ($11.7 million) and a $6.7 million unrealized gain on cobalt forward purchase contracts (see discussion of these contracts below). These increases were partially offset by a decrease in profit associated with lower copper by-product sales ($16.1 million).

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The increase in gross profit as a percentage of sales (30.7% in 2007, 28.0% in 2006) was primarily due to the positive factors discussed above, partially offset by the low margins on the resale of cobalt metal.

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 anticipated sale during the second quarter of 2008 of cobalt-containing finished products that are priced based on a formula that includes a fixed cobalt price component. These forward purchase contracts have not been designated as hedging instruments under SFAS No. 133, “Accounting for Derivative and Hedging Activities.” Accordingly, these contracts are adjusted to fair value at the end of each reporting period, with the gain or loss recorded in cost of products sold. The adjustment to fair value had no cash impact in 2007 as the contracts will be net settled with the counterparty in 2008. As noted above, the Company recorded a $6.7 million gain in 2007 related to these contracts. These contracts will continue to be marked to fair value until settlement, resulting in additional gains or losses based on changes in the cobalt reference price.

Selling, general and administrative (“SG&A”) expenses were $117.0 million in 2007 compared with $109.4 million in 2006. The increase was primarily due to increased selling expenses as a result of the increase in sales. SG&A expense in 2007 also includes $3.5 million in legal fees incurred by Specialties for a lawsuit the Company filed related to the unauthorized use by a third-party of proprietary information; and $3.1 million of SG&A expense related to Plaschem Specialty Products Pte Ltd. (“Plaschem”), which was acquired on March 21, 2006, and Borchers, which was acquired on October 1, 2007. Included in SG&A are corporate expenses in 2007 of $35.8 million compared with $40.1 million in 2006. Corporate expenses consist of unallocated corporate overhead, including legal, finance, human resources, information technology, strategic development and corporate governance activities, as well as share-based compensation. The decrease in corporate expenses was primarily due to a $3.2 million charge for the settlement of litigation related to the former chief executive officer’s termination in 2006 and a $2.9 million decrease in corporate legal and other professional fees, partially offset by a $3.0 million increase in employee incentive and share-based compensation expense.

Operating profit for 2007 increased to $196.2 million from $75.3 million in 2006 due to the factors impacting gross profit and SG&A expenses discussed above.

Other income (expense), net for 2007 was to $2.0 million of income compared with $14.8 million of expense in 2006. The following table summarizes the components of Other income (expense), net:

	Year Ended December 31,
(In thousands)	2007			2006			Change
Interest expense	$	(7,820	)	$	(38,659	)	$	30,839
Loss on redemption of Notes		(21,733	)		—			(21,733	)
Interest income		19,396			8,566			10,830
Interest income on Notes receivable from joint venture partner		4,526			—			4,526
Foreign exchange gain		8,100			3,661			4,439
Gain on sale of investment		—			12,223			(12,223	)
Other income (expense), net		(449	)		(582	)		133
	$	2,020		$	(14,791	)	$	16,811

The Company redeemed all $400.0 million of its outstanding Notes on March 7, 2007, 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, which includes 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. The loss on redemption of the Notes was offset by a $30.8 million decrease in interest expense due to the redemption of the Notes. Increased interest income in 2007 was primarily due to increased interest earned on the higher average cash balance throughout 2007 and $1.2 million of interest earned on the working capital adjustment related to the Norilsk transaction. In addition, 2007 also includes $4.5 million of interest income related to the notes receivable from the 25% minority shareholder in its joint venture in the DRC (See Note 1 to the Consolidated Financial Statements in

23

this Form 10-K). The $12.2 million gain included in 2006 was related to the sale of the Company’s investment in Weda Bay (See Note 5 to the Consolidated Financial Statements in this Form 10-K).

Income tax expense in 2007 was $76.3 million on pre-tax income of $198.3 million, or 38.5%, compared with income tax expense in 2006 of $30.6 million on pre-tax income of $60.5 million, or 50.5%. 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. This rate is lower than the U.S. statutory rate (35%) due primarily to income earned in foreign tax jurisdictions with lower statutory tax rates than the U.S., a tax holiday in Malaysia and the recognition of tax benefits for domestic losses in 2007. During the fourth quarter of 2007, the Company was informed by the DRC taxing authority that its tax holiday had expired, resulting in $9.8 million of expense related to income earned in the DRC. In both years, the strengthening Euro compared with the US dollar positively impacted the effective tax rate, as the Company’s statutory tax liability in Finland is calculated and payable in Euros but is remeasured to the US dollar functional currency for preparation of the consolidated financial statements. The 2006 effective tax rate is discussed below under “2006 operating results compared to 2005”.

Minority partners’ share of income relates to the Company’s 55%-owned smelter joint venture in the DRC. The increase in the minority partner’s income in 2007 compared with 2006 is primarily due to higher cobalt prices.

Income from continuing operations was $111.5 million in 2007 compared with $23.6 million in 2006 due primarily to the aforementioned factors.

Income from discontinued operations for 2007 and 2006 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. Also included in income from discontinued operations in 2006 was $5.8 million of income from the discontinued operations of the Company’s former Precious Metals Group (“PMG”) primarily due to the reversal of a $4.6 million tax contingency accrual and a $2.4 million gain on the sale of a former PMG building that had been fully depreciated, both partially offset by foreign exchange losses of $1.8 million from remeasuring Euro-denominated liabilities to U.S. dollars.

Net income in 2006 includes $0.3 million of income related to the cumulative effect of a change in accounting principle for the adoption of SFAS No. 123R, “Share-Based Payments.” See further discussion of the adoption of SFAS No. 123R in Note 2 to the Consolidated Financial Statements in this Form 10-K.

Net income was $246.9 million, or $8.15 per diluted share, in 2007 compared with $216.1 million, or $7.31 per diluted share, in 2006, due primarily to the aforementioned factors.

2006 operating results compared to 2005

The following table reflects the sales for the product line groupings in the Specialties segment for the year ended December 31,

(thousands of dollars)	2006		%			2005		%
Net Sales
Inorganics	$	422,496		64	%	$	400,921		65	%
Advanced organics		151,114		23	%		157,195		25	%
Electronic chemicals		86,494		13	%		59,411		10	%
	$	660,104				$	617,527

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

	2006		2005
Americas		22%		28%
Asia		44%		41%
Europe		34%		31%

The following table summarizes the percentage of sales dollars by end market:

	2006		2005
Batteries		25%		26%
Chemical		16%		15%
Electronic Chemical		13%		10%
Tire		8%		9%
Powder Metallurgy		9%		12%
Coatings		7%		8%
Other		22%		20%

The following table summarizes the average quarterly reference price of low grade (formerly 99.3%) cobalt:

	2006		2005		Change
First Quarter	$	12.43	$	17.26	$	(4.83	)
Second Quarter	$	14.43	$	15.03	$	(0.60	)
Third Quarter	$	15.59	$	13.41	$	2.18
Fourth Quarter	$	18.66	$	12.51	$	6.15
Full Year	$	15.22	$	14.55	$	0.67

Net sales increased $42.6 million, or 6.9%, to $660.1 million for the year ended December 31, 2006, compared with $617.5 million for the year ended December 31, 2005. The increase in net sales was primarily due to increased copper by-product sales ($40.6 million), sales related to the March 2006 acquisition of Plaschem ($10.8 million) and a favorable shift in product mix ($5.2 million). The increase in copper by-product sales was due to the increase in the average copper price in 2006 compared with 2005 and an increase in copper by-product volume. These increases were partially offset by lower product selling prices ($18.9 million) caused primarily by lower cobalt reference prices in the first half of 2006 compared with 2005.

Gross profit increased to $184.7 million in 2006 compared with $101.0 million in 2005. Margins increased to 28.0% from 16.4% primarily due to the sale of cobalt finished goods manufactured using lower cost raw materials that were purchased before the increase in cobalt metal prices which occurred throughout 2006 ($31.2 million). Also impacting gross profit were increased copper by-product sales ($23.9 million) and a favorable shift in product mix ($10.9 million). In addition, 2005 included the $9.4 million negative impact related to the scheduled maintenance shut-down of the smelter in the DRC.

SG&A expenses increased to $109.4 million in 2006 compared with $75.9 million in 2005. SG&A expenses in 2006 include $4.7 million of increased employee incentive compensation expense triggered by increased profitability in 2006, a $3.2 million charge for the settlement of litigation related to the former chief executive officer’s termination, a $1.7 million increase in share-based compensation, environmental charges of $4.2 million and an additional $1.0 million reserve against the note receivable from one of our joint venture partners in the DRC. SG&A expenses in 2005 included $27.5 million of income related to the receipt of net insurance proceeds related to the shareholder class action litigation, $4.6 million of income related to the mark-to-market of 380,000 shares of common stock issued in connection with the shareholder derivative litigation and income of $2.5 million related to the collection of a note receivable that had been fully reserved in 2002. In addition, 2005 included an $8.9 million charge related to the former chief executive officer’s departure, a $4.2 million charge to establish a reserve against the notes receivable from one of our joint venture partners in the DRC and environmental charges of $2.8 million.

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Other expense, net decreased $28.1 million to $14.8 million in 2006 compared with $42.9 million in 2005. The decrease was primarily due to a $12.2 million gain in 2006 related to the sale of the Company’s investment in Weda Bay (See Note 5 to the Consolidated Financial Statements in this Form 10-K) and a $6.7 million increase in interest income in 2006 compared with 2005 due to the higher average cash balance. In addition, other expense, net was also impacted by foreign exchange gains of $3.7 million in 2006 compared with a foreign exchange loss of $4.6 million in 2005.

Income tax expense in 2006 was $30.6 million on pre-tax income of $60.5 million, compared with income tax expense in 2005 of $1.7 million on a pre-tax loss of $17.8 million. The 2006 effective rate is higher than the statutory rate in the United States (35%) due primarily to additional U.S. income taxes on $384.1 million of undistributed earnings of consolidated foreign subsidiaries as of December 31, 2006. The taxes provided on such earnings were partially offset by the reversal of the valuation allowance against certain operating loss carryforwards. Previously, the Company’s intent was for such earnings to be reinvested by the subsidiaries indefinitely. However, due primarily to the redemption of the Notes in March 2007, the Company repatriated such undistributed earnings to the United States during 2007. The effective tax rate was also negatively impacted by losses in the United States with no corresponding tax benefit. These increases to the effective tax rate were partially offset by income earned in tax jurisdictions with lower statutory tax rates (primarily Finland at 26%) and a tax “holiday” in Malaysia. Also in 2006, the strengthening Euro compared with the US dollar positively impacted the effective tax rate, as the Company’s statutory tax liability in Finland is calculated and payable in Euros but is remeasured to the US dollar functional currency for preparation of the consolidated financial statements. The 2005 expense results primarily from profitability of the Company’s Kokkola, Finland operations and no tax benefit from losses in the US. In addition, the effective income tax rate in 2005 was negatively impacted by the weakening Euro compared with the US dollar.

Minority interest share of (income) loss relates to the Company’s 55%-owned smelter joint venture in the DRC. The minority partner’s income in 2006 reflects production and shipments throughout the year, whereas the losses in 2005 were attributable to the scheduled extended maintenance shut-down of the GTL smelter from January through May 2005.

Income from discontinued operations for 2006 was $192.2 million, of which $186.4 million relates to the Nickel business and $5.8 million relates to retained liabilities of PMG, which was sold in 2003. Income from discontinued operations for 2005 was $49.0 million, of which $39.6 million relates to the Nickel business and $9.4 million relates to PMG.

Income included in discontinued operations related to the Nickel business increased to $186.4 million in 2006 compared with $39.6 million in 2005. The increase was primarily due to a higher average nickel price ($116.9 million), the impact of favorable raw material pricing ($44.3 million) and favorable nickel hedging transactions ($28.3 million). Favorable raw material pricing was primarily due to the rapid increase in nickel price and the resulting impact of selling inventory purchased at lower prices. These increases were partially offset by a $35.1 million increase in income tax expense due to the increased earnings.

The Company recorded income from the discontinued operations of PMG of $5.8 million in 2006 primarily due to the reversal of a $4.6 million tax contingency accrual and a $2.4 million gain on the sale of a former PMG building that had been fully depreciated, both offset by foreign exchange losses of $1.8 million from remeasuring Euro-denominated liabilities to U.S. dollars. The Company recorded income from non-Nickel discontinued operations of $9.4 million in 2005 primarily due to the reversal of a $5.5 million tax contingency accrual, a $1.6 million tax refund related to PMG, and foreign exchange gains of $1.6 million from remeasuring Euro-denominated liabilities to U.S. dollars.

Net income in 2006 includes $0.3 million of income related to the cumulative effect of a change in accounting principle for the adoption of SFAS No. 123R, “Share-Based Payments.” See further discussion of the adoption of SFAS No. 123R in Note 2 to the Consolidated Financial Statements in this Form 10-K. Net income in 2005 includes $2.3 million of income related to the cumulative effect of a change in accounting principle for the adoption of FASB Interpretation (“FIN”) No. 47, “Accounting for Conditional Asset Retirement Obligations.” The

26

adoption of FIN No. 47 only impacted the Company’s Cawse mine which is included in discontinued operations in the consolidated financial statements for all periods presented.

Net income was $216.1 million, or $7.31 per diluted share, in 2006 compared with $38.9 million, or $1.36 per diluted share, in 2005, due primarily to the aforementioned factors.

Liquidity and Capital Resources

Cash Flow Summary

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

	2007			2006			change
Net cash provided by (used for):
Operating activities	$	41.0		$	95.0		$	(54.0	)
Investing activities		135.2			(18.0	)		153.2
Financing activities		(406.7	)		(5.7	)		(401.0	)
Effect of exchange rate changes on cash		1.4			4.6			(3.2	)
Discontinued operations-net cash used for operating activities		48.5			107.4			(58.9	)
Discontinued operations-net cash used for investing activities		(1.5	)		(15.6	)		14.1
Net change in cash and cash equivalents	$	(182.1	)	$	167.7		$	(349.8	)

The $54.0 million decrease in net cash provided by operating activities was primarily due to a $165.7 million increase in inventories during 2007 compared with a $27.6 million increase in inventories during 2006 and a $38.4 million increase in accounts receivable during 2007 compared with a $3.9 million increase in accounts receivable during 2006. These items were partially offset by a $92.2 million increase in accounts payable during 2007 compared with a $39.3 million increase in 2006. These increases in inventories, accounts receivable and accounts payable in 2007, which excludes amounts acquired in business combinations, were primarily due to higher cobalt metal prices in 2007 compared with 2006. Also impacting net cash provided by operating activities was the positive cash flow impact of income from continuing operations of $111.5 million in 2007 compared with income from continuing operations of $23.6 million in 2006. In addition, 2007 includes a $21.7 million charge related to the redemption of the Notes while 2006 includes a $12.2 million gain on the sale of the Company’s investment in Weda Bay. The $21.7 million charge related to the redemption of the Notes consisted of a cash premium of $18.5 million and non-cash charges totaling $3.2 million. The $18.5 million cash premium payment is included as a component of financing activities. The receipt of the Weda Bay proceeds is included as a component of investing activities

Net cash provided by investing activities increased $153.2 million in 2007 compared with 2006 primarily due to the $490.0 million of net proceeds related to the sale of the Nickel business partially offset by the cash outflow for acquisitions in 2007 ($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 Nickel joint venture partner. Investing activities in 2006 include proceeds of $12.2 million from the sale of the Company’s investment in Weda Bay, a $5.4 million payment for the Plaschem acquisition and a $6.9 million loan to a former Nickel joint venture partner.

27

Net cash used in financing activities increased $401.0 million in 2007 compared with 2006 primarily due to the $418.5 million payment to redeem the Notes.

	2006			2005			change
Net cash provided by (used for):
Operating activities	$	95.0		$	(7.4	)	$	102.4
Investing activities		(18.0	)		(8.9	)		(9.1	)
Financing activities		(5.7	)		(5.6	)		(0.1	)
Effect of exchange rate changes on cash		4.6			(5.3	)		9.9
Discontinued operations-net cash used for operating activities		107.4			123.8			(16.4	)
Discontinued operations-net cash used for investing activities		(15.6	)		(8.8	)		(6.8	)
Net change in cash and cash equivalents	$	167.7		$	87.8		$	79.9

The $102.4 million increase in net cash provided by operating activities was primarily due to the positive cash flow impact of income from continuing operations before accounting changes of $23.6 million in 2006 compared with a loss of $12.4 million in 2005; a $74.0 million payment in 2005 related to settlement of the shareholder litigation; an increase in accounts payable during the 2006 period compared to 2005 which resulted in a cash flow change of $62.9 million; and the change in accrued income taxes during 2006 compared to 2005 ($15.2 million). These positive factors were partially offset by the negative cash flow impact of an increase in inventories during 2006 compared with a decrease in inventories during 2005 ($95.0 million). The increase in inventories in 2006 was due primarily to higher cobalt metal prices at December 31, 2006 compared to a year ago, and corresponded with the increase in accounts payable in 2006. The increase in accrued income taxes in 2006 was due to higher earnings compared to a year ago.

Higher cash used in investing activities in 2006 was due primarily to the acquisition of Plaschem in March 2006 ($5.4 million, net of cash acquired) and loans to non-consolidated joint ventures in 2006 of $6.9 million, compared with proceeds from the collection of notes receivable of $5.5 million in 2005. Investing activities in 2006 also include proceeds of $12.2 million from the sale of the Company’s investment in Weda Bay. Capital expenditures were $14.5 million in 2006 compared with $13.4 million in 2005

In 2006, financing activities include proceeds from the exercise of stock options of $11.6 million, compared with $0.1 million in 2005. The cash inflow from the exercise of stock options in 2006 was offset by the repayment of the $17.3 million note payable with a Finnish bank.

Debt and Other Financing Activities

On March 7, 2007, the Company redeemed the entire $400.0 million of its outstanding Notes at a redemption price of 104.625% of the principal amount, or $418.5 million, plus accrued interest of $8.4 million. The premium amount of $18.5 million plus related deferred financing costs of $5.7 million less the deferred net gain on terminated interest rate swaps of $2.5 million is included in the Loss on redemption of Notes in the Statements of Consolidated Income.

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. 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 provides for interest-only payments during its term, with principal due at maturity. The Company has the option to specify that interest be calculated based either on LIBOR, plus a calculated margin amount, or 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 matures on

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December 20, 2010 and contains various affirmative and negative covenants. At December 31, 2007, there were no borrowings outstanding under the Revolver and the Company was in compliance with all covenants.

The Company has two term loans outstanding that expire in 2008 and 2019 and require monthly principal and interest payments. The balance of these term loans was $1.3 million at December 31, 2007 and $1.4 million at December 31, 2006. At December 31, 2007 and December 31, 2006, the Company also had a $0.3 million short-term note payable.

The Company believes that it will have sufficient cash provided by operations and available from its credit facility to provide for its working capital, debt service, acquisition and capital expenditure requirements during 2008.

The Company did not pay cash dividends in 2007, 2006 or 2005. 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 2008.

Capital Expenditures

Capital expenditures in 2007 were $19.4 million, related primarily to ongoing projects to maintain current operating levels and were funded through cash flows from operations. The Company expects to incur capital spending of approximately $53.0 million in 2008, (including items relating to the REM businesses), for projects to expand capacity, maintain and improve throughput with outlays for sustaining operations, and for expenditures related to environmental, health and safety compliance, and also for other fixed asset additions at existing facilities.

During 2005, the Company initiated a multi-year Enterprise Resource Planning (“ERP”) project that is expected to be implemented worldwide to achieve increased efficiency and effectiveness in supply chain, financial processes and management reporting. The new ERP system will replace or complement existing legacy systems and standardize the global business processes across the enterprise. The system implementation began in the first quarter of 2007, and the Company will continue to implement the ERP system at additional locations in a phased approach through 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, 2007 (in thousands).

	Payments due by period
	2008		2009		2010		2011		2012		Thereafter		Total
Purchase and other obligations(1)	$	657,954	$	506,987	$	506,899	$	505,530	$	103,402	$	—	$	2,280,772
Debt obligations		513		138		138		138		138		584		1,649
Operating lease obligations		4,472		4,123		3,831		1,636		1,609		8,317		23,988
Total	$	662,939	$	511,248	$	510,868	$	507,304	$	105,149	$	8,901	$	2,306,409

(1) For 2008 through 2013, 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 2007 for each respective metal. Commitments made under these contracts represent future purchases in line with expected usage.

Pension funding and postretirement benefit payments can vary significantly each year due to changes in legislation and the Company’s significant assumptions. As a result, pension funding and post-retirement benefit payments have not been included in the table above. The Company expects to contribute approximately $0.8 million related to its SCM pension plan in 2008. Pension benefit payments are made from assets of the pension plan. The Company expects to make payments related to its other postretirement benefit plans of approximately $0.5 million annually over the next ten years. Benefit payments beyond that time cannot currently be estimated. The Company also has an unfunded obligation to its former chief executive officer in settlement of an unfunded supplemental executive

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retirement plan. The Company expects to make annual benefit payments of approximately $0.7 million related to the former chief executive officer.

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 and Note 17 to the consolidated financial statements included in Item 8 of this Annual Report.

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 cost of the Company’s raw materials fluctuates due to actual or perceived changes in supply and demand of raw materials, changes in cobalt reference/market prices and changes in availability from suppliers. 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. The Company evaluates on a monthly basis the need for a lower of cost or market adjustment to inventories based on the end-of-the-month market price.

Long-Lived Assets — Goodwill must be reviewed at least annually for impairment, in accordance with a specified methodology. Further, goodwill, intangibles and other 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 — 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 foreign consolidated subsidiaries, to the extent such earnings are determined to be reinvested for an indefinite period of time. 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 lower than in the United States. The Company’s tax

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assets, liabilities, and tax expense are supported by its best estimates and assumptions of its global cash requirements, planned dividend repatriations, and expectations of future earnings. When the Company determines that it is more likely than not that deferred tax assets will not be realized, a valuation allowance is established.

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, the Company now believes that it is more likely than not that the net deferred tax asset related to temporary differences that reverse in 2008 and 2009 will be realized. Because there has been no fundamental change in the Company’s U.S. operations, it is more likely than not that deferred tax assets related to state and local net operating loss carryforwards and temporary differences that will reverse beyond 2009 will not be realized, and therefore the Company has recorded a valuation allowance against those deferred tax assets.

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 Standards adopted in 2007:

FIN No. 48:  In July 2006, the Financial Accounting Standards Board (“FASB”) issued FIN No. 48. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN No. 48 prescribes a recognition threshold and measurement attributable for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN No. 48 on January 1, 2007. The transition provisions require that the effect of applying the provisions of FIN No. 48 be reported as an adjustment to the opening balance of retained earnings in the year of adoption. The effect of adoption was a $0.5 million reduction to retained earnings at January 1, 2007.

EITF No. 06-3:  In June 2006, the FASB ratified the consensus of Emerging Issues Task Force (“EITF”) No. 06-03, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (that is, gross versus net presentation).” EITF No. 06-03 indicates that the income statement presentation of taxes within the scope of the Issue on either a gross basis or a net basis is an accounting policy decision that should be disclosed pursuant to APB No. 22. The Company has historically accounted for such taxes on a net basis and therefore the adoption of EITF No. 06-03 in the first quarter of 2007 had no impact on the Company’s results of operations and financial position.

Accounting Standards Not Yet Adopted

SFAS No. 160:  In December 2007, the FASB issued SFAS No. 160 (“SFAS No. 160”), “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51”). SFAS No. 160

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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. SFAS No. 160 is effective for annual periods beginning after December 15, 2008 and should be applied prospectively. However, the presentation and disclosure requirements of the statement shall be applied retrospectively for all periods presented. The Company has not determined the effect, if any; the adoption of SFAS No. 160 will have on its results of operations, financial position and related disclosure.

SFAS No. 159:  On February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial assets and liabilities and certain other items at fair value that are not currently required to be measured at fair value. An entity will report unrealized gains and losses on items for which the fair value option has been elected in the consolidated statements of income at each subsequent reporting date. The fair value option may be applied on an instrument-by-instrument basis, with several exceptions, such as those investments accounted for by the equity method, and once elected, the option is irrevocable unless a new election date occurs. The fair value option can be applied only to entire instruments and not to portions thereof. The pronouncement also establishes presentation and disclosure requirements to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company has not determined the effect, if any, the adoption of this statement will have on its results of operations, financial position and related disclosures.

SFAS No. 157:  In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 for financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis, and should be applied prospectively. The adoption of the provisions of SFAS No. 157 related to financial assets and liabilities and other assets and liabilities that are carried at fair value on a recurring basis is not anticipated to materially impact the Company’s results of operations or financial position. The FASB provided for a one-year deferral of the provisions of SFAS No. 157 for non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a non-recurring basis. The Company has not determined the effect, if any; the adoption of the provisions of SFAS No. 157 for non-financial assets and liabilities will have on its results of operations, financial position and related disclosures.

SFAS No. 141R:  In December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS No. 141R”), “Business Combinations”. SFAS No. 141R will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS No. 141R 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. SFAS 141R 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. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008. SFAS No. 141R must be applied prospectively to business combinations for which the acquisition date is on or after the adoption date. Early adoption is not permitted. The Company has not determined the effect, if any; the adoption of SFAS No. 141R will have on its results of operations or financial position.

EITF No. 06-4:  In June 2006, the EITF reached a consensus on EITF No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements,” which requires the application of the provisions of SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” to endorsement split-dollar life insurance arrangements. SFAS No. 106 would require the Company to recognize a liability for the discounted future benefit obligation that the Company will have

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to pay upon the death of the underlying insured employee. An endorsement-type arrangement generally exists when the Company owns and controls all incidents of ownership of the underlying policies. EITF No. 06-4 is effective for fiscal years beginning after December 15, 2007. The Company may have certain policies subject to the provisions of this new pronouncement and is currently determining the effect the adoption of EITF No. 06-4 will have on its financial statements.

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 most 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.

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.

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.

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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, at times, foreign currency exchange rates through its regular operating and financing activities, which include the use of derivative instruments.

The primary raw material used by the Company in manufacturing its products is cobalt. There are a limited number of supply sources for cobalt. Production problems or political or civil instability in supplier countries, primarily the DRC, Australia, Finland and Russia, have affected and may continue to 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. Although the Company has never experienced a significant shortage of cobalt raw material, production problems and political and civil instability in certain supplier countries may in the future affect the supply and market price of cobalt raw materials.

The cost of the Company’s raw materials fluctuates due to actual or perceived changes in supply and demand, changes in cobalt reference prices and changes in availability from suppliers. The Company attempts to mitigate changes in availability by maintaining adequate inventory levels and long-term supply relationships with a variety of producers. Fluctuations in the prices of cobalt have been significant in the past and the Company believes that cobalt price fluctuations are likely to continue in the future. The Company attempts to pass through to its customers increases in raw material prices by increasing the prices of its products. The Company’s profitability is largely dependent on the Company’s ability to maintain the differential between its product prices and product costs. 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. Reductions in the price of raw materials or declines in the selling prices of the Company’s finished goods could also result in the Company’s inventory carrying value being written down to a lower market value.

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 9 to the consolidated financial statements contained in Item 8 of this Annual Report).

The Company enters into derivative instruments and hedging activities to manage, where possible and economically efficient, commodity price risk and interest rate risk related to borrowings. All derivatives are reflected at their fair value in the Consolidated Balance Sheets. Changes in the fair values of derivatives not designated in a hedging relationship are recognized in earnings each period.

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. 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 fluctuation.

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 anticipated sale during the second quarter of 2008 of cobalt-containing finished products that are priced based on a formula which includes a fixed cobalt price component. These forward purchase contracts have not been designated as hedging instruments under SFAS No. 133. Accordingly, these contracts are adjusted to fair value as of the end of each reporting period, with the gain or loss recorded in cost of sales in the statements of consolidated income. Fair value is estimated based on the expected future cash flows discounted to present value. Future cash flows are estimated using a theoretical forward price when quoted forward prices are not available. These adjustments to fair value had no cash impact in 2007 as the contracts will be net

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settled with the counterparty in 2008. The Company recorded a $6.7 million gain in 2007 related to these contracts. These contracts will continue to be marked to fair value until settlement, resulting in additional gains or losses based on changes in the cobalt reference price.

By using derivative instruments to hedge exposures to changes in commodity prices and interest rates, the Company exposes itself to credit risk and market 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, 2007, 2006 and 2005.

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.

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 and QSI, a privately-held company, have agreed to co-develop new applications for the clean-energy and portable power sectors based upon QSI’s proprietary technology. This type of investment has an inherent risk as the technologies or products under development are generally early stage and may never materialize into a commercial opportunity. The carrying amount of this investment approximated fair value as of December 31, 2007.

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 most 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 operations. The Company does not currently hedge against the risk of exchange rate fluctuation.

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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, 2007 and 2006, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007. 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 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, 2007 and 2006, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, 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 therein.

As discussed in Notes 2, 7 and 15 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109,” as of January 1, 2007, Statement of Financial Accounting 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),” as of December 31, 2006, Statement of Financial Accounting Standards No. 123R, “Share-Based Payment,” and Emerging Issues Task Force No. 04-6, “Accounting for Stripping Costs Incurred during Production in the Mining Industry,” as of January 1, 2006 and Financial Accounting Standards Board Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations,” as of October 1, 2005.

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, 2007, 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 26, 2008 expressed an adverse opinion on the effectiveness of internal control over financial reporting as of December 31, 2007.

/s/ ERNST & YOUNG LLP

Cleveland, Ohio

February 26, 2008

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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, 2007, 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. 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.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the Electronics businesses of Rockwood Specialties Group, Inc. and Borchers GmbH (both acquired in 2007), which are included in the 2007 consolidated financial statements of OM Group, Inc. and together constituted 28% and 34% of total assets and net assets, respectively, as of December 31, 2007 and 1% and less than 1% of revenues and net income, respectively, for the year then ended. Our audit of internal control over financial reporting of OM Group, Inc. also did not include an evaluation of the internal control over financial reporting of the Electronics businesses of Rockwood Specialties Group, Inc. and Borchers GmbH.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment.

•  Management has identified a material weakness in internal controls related to the accounting for income taxes.

37

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2007 consolidated financial statements, and this report does not affect our report dated February 26, 2008, on those consolidated financial statements.

In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, OM Group, Inc. has not maintained effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria.

/s/ ERNST & YOUNG LLP

Cleveland, Ohio

February 26, 2008

38

OM Group, Inc. and Subsidiaries

Consolidated Balance Sheets

	December 31,
	2007			2006
(In thousands, except share data)
ASSETS
Current assets
Cash and cash equivalents	$	100,187		$	282,288
Accounts receivable, less allowance of $1,541 in 2007 and $1,137 in 2006		178,481			82,931
Inventories		413,434			216,492
Other current assets		60,655			30,648
Interest receivable from joint venture partner		3,776			—
Assets of discontinued operations		—			597,682
Total current assets		756,533			1,210,041
Property, plant and equipment, net		288,834			210,953
Goodwill		322,172			137,543
Notes receivable from joint venture partner, less allowance of $5,200 in 2007 and 2006		24,179			24,179
Other non-current assets		77,492			35,508
Total assets	$	1,469,210		$	1,618,224
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term debt	$	347		$	326
Current portion of long-term debt		166			167
Debt to be redeemed		—			402,520
Accounts payable		214,244			90,768
Accrued income taxes		32,040			17,497
Accrued employee costs		34,707			28,806
Other current liabilities		25,435			42,057
Liabilities of discontinued operations		—			167,148
Total current liabilities		306,939			749,289
Long-term debt		1,136			1,224
Deferred income taxes		29,645			4,118
Minority interests		52,314			43,286
Other non-current liabilities		50,790			38,228
Stockholders’ equity:
Preferred stock, $.01 par value:
Authorized 2,000,000 shares, no shares issued or outstanding		—			—
Common stock, $.01 par value:
Authorized 60,000,000 shares; issued 30,122,209 in 2007 and 29,801,334 shares in 2006		301			297
Capital in excess of par value		554,933			533,818
Retained earnings		467,726			221,310
Treasury stock (61,541 shares in 2007 and 2006, at cost)		(2,239	)		(2,239	)
Accumulated other comprehensive income		7,665			28,893
Total stockholders’ equity		1,028,386			782,079
Total liabilities and stockholders’ equity	$	1,469,210		$	1,618,224

See accompanying notes to consolidated financial statements.

39

OM Group, Inc. and Subsidiaries

Statements of Consolidated Income

	Year Ended December 31
	2007			2006			2005
(In thousands, except per share data)
Net sales	$	1,021,501		$	660,104		$	617,527
Cost of products sold		708,257			475,437			516,566
Gross profit		313,244			184,667			100,961
Selling, general and administrative expenses		117,009			109,408			75,849
Operating profit		196,235			75,259			25,112
Other income (expense):
Interest expense		(7,820	)		(38,659	)		(41,064	)
Loss on redemption of Notes		(21,733	)		—			—
Interest income		19,396			8,566			1,904
Interest income on Notes receivable from joint venture partner		4,526			—			—
Foreign exchange gain (loss)		8,100			3,661			(4,580	)
Gain on sale of investment		—			12,223			—
Other income (expense), net		(449	)		(582	)		860
		2,020			(14,791	)		(42,880	)
Income (loss) from continuing operations before income taxes, minority interest and cumulative effect of change in accounting principle		198,255			60,468			(17,768	)
Income tax expense		(76,311	)		(30,554	)		(1,710	)
Minority partners’ share of (income) loss		(10,405	)		(6,291	)		7,128
Income (loss) from continuing operations before cumulative effect of change in accounting principle		111,539			23,623			(12,350	)
Discontinued operations:
Income from discontinued operations, net of tax		63,057			192,163			48,989
Gain on sale of discontinued operations, net of tax		72,270			—			—
Total income from discontinued operations, net of tax		135,327			192,163			48,989
Income before cumulative effect of change in accounting principle		246,866			215,786			36,639
Cumulative effect of change in accounting principle		—			287			2,252
Net income	$	246,866		$	216,073		$	38,891
Net income (loss) per common share — basic:
Continuing operations	$	3.73		$	0.80		$	(0.43	)
Discontinued operations		4.52			6.55			1.71
Cumulative effect of change in accounting principle		—			0.01			0.08
Net income	$	8.25		$	7.36		$	1.36
Net income (loss) per common share — assuming dilution:
Continuing operations	$	3.68		$	0.80		$	(0.43	)
Discontinued operations		4.47			6.50			1.71
Cumulative effect of change in accounting principle		—			0.01			0.08
Net income	$	8.15		$	7.31		$	1.36
Weighted average shares outstanding:
Basic		29,937			29,362			28,679
Assuming dilution		30,276			29,578			28,679

See accompanying notes to consolidated financial statements.

40

OM Group, Inc. and Subsidiaries

Statements of Consolidated Comprehensive Income

	Year Ended December 31
	2007			2006			2005
(In thousands)
Net income	$	246,866		$	216,073		$	38,891
Foreign currency translation adjustments		(11,014	)		10,394			(6,365	)
Reclassification of hedging activities into earnings, net of tax		(9,824	)		(954	)		(3,475	)
Unrealized gain on cash flow hedges, net of tax expense of $3,117 in 2006 and $335 in 2005		—			9,824			954
Realized gain on available-for-sale securities		—			(4,745	)		(930	)
Unrealized gain on available-for-sale securities		—			—			4,745
Additional pension and post-retirement obligation		(390	)		(199	)		(1,071	)
Net change in accumulated other comprehensive income		(21,228	)		14,320			(6,142	)
Comprehensive income	$	225,638		$	230,393		$	32,749

See accompanying notes to consolidated financial statements.

41

OM Group, Inc. and Subsidiaries

Statements of Consolidated Cash Flows

	Year Ended December 31
(In thousands)	2007			2006			2005
Operating activities
Net income	$	246,866		$	216,073		$	38,891
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Income from discontinued operations		(63,057	)		(192,163	)		(48,989	)
Gain on sale of discontinued operations		(72,270	)		—			—
Income from cumulative effect of change in accounting principle		—			(287	)		(2,252	)
Gain on sale of investment		—			(12,223	)		—
Loss on redemption of Notes		21,733			—			—
Depreciation and amortization		33,229			31,841			32,593
Share-based compensation expense		7,364			5,227			3,509
Excess tax benefit on exercise of stock options		(1,744	)		—			—
Foreign exchange (gain) loss		(8,100	)		(3,661	)		4,580
Unrealized gain on cobalt forward purchase contracts		(6,735	)		—			—
Payment for termination of swap agreement		—			(2,877	)		—
Gain on collection of notes receivable		—			—			(2,500	)
Provision for Note receivable from joint venture partner		—			1,000			4,200
Interest income receivable from joint venture partner		(3,776	)		—			—
Deferred income taxes		(15,756	)		13,864			(3,300	)
Minority partners’ share of income (loss)		10,405			6,291			(7,128	)
Other non-cash items		431			(67	)		(3,736	)
Changes in operating assets and liabilities, excluding the effect of business acquisitions
Accounts receivable		(38,364	)		(3,879	)		(2,440	)
Inventories		(165,694	)		(27,613	)		67,418
Accounts payable		92,161			39,310			(23,625	)
Shareholder litigation accrual		—			—			(74,000	)
Other, net		4,311			24,131			9,436
Net cash provided by (used for) operating activities		41,004			94,967			(7,343	)
Investing activities
Expenditures for property, plant and equipment		(19,357	)		(14,547	)		(13,386	)
Proceeds from the sale of assets		461			—			—
Net proceeds from the sale of the Nickel business		490,036			—			—
Proceeds from collection of notes receivable		—			—			2,500
(Purchase) sale of investments		(2,000	)		12,223			—
Proceeds from loans to non-consolidated joint ventures		7,568			—			3,035
Loans to non-consolidated joint ventures		—			(6,888	)		—
Acquisition of businesses, net of cash acquired		(336,976	)		(5,418	)		—
Expenditures for software		(4,483	)		(3,329	)		(1,007	)
Net cash provided by (used for) investing activities		135,249			(17,959	)		(8,858	)
Financing activities
Payments of long-term debt and revolving line of credit		(400,000	)		(17,250	)		(55,622	)
Proceeds from the revolving line of credit		—			—			49,872
Premium for redemption of Notes		(18,500	)		—			—
Distribution to joint venture partners		(1,350	)		—			—
Proceeds from exercise of stock options		11,344			11,558			117
Excess tax benefit on exercise of stock options		1,744			—			—
Net cash used for financing activities		(406,762	)		(5,692	)		(5,633	)
Effect of exchange rate changes on cash		1,440			4,569			(5,293	)
Cash and cash equivalents
Increase (decrease) from continuing operations		(229,069	)		75,885			(27,127	)
Discontinued operations — net cash provided by operating activities		48,508			107,379			123,769
Discontinued operations — net cash used for investing activities		(1,540	)		(15,594	)		(8,803	)
Balance at the beginning of the year		282,288			114,618			26,779
Balance at the end of the year	$	100,187		$	282,288		$	114,618

See accompanying notes to consolidated financial statements

42

OM Group, Inc. and Subsidiaries

Statements of Consolidated Stockholders’ Equity

	Year Ended December 31,
(In thousands)	2007			2006			2005
Common Stock — Shares Outstanding, net of Treasury Shares
Beginning balance		29,740			29,307			28,480
Shares issued under share-based compensation plans		321			433			40
Shares issued for settlement of shareholder litigation		—			—			787
		30,061			29,740			29,307
Common Stock — Dollars
Beginning balance	$	297		$	293		$	285
Shares issued under share-based compensation plans		4			4			—
Shares issued for settlement of shareholder litigation		—			—			8
		301			297			293
Capital in Excess of Par Value
Beginning balance		533,818			516,510			498,250
Shares issued under share-based compensation plans		11,340			11,555			845
Excess tax benefit on the exercise of stock options		1,744			—			—
Settlement of shareholder litigation		—			—			13,375
Share-based compensation — employees		7,929			5,753			4,040
Share-based compensation — non-employee directors		102			—			—
		554,933			533,818			516,510
Retained Earnings
Beginning balance		221,310			6,811			(32,080	)
Adoption of FIN No. 48 in 2007 and EITF No. 04-6 in 2006		(450	)		(1,574	)		—
Net income		246,866			216,073			38,891
		467,726			221,310			6,811
Treasury Stock
Beginning balance		(2,239	)		(2,226	)		(710	)
Reacquired shares		—			(13	)		(1,516	)
		(2,239	)		(2,239	)		(2,226	)
Accumulated Other Comprehensive Income
Beginning balance		28,893			15,145			21,287
Foreign currency translation		(11,014	)		10,394			(6,365	)
Reclassification of hedging activities into earnings, net of tax		(9,824	)		(954	)		(3,475	)
Unrealized gain on cash flow hedges, net of tax expense of $3,541 in 2006 and $286 in 2005		—			9,824			954
Reclassification of realized gain on available-for-sale securities into earnings		—			(4,745	)		(930	)
Unrealized gain on available-for-sale securities		—			—			4,745
Additional pension and post-retirement obligation		(390	)		(199	)		(1,071	)
Adoption of SFAS No. 158		—			(572	)		—
		7,665			28,893			15,145
Total Stockholders’ Equity	$	1,028,386		$	782,079		$	536,533

See accompanying notes to consolidated financial statements

43

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

(In thousands, except as noted 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 subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The Company has a 55% interest in a joint venture 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. Minority interest is recorded for the remaining 45% interest.

On December 31, 2007, the Company completed the acquisition of the Electronics businesses (“REM”) of Rockwood Specialties Group, Inc. The assets and liabilities of REM, included in the Company’s Consolidated Balance Sheet at December 31, 2007, are based upon a preliminary allocation of the purchase price as the Company has not completed its evaluation of the fair value of assets acquired and liabilities assumed. REM operating results will be included in the Company’s Statement of Consolidated Income beginning January 1, 2008.

On November 17, 2006, the Company entered into a definitive agreement to sell its Nickel business to Norilsk Nickel (“Norilsk”). As a result, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the consolidated financial statements and accompanying notes reflect the Nickel business as a discontinued operation for all periods presented. The transaction closed on March 1, 2007.

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.

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 the contracts, 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, through its Specialties business, was the primary obligor for these sales and recorded the revenue on a gross basis.

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).

Cost of Products Sold — Shipping and handling costs are included in cost of products sold.

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 written off against the allowance when it becomes evident that collections will not occur. Bad debt expense is

44

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

included in selling, general and administrative expenses and amounted to $0.5 million in 2007 and 2006 and $0.6 million in 2005.

Inventories — Inventories are stated at the lower of cost or market and valued using the first-in, first-out (FIFO) method. 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. Monthly, the Company evaluates the need for a lower of cost or market adjustment to inventories based on the end of the month market prices.

Receivables from Joint Venture Partners and Minority 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% each.

In years prior to 2005, the Company refinanced the capital contribution for the 25% minority shareholder in its joint venture in the DRC. At December 31, 2007 and 2006 the notes receivable from this partner were $24.2 million, net of a $5.2 million valuation allowance. The notes were originally due in full on December 31, 2008 ($22.9 million) and December 31, 2010 ($6.5 million). However, in January 2008, the Company agreed to modify the terms of the notes. The modified terms include a new interest rate of LIBOR and a revised repayment date for the entire balance on December 31, 2010, which may be extended at the Company’s option.

Prior to the modification, the interest rate on the $22.9 million note was LIBOR plus 2.75%, (7.63% at December 31, 2007) and the interest rate on the $6.5 million note was LIBOR plus 1.25%, (6.59% at December 31, 2007). Prior to December 31, 2007, the Company had a full valuation allowance against the interest receivable under the notes. During 2007, the Company received $0.8 million, which was recorded as interest income, and agreed to forgive $4.0 million of interest due, resulting in a $3.8 million interest receivable at December 31, 2007. The Company received the $3.8 million in January 2008. Accordingly, the allowance against the interest receivable was reversed as of December 31, 2007.

Under the terms of the receivables, 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 $28.2 million at December 31, 2007 and $20.3 million at December 31, 2006), and by a loan payable from the joint venture to the partner (principal balance of $3.9 million at December 31, 2007 and 2006, plus accrued interest of $1.1 million at December 31, 2007 and $0.7 million at December 31, 2006), as repayment of the loan would qualify as a secondary consideration.

The Company currently anticipates that repayment of the receivables, net of the reserve, will be made from the partner’s share of any dividends from the joint venture and any other secondary considerations paid by 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 American Institute of Certified Public Accountants Statement of Position

45

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

No. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” Accordingly, internal use software costs are expensed or capitalized depending on whether they are incurred in the preliminary project stage, application development stage or the post-implementation stage. Amounts capitalized are amortized over the estimated useful lives of the software.

Long-lived Assets — Long-lived assets, including finite lived intangible 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 Other Intangible Assets — In accordance with SFAS No. 142 “Goodwill and Other Intangible Assets,” the Company evaluates the carrying value of goodwill for impairment annually as of October 1 and between annual evaluations if changes in circumstances or the occurrence of certain events indicate potential impairment. The results of the testing as of October 1, 2007 confirmed the fair value of each of the reporting units exceeded its carrying value and therefore no impairment loss was required to be recognized.

Excluding intangible assets related to the REM and Borchers acquisitions, finite lived intangible assets, which are included in Other non-current assets, consist principally of capitalized software which is being amortized using the straight-line method over 3 years.

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. The liability at December 31, 2007 was $8.0 million, of which $2.7 million was included in current liabilities and $5.3 million was included in Other non-current liabilities. The liability at December 31, 2006 was $6.9 million, of which $2.2 million is included in current liabilities and $4.7 million is included in Other non-current liabilities. The increase in the liability at December 31, 2007 compared with December 31, 2006 is primarily due to the translation of these primarily Euro denominated liabilities to the U.S. dollar

Research and Development — Research and development costs are charged to expense when incurred, are included in selling, general and administrative expenses and amounted to $8.2 million, $8.1 million and $8.3 million in 2007, 2006, and 2005, 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. Leasehold improvements related to these operating leases are amortized over the shorter of their estimated useful lives or the noncancellable lease.

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 foreign consolidated subsidiaries, to the extent such earnings are to be reinvested for an indefinite period of time.

Foreign Currency Translation — The functional currency for the Company’s Finnish subsidiaries and related DRC operations is the U.S. dollar since a majority of their purchases and sales are denominated in U.S. dollars.

46

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

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 Income.

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 in stockholders’ equity.

Derivative Instruments — The Company enters into derivative instruments and hedging activities to manage, where possible and economically efficient, commodity price 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, 2007 and 2006. 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 fluctuation.

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 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. At December 31, 2006, the notional value of the open contracts approximated $12.5 million. The fair value of open contracts, based on settlement prices at December 31, 2006, generated unrealized gains of approximately $0.9 million (net of $0.3 million deferred tax liability), which was included in Accumulated other comprehensive income at December 31, 2006 and reclassified to the Statement of Consolidated Income in 2007 as the underlying transactions occurred . The Company records related receivables in other current assets. Any ineffective portions of such cash flow hedges are recognized immediately in the Statements of Consolidated Income. In 2007, 2006 and 2005, there was no impact on earnings resulting from hedge ineffectiveness. There were no outstanding cash flow hedges at December 31, 2007.

Note 2 — Recently Issued Accounting Standards

Accounting Standards adopted in 2007:

FIN No. 48:  In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) No. 48. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN No. 48 prescribes a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN No. 48 on January 1, 2007. The transition provisions require that the effect of applying the provisions of FIN No. 48 be reported as an adjustment to the opening balance of retained earnings in the year of adoption. The effect of adoption was a $0.5 million reduction to retained earnings at January 1, 2007.

47

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

EITF No. 06-3:  In June 2006, the FASB ratified the consensus of Emerging Issues Task Force (“EITF”) No. 06-03, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (that is, gross versus net presentation).” EITF No. 06-03 indicates that the income statement presentation of taxes within the scope of the Issue on either a gross basis or a net basis is an accounting policy decision that should be disclosed pursuant to Accounting Principles Board (“APB”) Opinion No. 22 “Disclosure of Accounting Policy”. The Company has historically accounted for such taxes on a net basis and therefore the adoption of EITF No. 06-03 in the first quarter of 2007 had no impact on the Company’s results of operations and financial position.

Accounting Standards Not Yet Adopted:

SFAS No. 160:  In December 2007, the FASB issued SFAS No. 160 (“SFAS No. 160”), “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51”). SFAS No. 160 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. SFAS No. 160 is effective for annual periods beginning after December 15, 2008 and should be applied prospectively. However, the presentation and disclosure requirements of the statement shall be applied retrospectively for all periods presented. The Company has not determined the effect, if any, the adoption of SFAS No. 160 will have on its results of operations, financial position and related disclosure.

SFAS No. 159:  On February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial assets and liabilities and certain other items at fair value that are not currently required to be measured at fair value. An entity will report unrealized gains and losses on items for which the fair value option has been elected in the consolidated statements of income at each subsequent reporting date. The fair value option may be applied on an instrument-by-instrument basis, with several exceptions, such as those investments accounted for by the equity method, and once elected, the option is irrevocable unless a new election date occurs. The fair value option can be applied only to entire instruments and not to portions thereof. The pronouncement also establishes presentation and disclosure requirements to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company has not determined the effect, if any, the adoption of this statement will have on its results of operations, financial position and related disclosures.

SFAS No. 158:  In September 2006, the FASB issued 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).” This standard requires an employer to recognize the overfunded or underfunded status of defined benefit pension and other postretirement plans as an asset or liability in its consolidated balance sheet and to recognize changes in the funded status in the year in which the changes occur as a component of comprehensive income. The standard also requires an employer to measure the funded status of a plan as of the date of its year-end consolidated balance sheet.

The Company adopted the requirement to recognize the funded status of a defined benefit postretirement plan as an asset or liability in its Consolidated Balance Sheet as of December 31, 2006. The adoption resulted in an additional $0.6 million liability related to its postretirement plan and corresponding debit to Accumulated other comprehensive income. The adoption of SFAS No. 158 had no impact on the Company’s defined benefit pension plans. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end

48

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

consolidated balance sheet is effective for fiscal years ending after December 15, 2008. The Company expects to change the measurement date of its postretirement benefit plans from October 31 to the date of its statement of financial position as of December 31, 2008

SFAS No. 157:  In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 for financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis, and should be applied prospectively. The adoption of the provisions of SFAS No. 157 related to financial assets and liabilities and other assets and liabilities that are carried at fair value on a recurring basis is not anticipated to materially impact the Company’s results of operations or financial position. The FASB provided for a one-year deferral of the provisions of SFAS No. 157 for non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a non-recurring basis. The Company has not determined the effect, if any, the adoption of the provisions of SFAS No. 157 for non-financial assets and liabilities will have on its results of operations, financial position and related disclosures.

SFAS No. 141R:  In December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS No. 141R”), “Business Combinations”. SFAS No. 141R will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS No. 141R 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. SFAS 141R 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. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008. SFAS No. 141R must be applied prospectively to business combinations for which the acquisition date is on or after the adoption date. Early adoption is not permitted.

EITF No. 06-4:  In June 2006, the EITF reached a consensus on EITF No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements,” which requires the application of the provisions of SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” to endorsement split-dollar life insurance arrangements. SFAS No. 106 would require the Company to recognize a liability for the discounted future benefit obligation that the Company will have to pay upon the death of the underlying insured employee. An endorsement-type arrangement generally exists when the Company owns and controls all incidents of ownership of the underlying policies. EITF No. 06-4 is effective for fiscal years beginning after December 15, 2007. The Company may have certain policies subject to the provisions of this new pronouncement but has not determined the effect the adoption of EITF No. 06-4 will have on its results of operations, financial position and related disclosures.

Note 3 — Inventories

Inventories consist of the following as of December 31,

	2007		2006
Raw materials and supplies	$	199,901	$	138,913
Work-in-process		32,565		17,265
Finished goods		180,968		60,314
	$	413,434	$	216,492

49

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

Note 4 — Property, Plant and Equipment, net

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

	2007		2006
Land and improvements	$	10,482	$	7,517
Buildings and improvements		140,742		121,321
Machinery and equipment		440,350		355,142
Furniture and fixtures		12,907		14,283
Property, plant and equipment, at cost		604,481		498,263
Less accumulated depreciation		315,647		287,310
	$	288,834	$	210,953

Total depreciation expense on property, plant and equipment was $31.5 million in 2007 and $31.4 million 2006 and 2005.

Note 5 — Investments

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, OMG will supply QSI with raw materials and has the right to market and distribute certain QSI products.

Prior to 2005, the Company had an interest in Weda Bay Minerals, Inc. (“Weda Bay”) that was accounted for under the equity method. As a result of an other-than-temporary decline in value, the investment was written down to $0 in 2002. In December 2005, Weda Bay completed a private placement of 17,600,000 shares of common stock. Subsequent to that transaction, the Company owned approximately 7% of the outstanding shares of Weda Bay at December 31, 2005. In May of 2005, the Company signed a standstill agreement in which it agreed not to sell or otherwise dispose of it shares of Weda Bay for a period of 18 months. In December 2005, as consideration for consenting to the private placement, the Company was released from the standstill agreement, and was therefore free to sell the Weda Bay shares without restriction. Accordingly, the Company concluded that this investment should be accounted for under SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” beginning in December of 2005. At December 31, 2005, the unrealized gain of $4.7 million (based on the quoted market price of related shares) was included in Accumulated other comprehensive income. During 2006, the Company sold the common shares it held in Weda Bay and received cash proceeds of $12.2 million. The Company recognized a $12.0 million gain, net of $0.2 million tax expense, upon completion of the sale. The gain is included in Gain on sale of investment in the Statement of Consolidated Income. The Weda Bay Nickel deposit in Indonesia has not yet been developed, but the Company may be entitled to certain royalties if the project is completed.

Note 6 — Acquisitions

On December 31, 2007, the Company completed the acquisition of REM for approximately $315.6 million in cash, subject to customary post-closing adjustments. The Company incurred fees to date of approximately $4.9 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, its Ultra-Pure Chemicals (“UPC”) business, and its 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, the United Kingdom,

50

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

France, Taiwan, Singapore and China. The acquisition of REM provides new products and expanded distribution channels for the Company’s Electronic Chemicals product line.

The excess of the total purchase price over the estimated fair value of the net assets acquired has been allocated to goodwill and is estimated to be approximately $180.0 million as of December 31, 2007. The allocation of the purchase price to the assets acquired and liabilities assumed is preliminary. When the Company completes its evaluation of the fair value of assets acquired and liabilities assumed, including the valuation of any specifically identifiable intangible assets, the allocation will be adjusted accordingly. Goodwill is not deductible for tax purposes.

The preliminary allocation at December 31, 2007 is summarized below:

Accounts receivable	$	46,090
Inventory		23,121
Other current assets		23,977
Property, plant and equipment		79,733
Other intangibles		38,000
Other assets		2,443
Goodwill		179,955
Total assets acquired		393,319
Accounts payable		24,384
Other current liabilities		12,758
Other liabilities		19,916
Total liabilities assumed		57,058
Net assets acquired	$	336,261
Cash acquired		15,754
Purchase price, net of cash acquired	$	320,507

The unaudited pro forma information below reflects pro forma adjustments which are based upon currently available information and certain estimates and assumptions, and therefore the actual results may differ from the pro forma results. However, the Company believes that the assumptions provide a reasonable basis for presenting the significant effects of the transaction, and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the pro forma financial information.

51

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

The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the acquisition had been completed as of the beginning of 2007 or 2006. The information does not necessarily indicate the future results of operations or financial position of the Company.

	(Unaudited)		(Unaudited)
	Year Ended		Year Ended
	December 31,		December 31,
	2007		2006
Net sales	$	1,223.9	$	847.1
Income from continuing operations before cumulative effect of change in accounting principle	$	112.3	$	20.5
Net income	$	247.6	$	213.0
Net income per common share — basic
Continuing operations	$	3.75	$	0.69
Discontinued operations		4.52		6.55
Cumulative effect of change in accounting principle		—		0.01
Net income	$	8.27	$	7.25
Net income per common share — assuming dilution
Continuing operations	$	3.71	$	0.69
Discontinued operations		4.47		6.50
Cumulative effect of change in accounting principle		—		0.01
Net income	$	8.18	$	7.20

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 to date of approximately $1.2 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.

On March 21, 2006, the Company completed the acquisition of Plaschem Specialty Products Pte Ltd. and its subsidiaries (“Plaschem”). Plaschem develops and produces specialty chemicals for printed circuit board chemistries, semiconductor chemistries and general metal finishing with integrated manufacturing, research and technical support facilities in Singapore and the Shanghai area of China. In connection with the acquisition, the Company paid $5.2 million in cash, net of cash acquired and issued a $0.5 million note payable which was paid in 2007. The Company incurred fees of approximately $0.2 million associated with this transaction. Additional contingent consideration, up to a maximum of $2.0 million, is due to the seller if certain specified financial performance targets of the acquired business are met over the three-year period following the acquisition. At December 31, 2007, the Company has not recorded any contingent consideration. Goodwill of $1.3 million was recognized as a result of this acquisition. Plaschem is included in the Electronic Chemicals product line grouping results of operations since the date of acquisition.

52

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

Note 7 — Discontinued Operations and Disposition of the Nickel Business

On November 17, 2006, the Company entered into a definitive agreement to sell its Nickel business to Norilsk. The Nickel business consisted of the Harjavalta, Finland nickel refinery; the Cawse, Australia nickel mine and intermediate refining facility; a 20% equity interest in MPI Nickel Pty. Ltd.; and an 11% ownership interest in Talvivaara Mining Company, Ltd. The transaction closed on March 1, 2007, and at closing the Company received cash proceeds of $413.3 million. In addition, the agreement provided for a final purchase price adjustment (primarily related to working capital for the net assets sold), which was determined to be $83.2 million and was received by the Company in the second quarter of 2007.

The following table sets forth the components of the proceeds from the sale of the Nickel business:

Initial proceeds	$	413.3
Final purchase price adjustment		83.2
Transaction costs		(6.5	)
	$	490.0

The agreement also provided for interest on the working capital adjustment from the transaction closing date. In 2007, the Company recorded interest income of $1.2 million which is included in Other income (expense), net.

The Company recognized a pretax and after-tax gain on the sale of the Nickel business of $77.0 million and $72.3 million, respectively.

Discontinued operations includes share-based incentive compensation expense related to Nickel management that previously had been included in corporate expenses. No interest expense has been allocated to discontinued operations. The adoption of FIN No. 47, “Accounting for Conditional Asset Retirement Obligations,” at the Cawse, Australia nickel mine in 2005 resulted in a $2.3 million cumulative effect of a change in accounting principle in the Statements of Consolidated Income for the year ended December 31, 2005. The cumulative effect adjustment has not been reclassified to discontinued operations. Upon the adoption of EITF No. 04-6, “Accounting for Stripping Costs Incurred during Production in the Mining Industry,” the Company wrote off the amount of deferred stripping costs at the Cawse, Australia nickel mine that were incurred after production commenced at each pit. The effect of adoption was $1.6 million reduction to retained earnings at January 1, 2006.

During 2003, the Company completed the sale of its copper powders business, SCM Metal Products, Inc. (“SCM”), and PMG. The Company recorded income related to these discontinued operations of $5.8 million in 2006 primarily due to the reversal of a $4.6 million tax contingency accrual and a $2.4 million gain on the sale of a retained PMG building that was fully depreciated, both partially offset by foreign exchange losses of $1.8 million from remeasuring Euro denominated liabilities to U.S. dollars. In 2005, the Company recorded income from these discontinued operations of $9.4 million primarily due to the reversal of a $5.5 million tax contingency accrual, a $1.6 million tax refund related to PMG and foreign exchange gains of $1.6 million from remeasuring Euro-denominated liabilities to U.S. dollars. The reversal of the tax contingency accruals in 2006 and 2005 was due to a change in facts and circumstances.

53

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

Income from discontinued operations consisted of the following for the years ended December 31:

	2007			2006		2005
Net sales	$	193,091		$	790,939	$	632,082
Income from discontinued operations before income taxes	$	82,699		$	236,325	$	58,015
Income tax expense		19,642			44,162		9,026
Income from discontinued operations		63,057			192,163		48,989
Gain on sale of discontinued operations		76,991			—		—
Income tax expense		(4,721	)		—		—
Total income from discontinued operations, net of tax	$	135,327		$	192,163	$	48,989

Assets and liabilities of discontinued operations at December 31, 2006 were as follows:

	December 31,
	2006
Accounts receivable	$	97,050
Inventories		191,380
Property, plant and equipment, net		149,857
Goodwill		46,481
Other current assets		112,914
Assets of discontinued operations	$	597,682
Accounts payable	$	100,644
Other current liabilities		66,504
Liabilities of discontinued operations	$	167,148

Note 8 — Goodwill and Other Intangible Assets

Goodwill is tested for impairment on an annual basis and more often if indicators of impairment exist. Estimates of future cash flows, discount rates and terminal value amounts are used to determine the estimated fair value of the Company’s reporting units. The results of the Company’s testing in 2007 and 2006 confirmed the fair value of each of the reporting units exceeded its carrying value and therefore no impairment loss was required to be recognized.

Under SFAS No. 142, reporting units are defined as an operating segment or one level below an operating segment (i.e. component level). Goodwill was allocated to the reporting units based on their estimated fair values. The assignment of goodwill resulting from the REM acquisition to reporting units has not been completed as of December 31, 2007.

54

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

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

Balance at January 1, 2006	$	132,642
Plaschem acquisition		1,295
Foreign currency translation adjustments		3,606
Balance at December 31, 2006		137,543
Borchers acquisition		2,660
REM acquisition		179,955
Foreign currency translation adjustments		2,014
Balance at December 31, 2007	$	322,172

A summary of intangible assets follows:

	Gross Carrying		Accumulated
	Amount		Amortization			Net Balance
Customer list	$	4,584	$	(3,896	)	$	688
Capitalized software		8,944		(1,319	)		7,625
Other intangibles		40,136		(1,995	)		38,141
Balance at December 31, 2007	$	53,664	$	(7,210	)	$	46,454
Customer list	$	4,584	$	(3,590	)	$	994
Capitalized software		4,336		—			4,336
Other intangibles		2,184		(1,915	)		269
Balance at December 31, 2006	$	11,104	$	(5,505	)	$	5,599

Other intangibles include $38.0 million related to the REM acquisition. The valuation of REM’s and Borchers intangible assets is preliminary as the Company has not completed its appraisal of the acquired assets. The remaining other intangibles consists primarily of patents. The weighted average remaining amortization period for the customer list is 2 years and the weighted average remaining amortization period for capitalized software and the other intangibles, excluding the REM portion, is 3 years at December 31, 2007. Amortization expense related to intangible assets for the years ended December 31, 2007, 2006 and 2005 was approximately $1.7 million, $0.4 million and $1.2 million, respectively. Estimated annual pretax amortization expense for intangible assets is approximately $2.1 million for 2008 and 2009 and $0.6 million for 2010. The expected amortization expense excludes REM and Borchers as the future expense will be dependant on completion of the valuation of the fair value of assets acquired and liabilities assumed. The Company does not have any indefinite lived intangible assets.

During 2005, the Company initiated a multi-year ERP project that is expected to be implemented worldwide to achieve increased efficiency and effectiveness in 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.

55

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

Note 9 — Debt

Debt consists of the following as of December 31:

	2007		2006
Senior Subordinated Notes	$	—	$	400,000
Notes payable — bank		1,649		1,717
Deferred gain on termination of fair value hedges		—		2,520
		1,649		404,237
Less: Short-term debt		347		326
Less: Current portion of long-term debt		166		167
Less: Debt to be redeemed		—		402,520
Total long-term debt	$	1,136	$	1,224

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.

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. 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 provides for interest-only payments during its term, with principal due at maturity. 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 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 expires on December 20, 2010. At December 31, 2007, there were no borrowings outstanding under the Revolver.

The Revolver contains certain covenants, including financial covenants, that require the Company to (i) maintain a minimum cash flow coverage ratio and (ii) not exceed a certain debt to adjusted earnings ratio. As of December 31, 2007, the Company was in compliance with all of the covenants under the Revolver.

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. Unamortized fees of $0.7 million related to the previous revolver were expensed in 2005 and are included in interest expense in the Statements of Consolidated Income.

The Company has two term loans outstanding that expire in 2008 and 2019 and require monthly principal and interest payments. The balance of these term loans was $1.3 million at December 31, 2007 and $1.4 million at December 31, 2006. At December 31, 2007 and 2006, the Company also had a $0.3 million short-term note payable.

56

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

Aggregate annual maturities of total debt are as follows:

2008	$	513
2009		138
2010		138
2011		138
2012		138
thereafter		584
	$	1,649

Interest paid on long-term debt was $8.5 million, $37.5 million, and $38.2 million for 2007, 2006 and 2005, respectively. Interest expense has not been allocated to discontinued operations. No interest was capitalized in 2007, 2006 or 2005.

Note 10 — Financial Instruments

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 anticipated sale during the second quarter of 2008 of cobalt-containing finished products that are priced based on a formula which includes a fixed cobalt price component. These forward purchase contracts have not been designated as hedging instruments under SFAS No. 133. Accordingly, these contracts, with a notional value of $17.3 million, are adjusted to fair value as of the end of each reporting period, with the gain or loss recorded in cost of sales. Fair value is estimated based on the expected future cash flows discounted to present value. Future cash flows are estimated using a theoretical forward price when quoted forward prices are not available. The Company recorded a $6.7 million gain in 2007 related to these contracts. The adjustment to fair value had no cash impact in 2007 as the contracts will be net settled with the counterparty in 2008. These contracts will continue to be marked to fair value until settlement, resulting in additional gains or losses based on changes in the cobalt reference price. The ultimate gain or loss on the forward purchase contracts will be realized upon the net settlement with the counterparty in the second quarter of 2008 when the underlying transactions are scheduled to occur.

During 2006, the Company completed the termination of, and settled for cash, two interest rate swap agreements expiring in 2011. These swap agreements converted $100 million of the fixed 9.25% Notes to a floating rate. The combined pretax loss on the termination of the swaps of $2.9 million was deferred and was being amortized to interest expense through the date on which the swaps were originally scheduled to mature. In previous years, the Company completed the termination of, and settled for cash, other interest rate swap agreements, resulting in an aggregate pretax gain of $8.0 million that was deferred and was being amortized to interest expense through the date on which the swaps were originally scheduled to mature. In connection with the redemption of the Notes on March 7, 2007, the Company recognized a net gain on the terminated interest rate swaps of $2.5 million.

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.

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, 2007 receivables from the five largest customers represented 7% of the Company’s net accounts receivable. Generally, the company does not obtain security from its customers in support of accounts receivable. Historically, minimal credit losses have been incurred.

57

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

Sales to Nichia Chemical Corporation represented approximately 23%, 19% and 19% of net sales in 2007, 2006 and 2005, respectively. Sales to Luvata Pori Oy were approximately 11% of net sales in 2006. No other customer individually represented more than 10% of net sales for any period presented. Sales to the top five customers represented approximately 40% of net sales in 2007. The loss of one or more of these customers, or any decrease in sales to any of these customers, could have a material adverse effect on the Company’s business, results of operations or financial position.

Note 11 — Income Taxes

Income (loss) from continuing operations before income taxes, minority interest and cumulative effect of change in accounting principle consists of the following:

	Year Ended December 31
	2007			2006			2005
United States	$	(50,638	)	$	(72,018	)	$	(48,325	)
Outside the United States		248,893			132,486			30,557
	$	198,255		$	60,468		$	(17,768	)

Income tax expense (benefit) is summarized as follows:

	Year Ended December 31
	2007			2006			2005
Current tax provision (benefit):
United States:
Federal	$	51,195		$	422		$	365
State and local		80			150			(105	)
Outside the United States		40,792			16,118			4,750
Total current		92,067			16,690			5,010
Deferred tax provision (benefit):
United States		(18,997	)		14,077			—
Outside the United States		3,241			(213	)		(3,300	)
Total deferred		(15,756	)		13,864			(3,300	)
	$	76,311		$	30,554		$	1,710

58

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

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
	2007			2006			2005
Income (loss) from continuing operations before income taxes, minority interest and cumulative effect of change in accounting principle	$	198,255		$	60,468		$	(17,768	)
Income taxes at the United States statutory rate (35)%	$	69,389		$	21,164		$	(6,219	)
Effective tax rate differential on earnings/losses outside of the United States		(40,775	)		(23,966	)		(3,061	)
Repatriation of foreign earnings		45,709			92,841			46,900
Malaysian tax holiday		(6,975	)		(6,963	)		(4,899	)
Change in deferred tax rates		1,930			—			—
Increase (reversal) of valuation allowance		4,103			(53,026	)		—
Income with no related tax expense		—			—			(30,769	)
Other, net		2,930			504			(242	)
Income tax expense	$	76,311		$	30,554		$	1,710
Effective income tax rate		38.5	%		50.5	%		−9.6	%

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

	December 31
	2007			2006
Current asset — operating accruals	$	7,131		$	7,892
Current asset — federal operating loss and credit carryforwards		—			71,812
Current liability — earnings repatriation		—			(95,840	)
Current liability — prepaid expenses		(3,069	)		(2,503	)
Non-current asset — employee benefit and other accruals		16,462			17,843
Non-current asset — state operating loss carryforwards		7,827			10,697
Non-current liability — accelerated depreciation		(24,850	)		(9,394	)
Non-current liability — pensions		(4,793	)		(1,559	)
Valuation allowance		(22,048	)		(18,762	)
Net deferred tax liability	$	(23,340	)	$	(19,814	)

59

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

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

	December 31
	2007			2006
Other current assets	$	2,867		$	—
Other non-current assets		6,507			5,648
Other current liabilities		(3,069	)		(21,344	)
Deferred income taxes — non-current liabilities		(29,645	)		(4,118	)
	$	(23,340	)	$	(19,814	)

At December 31, 2007, the Company had U.S. state net operating loss carryforwards representing a potential future tax benefit of approximately $7.8 million. These carryforwards expire at various dates from 2009 through 2028. The U.S. federal net operating losses utilized in 2007 and 2006 were $178.9 million and $32.9 million, respectively, primarily due to the repatriation of earnings. The Company has no U.S. federal net operating loss carryforwards at December 31, 2007.

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 European 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. This tax liability provides sufficient positive evidence that it is more likely than not that the net deferred tax asset related to temporary differences that reverse in 2008 and 2009 will be realized. Because there has been no fundamental change in the Company’s U.S. operations, it is more likely than not that deferred tax assets related to state and local net operating loss carryforwards and temporary differences that will reverse beyond 2009 will not be realized, and therefore the Company has recorded a valuation allowance against those deferred tax assets.

The Company has not provided additional United States income taxes on approximately $140.1 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 reinvested by the 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 $7.0 million, $7.0 million and $4.9 million for 2007, 2006, and 2005, respectively. The benefit of the tax holiday on net income per diluted share was approximately $0.23, $0.24 and $0.17 in 2007, 2006 and 2005, respectively.

During the fourth quarter of 2007, the Company was informed by the DRC taxing authority that its tax holiday had expired, resulting in $9.8 million of tax expense related to income earned in the DRC.

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 2002. Tax returns of certain of the Company’s subsidiaries are being examined by various taxing authorities. The Company has not been informed of any material

60

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

assessments resulting from such examinations for which an accrual has not been previously provided, and the Company would vigorously contest any material assessment. While the examinations are ongoing, the Company believes that any potential assessment would not materially affect the Company’s financial condition or results of operations.

Income tax payments were $75.1 million, $24.7 million and $37.0 million in 2007, 2006 and 2005, respectively.

The Company adopted the provisions of Financial Accounting Standards Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes” on January 1, 2007. As a result of the adoption, the Company recognized a $0.5 million liability which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance at January 1, 2007	$	2.1
Additions for tax positions related to the current year		8.0
Additions for tax positions of prior years		0.3
Reductions for tax positions of prior years		(0.1	)
Settlements		—
Balance at December 31, 2007	$	10.3

If recognized, all uncertain tax positions would affect the effective tax rate. At December 31, 2007, there are no tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties as a component of income tax expense. During the year ended December 31, 2007, the Company recognized approximately $0.7 million in interest and penalties, all of which is accrued at December 31, 2007.

At December 31, 2007, the liability for unrecognized tax benefits includes $0.2 million for uncertain tax positions for which it is reasonably possible that the unrecognized tax position will decrease within the next twelve months. These unrecognized tax benefits relate to mark-ups on management charges and may decrease upon completion of examination by taxing authorities.

Note 12 — Pension and Other Post-Retirement Benefit Plans

The Company sponsors a defined contribution plan covering all eligible U.S. employees. To be eligible for the plan, an employee must be a full-time associate and at least 21 years of age. Company contributions are determined by the board of directors annually and are computed based upon participant compensation. 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. Aggregate defined contribution plan expenses were $2.7 million, $2.4 million and $2.2 million in 2007, 2006 and 2005, respectively. Company contributions are directed by the employee into various investment options. Prior to 2007, Company stock was an investment option. All Company stock was transferred to other investments as of December 31, 2007. At December 31, 2006, the plan had invested in 35,083 shares, or $1.6 million, of the Company’s common stock based on the market price of the common stock on that date.

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. The Company also has an unfunded obligation to its former Chief Executive Officer in settlement of an unfunded supplemental executive retirement plan (“SERP”) and other unfunded post-

61

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

retirement benefit plans (“OPEB”), primarily health care and life insurance for certain employees and non-employees in the United States. The Company uses an October 31 measurement date for both its pension and post-retirement benefit plans.

The non-U.S. plans are not significant and relate primarily to liabilities of the acquired Borchers entities.

Actuarial assumptions used in the calculation of the recorded amounts are as follows:

	2007	2006
U.S. Plans
Weighted-average discount rate	5.50%		5.50	%
Expected return on pension plan assets	7.00%		8.75	%
Projected health care cost trend rate	9.00%		10.00	%
Ultimate health care cost trend rate	5.00%		6.00	%
Year ultimate health care trend rate is achieved	2012		2011
Non U.S. Plans
Weighted-average discount rate	5.0% - 5.25%		n/a
Expected return on pension plan assets	5.0% - 6.0%		n/a

The Company employs a total return investment approach for the defined benefit pension plan assets. A mix of equities and fixed income investments are used to maximize the long-term return of assets for a prudent level of risk. 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.

The Company’s U.S. pension plan weighted-average asset allocations and target allocation by asset category are as follows:

	Target			December 31,
	Allocation			2007			2006
Equity securities		50	%		54	%		47	%
Debt securities		50	%		45	%		53	%
Cash		—			1	%		—
Total assets		100	%		100	%		100	%

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. During 2006, the Company reviewed the investment allocations and changed the target allocations. As a result of the change in the target allocation, the expected return on pension plan assets assumption for 2007 decreased to 7.0% from the 8.75% assumption used in 2006.

62

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									Non-U.S. Plans
	2007			2006			2005			2007
Service cost	$	—		$	—		$	—		$	4
Interest cost		1,317			1,272			1,246			8
Amortization of unrecognized net loss		302			269			214			—
Expected return on plan assets		(788	)		(922	)		(575	)		(2	)
Amortization of unrecognized prior service cost		—			—			172			—
Amortization of unrecognized net transition (asset) obligation		—			9			(369	)		—
SERP expense related to former CEO		—			1,413			2,919			—
	$	831		$	2,041		$	3,607		$	10

	Other Post-retirement Benefits
	U.S. Plans
	2007		2006		2005
Service cost		82		131		69
Interest cost		264		242		252
Net amortization		40		40		40
	$	386	$	413	$	361

63

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
	2007			2006			2007
Change in benefit obligation
Projected benefit obligation at beginning of year	$	(24,902	)	$	(22,737	)	$	—
Service cost		—			—			(4	)
Interest cost		(1,317	)		(1,272	)		(8	)
Actuarial loss (gain)		171			(673	)		(9	)
Benefits paid		904			997			14
Acquisition		—			—			(1,866	)
Foreign currency exchange rate changes		—			—			(64	)
SERP payments (increase) related to former CEO		672			(1,217	)		—
Projected benefit obligation at end of year	$	(24,472	)	$	(24,902	)	$	(1,937	)
Change in plan assets
Fair value of plan assets at beginning of year	$	10,940		$	9,951		$	—
Actual return on plan assets		1,025			922			2
Employer contributions		1,625			1,064			251
Acquisition		—			—			81
Foreign currency exchange rate changes		—			—			10
Benefits paid		(904	)		(997	)		(14	)
Fair value of plan assets at end of year	$	12,686		$	10,940		$	330
Funded status — plan assets less than benefit obligations	$	(11,786	)	$	(13,962	)	$	(1,607	)
Recognized in accumulated other comprehensive income:
Net actuarial loss	$	8,744		$	9,453		$	9
Amounts not yet recognized as a component of net postretirement benefit cost	$	8,744		$	9,453		$	9
Amounts recorded in the balance sheet consist of:
Accrued benefit liability	$	(11,786	)	$	(13,962	)	$	(1,607	)
Accumulated other comprehensive loss		8,744			9,453			9
Net amount recognized	$	(3,042	)	$	(4,509	)	$	(1,598	)

64

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

	Other Post-retirement Benefits
	U.S. Plans
	2007			2006
Change in benefit obligation
Projected benefit obligation at beginning of year	$	(4,988	)	$	(4,514	)
Service cost		(82	)		(131	)
Interest cost		(264	)		(242	)
Actuarial loss		(1,131	)		(391	)
Benefits paid		385			290
Projected benefit obligation at end of year	$	(6,080	)	$	(4,988	)
Change in plan assets
Fair value of plan assets at beginning of year	$	—		$	—
Employer contributions		385			290
Benefits paid		(385	)		(290	)
Fair value of plan assets at end of year	$	—		$	—
Funded status — plan assets less than benefit obligations	$	(6,080	)	$	(4,988	)
Recognized in accumulated other comprehensive income:
Net actuarial gain	$	1,431		$	301
Prior service cost		231			271
Amounts not yet recognized as a component of net postretirement benefit cost	$	1,662		$	572
Amounts recorded in the balance sheet consist of:
Accrued benefit liability	$	(6,080	)	$	(4,988	)
Accumulated other comprehensive loss		1,662			572
Net amount recognized	$	(4,418	)	$	(4,416	)

The accumulated benefit obligation at December 31, 2007 and 2006 equals the projected benefit obligation at December 31, 2007 and 2006 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, 2007 and 2006 approximates the projected benefit obligation at December 31, 2007 and 2006 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 $1.5 million to its pension plans in 2008.

65

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

Future pension and other post-retirement benefit payments expected to be paid are as follows:

			Other
			Postretirement
Expected Benefit Payments	Pension		Benefits
2008	$	1,855	$	383
2009	$	1,822	$	413
2010	$	1,835	$	413
2011	$	1,870	$	420
2012	$	1,825	$	393
2013-2017	$	9,295	$	1,939

The expected other post-retirement benefits payments included above are net of expected Medicare subsidy receipts of approximately $0.5 million, to be received over the 10 year period 2008 — 2017.

The amounts in accumulated other comprehensive income that are expected to be recognized as components of net periodic benefit cost during 2008 are as follows:

			Other
			Postretirement
	Pension		Benefits
Net actuarial loss	$	277	$	609
Prior service cost		—		40
Total	$	277	$	649

Assumed health care cost trend rates may have a significant effect on the amounts reported for other post-retirement benefits. A one percentage point change in the assumed health care cost trend rate would have the following effect:

	1% Increase		1% Decrease
Benefit cost	$	84	$	(66	)
Projected benefit obligation	$	897	$	(734	)

66

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

Note 13 — Accumulated Other Comprehensive Income (Loss)

				Unrealized
				Gains and
				Losses, Net			Unrealized						Accumulated
	Foreign			on Cash Flow			Gain on			Pension and			Other
	Currency			Hedging			Available for			Post-Retirement			Comprehensive
	Translation			Derivatives			Sale Securities			Obligation			Income (Loss)
Balance January 31, 2005		25,065			3,475			930			(8,183	)		21,287
Reclassification adjustments		(723	)		(3,475	)		(930	)		—			(5,128	)
Current period credit (charge)		(5,642	)		1,289			4,745			(1,071	)		(679	)
Deferred taxes		—			(335	)		—			—			(335	)
Balance December 31, 2005		18,700			954			4,745			(9,254	)		15,145
Reclassification adjustments		—			(954	)		(4,745	)		—			(5,699	)
Current period credit (charge)		10,394			12,941			—			(199	)		23,136
Deferred taxes		—			(3,117	)		—			—			(3,117	)
Adoption of SFAS No. 158		—			—			—			(572	)		(572	)
Balance December 31, 2006		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 December 31, 2007	$	18,080		$	—		$	—		$	(10,415	)	$	7,665

During 2005, $0.7 million which had been included as a component of foreign currency translation in Accumulated other comprehensive income was charged to foreign exchange loss in the Statements of Consolidated Income pursuant to the liquidation of an entity in Thailand.

Note 14 — Earnings Per Share

The following table sets forth the computation of basic and dilutive income (loss) per common share from continuing operations before cumulative effect of change in accounting principle for the years ended December 31:

	2007		2006		2005
Income (loss) from continuing operations before cumulative effect of change in accounting principle	$	111,539	$	23,623	$	(12,350	)
Weighted average shares outstanding		29,937		29,362		28,679
Dilutive effect of stock options and restricted stock		339		216		—
Weighted average shares outstanding — assuming dilution		30,276		29,578		28,679
Income (loss) per common share from continuing operations before cumulative effect of change in accounting principle	$	3.73	$	0.80	$	(0.43	)
Income (loss) per common share from continuing operations before cumulative effect of change in accounting principle — assuming dilution	$	3.68	$	0.80	$	(0.43	)

67

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

The following table sets forth the computation of basic and dilutive net income per common share for the years ended December 31:

	2007		2006		2005
Net income	$	246,866	$	216,073	$	38,891
Weighted average shares outstanding		29,937		29,362		28,679
Dilutive effect of stock options and restricted stock		339		216		—
Weighted average shares outstanding — assuming dilution		30,276		29,578		28,679
Net income per common share	$	8.25	$	7.36	$	1.36
Net income per common share — assuming dilution	$	8.15	$	7.31	$	1.36

Due to the net loss in 2005, 1.6 million shares of unvested stock options and restricted stock that could potentially dilute income (loss) per common share from continuing operations before cumulative effect of change in accounting principle in the future were not included in the computation because to do so would have been antidilutive.

Note 15 — Share-Based Compensation

On May 8, 2007, the stockholders of the Company approved the 2007 Incentive Compensation Plan (the “2007 Plan”). The 2007 Plan supersedes and replaces 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 will 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 10-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 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.

In December 2004, the FASB issued SFAS No. 123 (revised), “Share-Based Payments” (“SFAS No. 123R”). SFAS No. 123R is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) and supersedes APB No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123R requires that the cost of transactions involving share-based payments be recognized in the financial statements based on a fair-value-based measurement. The Company adopted SFAS No. 123R on January 1, 2006 using the modified prospective method. The Company has selected the Black-Scholes option-pricing model and will recognize compensation expense on a straight-line method over the awards’ vesting period. Previously, the Company expensed share-based payments under the provisions of SFAS No. 123.

SFAS No. 123R requires the Company to estimate forfeitures in calculating the expense relating to share-based compensation while SFAS No. 123 had permitted the Company to recognize forfeitures as an expense reduction upon occurrence. The adjustment to apply estimated forfeitures to previously recognized share-based compensation

68

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

was accounted for as a cumulative effect of a change in accounting principle at January 1, 2006 and increased net income by $0.3 million, or $.01 per basic and diluted share, for the year ended December 31, 2006. The income tax expense related to the cumulative effect was offset by a corresponding change in deferred tax assets and valuation allowance; thus, there was no net tax impact upon adoption of SFAS 123R. As a result of adopting SFAS No. 123R, the Company’s income from continuing operations for the year ended December 31, 2006 increased $0.1 million as share-based compensation expense was reduced for estimated forfeitures.

The Statements of Consolidated Income 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 $7.2 million, $5.2 million and $3.5 million in 2007, 2006 and 2005, 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 2006 or 2005. In connection with the sale of the Nickel business, the Company entered into agreements with certain Nickel 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 Income include share-based compensation expense as a component of discontinued operations of $0.7 million, $0.8 million and $0.5 million in 2007, 2006 and 2005, respectively.

At December 31, 2007, there was $9.1 million of unrecognized compensation expense related to nonvested share-based awards. That cost is expected to be recognized as follows: $5.6 million in 2008, $3.3 million in 2009 and $0.2 million in 2010 as a component of Selling, general and administrative expenses. There is no unrecognized compensation expense related to the Nickel business. Unearned compensation expense is recognized over the vesting period for the particular grant. Unrecognized compensation cost will be adjusted for future changes in actual and estimated forfeitures.

In connection with the exercise of stock options previously granted, the Company received cash payments of $11.3 million in 2007, $11.6 million in 2006 and $0.1 million in 2005. SFAS 123R requires that excess tax benefits be recognized as an increase to additional paid-in capital. The exercise of stock options during 2007 resulted in a $1.7 million increase in additional paid-in capital. The Company issues new shares to satisfy stock option exercises and restricted stock awards. The Company does not settle share-based payment obligations for cash.

Beginning in 2007, non-employee directors of the Company are paid a portion of their annual retainer in unrestricted shares of common stock. Shares awarded under the plan are fully vested and are not subject to any restrictions. For purposes of determining the number of shares of common stock to be issued, the shares are measured using 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 1,919 shares during the fourth quarter of 2007.

Stock Options

Options granted generally vest in equal increments over a three-year period from the grant date. 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 2007 and 2006, the Company granted stock options to purchase 184,750 and 144,700 shares of common stock, respectively. Upon any change in control of the Company, as defined in the applicable plan, the stock options become 100% vested and exercisable.

In June 2005, as an inducement to join the Company, the CEO was granted options to purchase 254,996 shares of common stock, of which options for 80,001 shares vested on May 31, 2006, options for 85,050 shares vested on May 31, 2007 and options for 89,945 shares vest on May 31, 2008, subject to the CEO remaining employed by the Company on that date. The options that vested in 2006 have an exercise price equal to the market price of the Company’s common stock on the date of grant ($24.89). The options that vested in 2007 and will vest in 2008 have

69

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

exercise prices set above the grant date market price of the Company’s common stock ($28.67 and $33.67, respectively).

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:

	2007			2006			2005
Risk-free interest rate		4.7	%		4.9	%		4.0	%
Dividend yield		—			—			—
Volatility factor of Company common stock		0.47			0.47			0.44
Weighted-average expected option life (years)		6.0			6.1			5.0
Weighted-average grant-date fair value	$	26.24		$	14.97		$	9.61

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 shortcut method allowed by Staff Accounting Bulletin (“SAB”) No. 107. 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 and weighted-average grant-date fair value:

			Weighted-Average
			Fair Value at
	Shares		Grant Date
Non-vested at December 31, 2006		439,008	$	11.60
Non-vested at December 31, 2007		364,343	$	18.46
Granted during 2007		184,750	$	26.24
Vested during 2007		254,665	$	12.18
Vested during 2006		324,316	$	11.12
Vested during 2005		216,666	$	11.99
Forfeited during 2007		4,750	$	47.61

The fair value of options that vested during 2007, 2006 and 2005 was $3.1 million, $3.6 million and $2.6 million, respectively. The intrinsic value of options exercised during 2007, 2006 and 2005 was $6.4 million, $8.2 million and $1.3 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.

70

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

A summary of the Company’s stock option activity for 2007 is as follows:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding at January 1, 2007		894,703		$	32.40
Granted		184,750			51.16
Exercised		(308,021	)		36.53
Expired unexercised		(11,000	)		54.76
Forfeited		(4,750	)		47.61
Outstanding at December 31, 2007		755,682		$	34.88		7.67	$	17,170,998
Vested or expected to vest at December 31, 2007		748,952		$	34.81		7.66	$	17,072,619
Exercisable at December 31, 2007		391,339		$	29.85		6.93	$	10,884,737

Restricted Stock — Performance-Based Awards

During 2007 and 2006, the Company awarded 86,854 and 99,520 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. Of the 86,854 shares awarded during 2007, 80,600 shares will vest upon the satisfaction of established performance criteria based on consolidated operating profit and average return on net assets over a three-year performance period ending December 31, 2009. The remaining 6,254 shares will vest if the Company meets an established earnings target for the Specialties business segment during any one of the years in the three-year period ending December 31, 2009. The target for the 6,254 shares was not met for the year ended December 31, 2007.

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 service 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, the shares become 100% vested. 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 a Nickel 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.

71

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

A summary of the Company’s performance-based restricted stock awards for 2007 is as follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Non-vested at January 1, 2007		95,900		$	28.93
Granted		86,854			42.13
Vested		(3,825	)		28.80
Forfeited		(7,865	)		32.65
Non-vested at December 31, 2007		171,064		$	35.46
Expected to vest at December 31, 2007		164,810

Restricted Stock — Time-Based Awards

During 2007 and 2006, the Company awarded 24,360 and 23,300 shares, respectively, of time-based restricted stock that vest three years from the date of grant subject to the respective recipient remaining employed by the Company on that date. The value of the restricted stock awarded in 2007 and 2006, based upon the market price of an unrestricted share of the Company’s common stock at the date of grant, was $1.2 million and $0.7 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, 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 a Nickel 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.

In June 2005, the Company granted 166,194 shares of restricted stock to its CEO in connection with his hiring. The restricted shares vest on May 31, 2008, subject to the CEO remaining employed by the Company on that date. During the second quarter of 2006, the Company amended the restricted stock agreement to provide for pro rata vesting of the shares covered by the restricted stock agreement in the event the CEO becomes disabled or dies prior to the May 31, 2008 vesting date. The market value of the restricted stock award based upon the market price ($24.89) of an unrestricted share of the Company’s common stock at the date of grant was $4.1 million and the expense is being recognized ratably over the vesting period.

A summary of the Company’s time-based restricted stock awards for 2007 is as follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Non-vested at January 1, 2007		188,494		$	25.39
Granted		24,360		$	51.16
Vested		(2,100	)	$	28.76
Forfeitures		(1,250	)	$	43.10
Non-vested at December 31, 2007		209,504		$	28.25
Expected to vest at December 31, 2007		209,159		$	28.24

72

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

Note 16 — Commitments and Contingencies

The Company received a letter, dated February 11, 2008, from the Ministry of Mining of the government of the DRC with respect to the Company’s joint venture smelter operations in the DRC. The letter contains the results of an inter-ministerial review of the joint venture’s contracts, which review was undertaken as part of a broader examination of mining contracts in the DRC to determine whether any such contracts need to be revisited and whether adjustments are recommended to be made. The Company is currently reviewing the contents of the letter and preparing its response, which is due by March 5, 2008, and believes that any potential impact is not reasonably likely to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

During 2007, the Company entered into five-year supply agreements with Norilsk for up to 2,500 metric tons per year of cobalt metal, up to 2,500 metric tons per year of cobalt in the form of crude 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. In addition, the Company entered into two-year agency and distribution agreements for nickel salts.

The Division of Enforcement of the Securities and Exchange Commission (the “SEC”) conducted an informal investigation resulting from the self reporting by the Company of the internal investigation conducted in 2003 and 2004 by the audit committee of the Company’s board of directors in connection with the previously filed restatement of the Company’s financial results for periods prior to December 31, 2003. On July 18, 2007, without admitting or denying the nonjurisdictional findings by the SEC, the Company consented to an order to cease-and-desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934, and Rules 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 under the Securities Exchange Act. The SEC considered remedial acts promptly undertaken by the Company and cooperation afforded the SEC staff and did not assess the Company any financial penalties.

During 2005, the Company reversed a $5.5 million tax contingency accrual that was originally established in July 2003 upon the sale of PMG as the liability was no longer considered probable. The contingency relates to a tax matter in Brazil for which the Company has indemnified the PMG buyer under terms of the PMG sale agreement. This case was heard during the fourth quarter of 2007 and a favorable ruling was received; therefore this contingency has been resolved.

During 2007, the Company became aware of two contingent liabilities related to the Company’s former PMG operations in Brazil. The contingencies, which remain the responsibility of OMG to the extent the matters relate to the period from 2001-2003 during which the Company owned PMG, are potential assessments by Brazilian taxing authorities related to duty drawback tax for items sold by PMG, and certain VAT and/or Service Tax assessments. The Company has assessed the current likelihood of an unfavorable outcome of these contingencies and concluded that they are reasonably possible but not probable. If the ultimate outcome of these contingencies is unfavorable, the loss, based on exchange rates at December 31, 2007, would be up to $24.3 million and would be recorded in discontinued operations.

The Company is a party to various other legal proceedings incidental to its business and 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 has estimated the undiscounted costs of remediation, which will be incurred over several years. The Company accrues an amount consistent with the estimates of these costs when it is

73

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

probable that a liability has been incurred. The Company’s expense related to environmental liabilities was $4.9 million in 2007, $4.2 million in 2006 and $2.8 million in 2005. At December 31, 2007 and 2006 the Company has recorded environmental liabilities of $4.9 million and $8.0 million, respectively, primarily related to remediation and decommissioning at the Company’s closed manufacturing sites in Newark, New Jersey and Vasset, France. The Company has recorded $3.2 million in other current liabilities and $1.7 million in Other non-current liabilities as of December 31, 2007.

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, as well as other legal proceedings arising out of operations in the normal course of business, 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.

Note 17 — Lease Obligations

The Company rents office space, equipment, land and an airplane under long-term operating leases. The Company’s operating lease expense was $5.2 million in 2007, $4.3 million in 2006 and $4.2 million in 2005.

Future minimum payments under noncancellable operating leases, including REM and Borchers, at December 31, 2007 are as follows for the year ending December 31:

2008	$	4,472
2009		4,123
2010		3,831
2011		1,636
2012		1,609
2013 and thereafter		8,317
Total minimum lease payments	$	23,988

Note 18 — Reportable Segments and Geographic Information

As a result of the sale of the Nickel business on March 1, 2007, the Company’s consolidated financial statements, accompanying notes and other information provided in this Form 10-K reflect the Nickel segment as a discontinued operation for all periods presented. The Nickel business consisted of the Harjavalta, Finland nickel refinery, the Cawse, Australia nickel mine and intermediate refining facility, a 20% equity interest in MPI Nickel Pty. Ltd. and an 11% ownership interest in Talvivaara Mining Company, Ltd.

After reclassifying the Nickel segment to discontinued operations, the Company has one remaining operating segment — Specialties. The Specialties segment includes products manufactured using cobalt and other metals such as copper, zinc, manganese, and calcium. In late 2005, the Company began a strategic transformation away from commodity-based businesses and markets to value-added, specialty businesses and markets. The sale of the Company’s Nickel business, discussed above, was part of the transformation. Pursuant to the transformation, the Vice President and General Manager of the Specialties segment established three business units that represent product line groupings around end markets: Advanced Organics, Inorganics and Electronic Chemicals. The Specialties segment also includes certain other operations, primarily the DRC smelter operations, which are not classified into one of these groupings. The Company’s products are sold in various forms such as solutions, crystals and powders. The Company’s products are essential components in numerous complex chemical and industrial processes and are used in many end markets.

On October 1, 2007, the Company acquired Borchers, a European-based specialty coatings additive supplier that offers products to enhance the performance of coatings and ink systems from the production stage through customer

74

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

end use. Borchers has locations in Germany and France. The Borchers operations are included with the Company’s existing Advanced Organics product line grouping from the date of acquisition. The results of operations of Borchers are included in the Company’s results beginning October 1, 2007.

On December 31, 2007, the Company acquired REM. The REM businesses consist of its Printed Circuit Board business, Ultra-Pure Chemicals business, and its 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, the United Kingdom, France, Taiwan, Singapore and China. The financial position of REM is included in the consolidated balance sheet as of December 31, 2007.

As a result of the acquisition of REM, beginning January 1, 2008, the Company reorganized its management structure and external reporting around two reportable segments: Specialty Chemicals and Advanced Materials. However, as discussed above, the Company operated only the Specialties segment throughout 2007.

Corporate is comprised of general and administrative expenses not allocated to Specialties.

The following table reflects the 2007, 2006 and 2005 sales for the product line groupings within Specialties:

	2007		2006		2005
Net Sales
Inorganics	$	717,605	$	422,496	$	400,921
Advanced organics		194,620		151,114		157,195
Electronic chemicals		109,276		86,494		59,411
	$	1,021,501	$	660,104	$	617,527

Sales to one customer represented approximately 23%, 19% and 19% of net sales in 2007, 2006 and 2005, respectively. In addition, sales to another customer were approximately 11% of net sales in 2006. There are a limited number of supply sources for cobalt. Production problems or political or civil instability in supplier countries, primarily the DRC, Australia, 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.

While its primary manufacturing site is in Finland, the Company also has manufacturing and other facilities in North America, Europe and Asia-Pacific, and the Company markets its products worldwide. Further, approximately 24% 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.

75

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

	2007			2006			2005
Business Segment Information
Net Sales
Specialties	$	1,021,501		$	660,104		$	617,527
Operating profit (loss)
Specialties	$	232,042		$	115,349		$	36,124
Corporate(a)		(35,807	)		(40,090	)		(11,012	)
	$	196,235		$	75,259		$	25,112
Interest expense	$	(7,820	)	$	(38,659	)	$	(41,064	)
Loss on redemption of Notes		(21,733	)		—			—
Interest income		23,922			8,566			1,904
Foreign exchange gain (loss)		8,100			3,661			(4,580	)
Gain on sale of investment		—			12,223			—
Other (expense) income, net		(449	)		(582	)		860
		2,020		$	(14,791	)	$	(42,880	)
Income (loss) from continuing operations before income taxes, minority interest and cumulative effect of change in accounting principle	$	198,255		$	60,468		$	(17,768	)
Expenditures for property, plant & equipment
Specialties	$	19,357		$	14,547		$	13,386
Depreciation and amortization
Specialties	$	32,333		$	30,867		$	30,676
Corporate		896			974			1,917
	$	33,229		$	31,841		$	32,593
Total assets
Specialties	$	1,034,025		$	826,488
Corporate		41,866			194,054
REM		393,319			—
Assets of discontinued operations		—			597,682
	$	1,469,210		$	1,618,224

76

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

			Long-Lived
	Net Sales(b)		Assets(c)
Geographic Region Information
2007
Finland	$	373,148	$	76,491
United States		178,894		47,298
Japan		313,195		80
Other		156,264		95,273
Democratic Republic of the Congo		—		69,692
	$	1,021,501	$	288,834
2006
Finland	$	209,603	$	75,257
United States		147,395		32,347
Japan		189,493		77
Other		113,613		23,047
Democratic Republic of the Congo		—		80,225
	$	660,104	$	210,953
2005
Finland	$	171,190
United States		177,275
Japan		178,887
Other		90,175
Democratic Republic of the Congo		—
	$	617,527

(a)	In 2006, the Corporate loss includes a $3.2 million charge related to the settlement of litigation with the Company’s former CEO. In 2005, the Corporate loss includes $27.5 million of income related to the receipt of net insurance proceeds after legal expenses, charges totaling $9.6 million related to the departure of the Company’s former CEO and former CFO and $4.6 million of income related to the mark-to-market of 380,000 shares of common stock issued in connection with the shareholder derivative litigation.
(b)	Net sales attributed to the geographic area are based on the location of the manufacturing facility, except for Japan, which is a sales office.
(c)	Long-lived assets consists of property, plant and equipment, net and includes a preliminary allocation of $79.7 million related to REM. The Company has not yet completed its evaluation of the fair value of assets acquired.

77

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

Note 19 — Quarterly Results of Operations (Unaudited)

	2007
	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter		Full Year
Net sales	$	216,196		$	231,298		$	264,640		$	309,367	$	1,021,501
Gross profit	$	72,244		$	83,677		$	73,138		$	84,185	$	313,244
Income (loss) from continuing operations	$	(18,541	)	$	44,132		$	39,507		$	46,441	$	111,539
Income (loss) from discontinued operations, net of tax		61,019			1,904			(1,412	)		1,546		63,057
Gain (loss) on sale of discontinued operations, net of tax		72,289			(19	)		—			—		72,270
Net income	$	114,767		$	46,017		$	38,095		$	47,987	$	246,866
Net income (loss) per common share — basic
Continuing operations	$	(0.63	)	$	1.48		$	1.32		$	1.55	$	3.73
Discontinued operations		4.48			0.06			(0.05	)		0.05		4.52
Net income	$	3.85		$	1.54		$	1.27		$	1.60	$	8.25
Net income (loss) per common share — assuming dilution
Continuing operations	$	(0.63	)	$	1.46		$	1.30		$	1.53	$	3.68
Discontinued operations		4.48			0.06			(0.04	)		0.05		4.47
Net income	$	3.85		$	1.52		$	1.26		$	1.58	$	8.15

In the first quarter of 2007, the Company recognized a pre-tax and after-tax gain on the sale of the Nickel business of $77.0 million and $72.3 million, respectively. The first quarter of 2007 also includes a $21.7 million loss ($14.1 million after tax) on redemption of the Notes, and income tax expense of $38.8 million related to repatriation of cash from foreign entities for the redemption of the Notes in March 2007.

The second quarter of 2007 includes $2.0 million in legal fees for a lawsuit the Company filed related to the unauthorized use by a third-party of proprietary information and a $1.1 million charge to increase the environmental liability due to a change in the estimate to complete the environmental remediation activities at the Company’s closed Newark, New Jersey site. Income from continuing operations also reflects the extension of the tax holiday in Malaysia retroactive to January 1, 2007, which resulted in a reduction in income tax expense in the second quarter of $3.6 million, of which $2.7 million relates to and would have been recorded in the first quarter of 2007 if the extension had been granted during the first quarter of 2007.

The third quarter of 2007 includes a $3.5 million charge to increase the estimated environmental remediation liability related to the Newark, New Jersey site and $1.2 million in legal fees for a lawsuit the Company filed related to the unauthorized use by a third-party of proprietary information.

The fourth quarter of 2007 includes the results of Borchers. The fourth quarter of 2007 also includes income tax expense of $18.6 million, or an effective income tax rate of 28.1%, which includes $9.8 million of expense related to income earned in the DRC. During the fourth quarter of 2007, the Company was informed by the DRC taxing authority that its tax holiday had expired.

78

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

	2006
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter			Full Year
Net sales	$	142,447	$	175,156	$	170,420	$	172,081		$	660,104
Gross profit	$	34,154	$	50,535	$	53,175	$	46,803		$	184,667
Income (loss) from continuing operations before cumulative effect of change in accounting principle	$	2,744	$	24,085	$	13,830	$	(17,036	)	$	23,623
Income from discontinued operations, net of tax		15,142		29,030		74,178		73,813			192,163
Cumulative effect of change in accounting principle		287		—		—		—			287
Net income	$	18,173	$	53,115	$	88,008	$	56,777		$	216,073
Net income (loss) per common share — basic
Continuing operations	$	0.09	$	0.82	$	0.47	$	(0.58	)	$	0.80
Discontinued operations		0.52		0.99		2.53		2.51			6.55
Cumulative effect of change in accounting principle		0.01		—		—		—			0.01
Net income	$	0.62	$	1.81	$	3.00	$	1.93		$	7.36
Net income (loss) per common share — assuming dilution
Continuing operations	$	0.09	$	0.82	$	0.47	$	(0.58	)	$	0.80
Discontinued operations		0.52		0.98		2.50		2.51			6.50
Cumulative effect of change in accounting principle		0.01		—		—		—			0.01
Net income	$	0.62	$	1.80	$	2.97	$	1.93		$	7.31

The first quarter of 2006 includes $0.3 million of income related to the cumulative effect of a change in accounting principle for the adoption of SFAS No. 123R, “Share-Based Payments.” See further discussion of the adoption of SFAS No. 123R in Note 15.

The second quarter of 2006 includes a $12.0 million gain related to the sale of common shares of Weda Bay Minerals, Inc. The net book value of the investment was zero due to a permanent impairment charge recorded in prior years. The second quarter also includes an additional $1.0 million reserve provided against the note receivable from our joint venture partner in the DRC.

The fourth quarter of 2006 includes a $1.8 million charge for the settlement of litigation related to the termination of the Company’s former chief executive officer.

In the fourth quarter of 2006, the effective income tax rate for the full year 2006 for continuing operations was adjusted to 50.5% from 19.2%. The adjustment relates primarily to providing additional U.S. income taxes on $384.1 million of undistributed earnings of consolidated foreign subsidiaries as of December 31, 2006. The taxes provided on such earnings were partially offset by the reversal of the valuation allowance against certain operating loss carryforwards. Previously, the Company’s intent was for such earnings to be reinvested by the subsidiaries indefinitely. However, due primarily to the planned redemption of the Notes in March 2007 the Company determined it would repatriate such undistributed earnings to the United States during 2007.

79

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, 2007. 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 not effective as of December 31, 2007, due solely to the material weakness in the Company’s internal control over financial reporting as described below in “Management’s Report on Internal Control over Financial Reporting.” In light of this material weakness, the Company performed additional analysis as deemed necessary to ensure that the consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the consolidated financial statements included in this report present fairly in all material respects the Company’s financial position, results of operations and cash flows for the period presented.

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) and 15d-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, 2007 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 did not maintain effective internal control over financial reporting solely as a result of the following material weakness:

•  The Company did not maintain effective controls over its accounting for income taxes. This material weakness resulted in adjustments during the year-end audit process to income tax expense and accrued income taxes.

On October 1, 2007, the Company acquired Borchers, a European-based specialty coatings additive supplier. On December 31, 2007, the Company completed the acquisition of REM from Rockwood Specialties Group, Inc. Due to the close proximity of the completion date of the acquisitions to the date of management’s assessment of the effectiveness of the Company’s internal control over financial reporting, management did not include Borchers and REM in its assessment of internal control over financial reporting.

The total combined assets of Borchers and REM represented 28% of the Company’s total assets as of December 31, 2007.

The operating results of Borchers are included in the Company’s financial statements from the date of acquisition. The assets and liabilities of REM are included in the Company’s Consolidated Balance Sheet at December 31, 2007. Operating results of REM will be included in the Company’s financial statements beginning January 1, 2008.

Changes in Internal Controls

Management previously identified a material weakness with respect to the Company’s accounting for income taxes in 2006 and addressed this material weakness by identifying and implementing additional enhancements to the related control procedures and by hiring a third-party service provider to review the Company’s tax provision. However, these

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remediation steps implemented during 2007 did not adequately remediate the material weakness in accounting for income taxes.

In light of the continuation of the material weakness described above in 2007, the Company plans to implement additional review and control procedures to ensure compliance with SFAS No. 109, FIN No. 48, and other applicable rules and regulations with respect to tax matters. The Company believes that such actions will remediate the material weakness in 2008.

There were no other changes in the Company’s internal control over financial reporting in connection with the Company’s fourth quarter 2007 evaluation, or subsequent to such evaluation, that would materially affect, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.  Other Information

None.

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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 Securities Exchange Act of 1934 in connection with the 2008 Annual Meeting of Stockholders of the Company (the “2008 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 2008 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 Securities Exchange Act of 1934 will be set forth in the 2008 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 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 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.

In accordance with New York Stock Exchange rules, on June 5, 2007, 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 2008 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 2008 Proxy Statement under the heading “Security Ownership of Directors, Executive Officers and Certain Beneficial Owners” and is incorporated herein by reference.

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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, 2007.

					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		outstanding options)
Equity Compensation Plans Approved by the Stockholders		748,952	$	34.81		2,998,081
Equity Compensation Plans Not Approved by the Stockholders(a)		88,934	$	33.67		—

(a) As an inducement to join the Company, on June 30, 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 will become exercisable on May 31, 2008 if the Chief Executive Officer remains employed by the Company on that date. 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 2008 Proxy Statement under the headings “Corporate Governance and Board Matters — Certain Relationships and Related Transactions” and “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 2008 Proxy Statement under the heading “Description of Principal Accountant Fees and Services” and is incorporated herein by reference.

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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, 2007 and 2006

Statements of Consolidated Income for the years ended December 31, 2007, 2006 and 2005

Statements of Consolidated Comprehensive Income for the years ended December 31, 2007, 2006 and 2005

Statements of Consolidated Cash Flows for the years ended December 31, 2007, 2006 and 2005

Statements of Consolidated Stockholders’ Equity for the years ended December 31, 2007, 2006 and 2005

Notes to Consolidated Financial Statements

(2) Schedule II — Valuation and Qualifying Accounts for the years ended December 31, 2007, 2006 and 2005

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	Amended and Restated Certificate of Incorporation of the Company.‡
3.2	Amended and Restated Bylaws of the Company.
(4) Instruments defining rights of security holders including indentures.
4.1	Form of Common Stock Certificate of the Company.‡
4.2	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 March 9, 2006).
4.3	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 February 28, 2007).
4.4	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 February 28, 2007).
(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).

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*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) effective as of January 1, 2005.
10.5	Stock Purchase Agreement dated as of October 7, 2007 by and between Rockwood Specialties Group, Inc. and OM Group, Inc.
*10.6	OM Group, Inc. Bonus Program for Key Executives and Middle Management.‡
+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	Contract for the Sale of Cobalt Copper Concentrate between OMG Kokkola Chemicals Oy and Central Trading of Africa Ltd dated October 4, 2007.
+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 Exhibit 10.14).
+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 Exhibit 10.14).
+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 Exhibit 10.14).
*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 26, 2005 (incorporated by reference to Exhibit 99 to the Company’s Current Report on Form 8-K filed on June 2, 2005).
*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).

85

*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).
*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	Amendment No. 1, effective November 13, 2006, to Employment Agreement dated May 26, 2005 between Joseph M Scaminace and OM Group, Inc. (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K filed on November 14, 2006).
*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	Retention and Severance Agreement by and between OM Group, Inc. and Marcus P. Bak dated February 9, 2007 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on February 15, 2007).
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).
12	Computation of Ratio of Earnings to Fixed Charges
21	List of Subsidiaries

86

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.
++	Portions of Exhibit have been omitted and filed separately with the Securities and Exchange Commission in reliance upon the Company’s request for confidential treatment in reliance on Rule 24b-2.
‡	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.

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OM Group, Inc.
Schedule II — Valuation and Qualifying Accounts
Years Ended December 31, 2007, 2006 and 2005
(Dollars in Millions)

	Balance		Charged			Charged
	at		to			to						Balance at
	Beginning		Costs and			Other						End of
Classifications	of Year		Expenses			Accounts			Deductions			Year
2007:
Allowance for doubtful accounts	$	1.1		0.5	(1)		—			(0.1	)(4)	$	1.5
Income tax valuation allowance		18.8		3.2	(2)		—	(2)		—			22.0
Environmental reserve		8.0		4.9	(3)		0.3	(6)		(8.3	)(5)		4.9
	$	27.9	$	8.6		$	0.3		$	(8.4	)	$	28.4
2006:
Allowance for doubtful accounts	$	1.4		0.5	(1)		(0.1	)(6)		(0.7	)(4)	$	1.1
Income tax valuation allowance		78.0		—			—			(59.2	)(2)		18.8
Environmental reserve		8.8		4.2	(3)		(0.5	)(6)		(4.5	)(5)		8.0
	$	88.2	$	4.7		$	(0.6	)	$	(64.4	)	$	27.9
2005:
Allowance for doubtful accounts	$	2.0		0.6	(1)		(0.2	)(6)		(1.0	)(4)	$	1.4
Income tax valuation allowance		123.1		—			—			(45.1	)(2)		78.0
Environmental reserve		9.5		2.8	(3)		(0.4	)(6)		(3.1	)(5)		8.8
Shareholder litigation accrual		92.0		—			—			(92.0	)(7)		—
	$	226.6	$	3.4		$	(0.6	)	$	(141.2	)	$	88.2

(1)	Provision for uncollectible accounts included in selling, general and administrative expenses.
(2)	Increase (decrease) in valuation allowance is recorded as a component of the provision for income taxes.
(3)	Provision for environmental costs included in selling, general and administrative expenses.
(4)	Actual accounts written-off against the allowance.
(5)	Actual cash expenditures charged against the accrual.
(6)	Foreign currency translation adjustment.
(7)	Settlement of shareholder class action and shareholder derivative lawsuits.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on February 28, 2008.

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 28, 2008 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

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EX-3.2

Exhibit 3.2

AMENDED AND RESTATED

BY-LAWS

OF

OM GROUP, INC.

As Adopted by the Stockholders

October 7, 1993, and

Further Amended by the Directors

on August 8, 2006 and on

November 6, 2007

AMENDED AND RESTATED

BY-LAWS

OF

OM GROUP, INC.

ARTICLE I

OFFICES

     The Corporation may have such office(s) at such place(s), both within and outside the State of Delaware, as the Board of Directors from time to time determines or as the business of the Corporation from time to time requires.

ARTICLE II

MEETINGS OF THE STOCKHOLDERS

     Section 1. Annual Meetings. Annual meetings of stockholders shall be held each year on such date and at such time and place (within or outside the State of Delaware), if any, as is designated from time to time by the Board of Directors or, in the absence of a designation by the Board of Directors, the Chairman of the Board, the President or the Secretary, and stated in the notice of the meeting. Notwithstanding the foregoing, the Board of Directors may, in its sole discretion, determine that meetings of stockholders shall not be held at any place, but may instead be held by means of remote communication, subject to such guidelines and procedures as the Board of Directors may adopt from time to time. The Board of Directors may postpone and reschedule any previously scheduled annual meeting of stockholders. At each annual meeting, the stockholders shall elect by a plurality vote directors to succeed those directors whose terms of office are then expiring and shall transact such other business as may properly be brought before the meeting in accordance with Article II, Section 5 of these By-Laws.

     Section 2. Special Meeting. Unless otherwise prescribed by law, the Corporation’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) or these By-Laws, special meetings of stockholders for any purpose or purposes may be called by the Chairman of the Board, if any, or by the President or Secretary upon the written request of a majority of the total number of directors that the Corporation would have if there were no vacancies (the “Whole Board”). Requests for special meetings shall state the purpose or purposes of the proposed meeting. The Board of Directors may postpone and reschedule any previously scheduled special meeting of stockholders. At each special meeting, the stockholders shall transact such business as may properly be brought before the meeting in accordance with Article II, Section 5 of these By-Laws. Special meetings of the holders of the outstanding shares of Preferred Stock, par value $0.01 per share (the “Preferred Stock”), of the Corporation may be called in the manner and for the purposes provided in the resolution or resolutions providing for the issue of any series of Preferred Stock and the designation, relative powers, preferences and rights, and the qualifications, limitations or restrictions of such series adopted by the Board of Directors (a “Preferred Stock Designation”) pursuant to Article Fourth of the Certificate of Incorporation.

2

     Section 3. Notices of Annual and Special Meetings. Except as otherwise provided by law, the Certificate of Incorporation, any Preferred Stock Designation or these By-Laws, written notice of any annual or special meeting of stockholders shall state the place, if any, and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, date and time thereof, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, and shall be given to each stockholder of record entitled to vote at such meeting not less than ten days nor more than 60 days prior to the date of the meeting.

     Section 4. List of Stockholders. At least ten days before every meeting of stockholders, the officer or transfer agent in charge of the stock transfer books of the Corporation shall prepare and make a complete alphabetical list of stockholders entitled to vote at such meeting, which list shows the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to examination by any stockholder for any purpose germane to the meeting for a period of at least ten days prior to the meeting (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to examination by any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

     Section 5. Presiding Officers; Order of Business.

          (a) The Chairman of the Board, if any, or such other officer of the Corporation designated by the Board of Directors, shall call meetings of stockholders to order and act as chairperson thereof. Unless otherwise determined by the Board of Directors prior to the meeting, the chairperson of a meeting of stockholders will also have the authority in his or her sole discretion to regulate the conduct of such meeting, including without limitation by imposing restrictions on the persons (other than stockholders of the Corporation or their duly appointed proxies) that may attend such meeting, by ascertaining whether any stockholder or any stockholder’s proxy may be excluded from such meeting based upon any determination by the chairperson of the meeting, in his or her sole discretion, that any such person has disrupted or is likely to disrupt the proceedings thereat, and by determining the circumstances in which any person may make a statement or ask questions at such meeting. The secretary of a meeting of stockholders shall be the Secretary of the Corporation, or, if the Secretary is not present, an Assistant Secretary, or, if an Assistant Secretary is not present, such person as may be chosen by the Board of Directors, or, if none, by such person who is chosen by the chairperson of such meeting.

          (b) The following order of business, unless otherwise ordered at the meeting by

3

the chairperson thereof, shall be observed as far as practicable and consistent with the purposes of the meeting:

          (1) Call of the meeting to order.

          (2) Presentation of proof of mailing of notice of the meeting and, if the meeting is a special meeting, the call thereof.

          (3) Presentation of proxies.

          (4) Determination and announcement that a quorum is present.

          (5) Reading and approval (or waiver thereof) of the minutes of the previous meeting of stockholders.

          (6) Reports, if any, of officers.

          (7) Election of directors, if the meeting is an annual meeting or a meeting called for such purpose.

          (8) Consideration of the specific purpose or purposes for which the meeting has been called (other than the election of directors).

          (9) Transaction of such other business as is properly brought before the meeting.

          (10) Adjournment.

          (c) To be properly brought before an annual meeting, business shall be (i) specified in the notice of the annual meeting (or any supplement thereto) given by or at the direction of the Board of Directors in accordance with Article II, Section 3 of these By-Laws, (ii) otherwise properly brought before the annual meeting by the chairperson of the annual meeting or by or at the direction of a majority of the Whole Board, or (iii) otherwise properly requested to be brought before the annual meeting by a stockholder of the Corporation in accordance with Article II, Section 5(d) of these By-Laws.

          (d) For business to be properly requested to be brought before an annual meeting by a stockholder (i) the stockholder shall be a stockholder of record of the Corporation at the time of the giving of the notice for such annual meeting provided for in these By-Laws, (ii) the stockholder shall be entitled to vote at such annual meeting, (iii) the stockholder shall have given timely notice thereof in writing to the Secretary and (iv) if the stockholder, or the beneficial owner on whose behalf any business is brought before the annual meeting, has provided the Corporation with a Proposal Solicitation Notice (as defined below), such stockholder or beneficial owner shall have delivered a proxy statement and form of proxy to the holders of at least the percentage of shares of the Corporation entitled to vote that is required to approve such business that the stockholder proposes to bring before the annual meeting and included in such materials the Proposal Solicitation Notice. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the first anniversary of the date on which the

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Corporation first mailed its proxy materials for the preceding year’s annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the first anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely shall be so delivered not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public disclosure of the date of such annual meeting is first made. In no event shall the public disclosure of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (A) a description in reasonable detail of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (B) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business and the beneficial owner, if any, on whose behalf the proposal is made, (C) the class and series and number of shares of capital stock of the Corporation that are owned beneficially and of record by the stockholder proposing such business and by the beneficial owner, if any, on whose behalf the proposal is made, (D) a description of all arrangements or understandings between or among such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business, (E) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to the holders of at least the percentage of shares of the Corporation entitled to vote that is required to approve the proposal (an affirmative statement of such intent, a “Proposal Solicitation Notice”), and (F) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the annual meeting. Notwithstanding the foregoing provisions of this Article II, Section 5(d) of these By-Laws, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder (the “Exchange Act”) with respect to the matters set forth in this Article II, Section 5(d) of these By-Laws. For purposes of this Article II, Section 5(d) of these By-Laws and Article III, Section 3 of these By-Laws, “public disclosure” means disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document filed by the Corporation with the Securities and Exchange Commission pursuant to the Exchange Act or furnished by the Corporation to stockholders. Nothing in this Article II, Section 5(d) of these By-Laws will be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

          (e) At a special meeting of stockholders, only such business may be conducted or considered as is properly brought before the special meeting. To be properly brought before a special meeting, business shall be (i) specified in the notice of the special meeting (or any supplement thereto) given in accordance with these By-Laws or (ii) otherwise properly brought before the special meeting by the chairperson of the special meeting or by or at the direction of a majority of the Whole Board.

          (f) The determination of whether any business sought to be brought before any annual or special meeting of stockholders is properly brought before such meeting in accordance with Article II, Section 5 of these By-Laws will be made by the chairperson of such meeting. If the chairperson of such meeting determines that any business is not properly brought before such meeting, the chairperson will so declare to the meeting and any such business will not be conducted or considered.

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     Section 6. Quorum; Adjournments.

          (a) Except as otherwise provided by law, the Certificate of Incorporation, any Preferred Stock Designation or these By-Laws, the holders of a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at any meeting of stockholders present in person or by proxy, shall be necessary to and shall constitute a quorum for the transaction of business at such meeting of stockholders.

          (b) If a quorum is not present in person or by proxy at any meeting of stockholders, the stockholders entitled to vote thereat, present in person or by proxy, shall have the power to adjourn the meeting from time to time, without notice of the adjourned meeting if the time and place, if any, of the adjourned meeting and the means of remote communication, if any, by which stockholders may be deemed to be present in person or by proxy at such meeting, are announced at the meeting at which the adjournment is taken, until a quorum is present in person or by proxy.

          (c) Any business which might have been transacted at a meeting as originally called may be transacted at any meeting held after adjournment as provided in this Article II, Section 6 at which reconvened meeting a quorum is present in person or by proxy. Anything in Article II, Section 6(c) to the contrary notwithstanding, if an adjournment is for more than 30 days, or, if after an adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting stating the time and place, if any, of the adjourned meeting and the means of remote communication, if any, by which stockholders may be deemed to be present in person or by proxy at such meeting, shall be given to each stockholder of record entitled to vote thereat.

     Section 7. Voting.

          (a) At any meeting of stockholders, every stockholder having the right to vote shall be entitled to vote in person or by proxy. Except as otherwise provided by law, the Certificate of Incorporation or any Preferred Stock Designation, each stockholder of record shall be entitled to one vote (on each matter submitted to a vote) for each share of capital stock registered in his, her or its name on the books of the Corporation as of the applicable record date for such vote.

          (b) All elections of directors shall be by written ballot unless otherwise provided in the Certificate of Incorporation or any Preferred Stock Designation. If authorized by the Board of Directors, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission; provided that any such electronic transmission shall either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder.

          (c) Except as otherwise provided by law, the Certificate of Incorporation, Preferred Stock Designation, these By-Laws or the applicable standards of the New York Stock Exchange (the “NYSE”) or any other exchange or quotation service on which the Corporation’s shares are listed or quoted, all elections of directors and all other matters that may properly be presented for a vote of stockholders shall be determined by a vote of the holders of a majority of the shares present in person or represented by proxy and voting on such other matters.

     Section 8. No Action by Written Consent. As provided in Article Ninth of the Certificate of Incorporation, no action which is required or permitted to be taken at any meeting

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of stockholders may be taken by written consent of stockholders in lieu of a meeting.

ARTICLE III

DIRECTORS

     Section 1. General Powers. The business and affairs of the Corporation shall be managed under the direction of its Board of Directors, which may exercise all powers of the Corporation and perform or authorize the performance of all lawful acts and things which are not by law, the Certificate of Incorporation or these By-Laws directed or required to be exercised or performed by stockholders.

     Section 2. Number and Classification of Directors. Subject to the rights, if any, of any series of Preferred Stock then outstanding, (a) the number of directors of the Corporation shall be not less than three nor more than 15, as fixed from time to time by the Board of Directors (provided that no reduction in the number of directors shall of itself have the effect of shortening the term of any incumbent director), (b) the Directors (other than those who may be elected by the holders of any series of the Preferred Stock) shall be divided into three classes as nearly equal in number as the then total number of directors constituting the Whole Board permits, with the term of office of one class expiring each year; and (c) at each annual meeting of stockholders, the directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election.

     Section 3. Nominations. (a) Subject to the rights of any holder of any series of Preferred Stock then outstanding, only persons who are nominated in accordance with this Article III, Section 3 shall be eligible for election as directors.

          (b) Nominations of persons for election as directors of the Corporation may be made only at an annual meeting of stockholders (i) by or at the direction of the Board of Directors or by any committee or person appointed by the Board of Directors or (ii) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Article III, Section 3 and is entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Article III, Section 3. Any nomination made pursuant to clause (i) of the preceding sentence shall be made pursuant to timely notice in proper written form to the Secretary of the Corporation.

          (c) To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the first anniversary of the date on which the Corporation first mailed its proxy materials for the preceding year’s annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely shall be so delivered not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public disclosure of the date of such meeting is first made. In no event shall the public disclosure of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above.

          (d) To be in proper written form, such stockholder’s notice shall set forth or include (i) the name and address, as they appear on the Corporation’s books, of the stockholder

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giving the notice, and of the beneficial owner, if any, on whose behalf the nomination is made; (ii) a representation that the stockholder giving the notice is a holder of record of stock of the Corporation entitled to vote at such annual meeting and intends to appear in person or by proxy at the annual meeting to nominate the person or persons specified in the notice; (iii) the class and number of shares of stock of the Corporation owned beneficially and of record by the stockholder giving the notice and by the beneficial owner, if any, on whose behalf the nomination is made; (iv) a description of all arrangements or understandings between or among any of (A) the stockholder giving the notice, (B) the beneficial owner on whose behalf the notice is given, (C) each nominee, and (D) any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder giving the notice; (v) such other information regarding each nominee proposed by the stockholder giving the notice as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the Board of Directors; (vi) the signed consent of each nominee to serve as a Director of the Corporation if so elected; (vii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of at least the percentage of shares of the Corporation entitled to vote required to elect such nominee or nominees (an affirmative statement of such intent, a “Nomination Solicitation Notice”); and (viii) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in the notice. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director. The chairperson of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by this Article III, Section 3, and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Article III, Section 3, a stockholder shall also comply with all applicable requirements of the Exchange Act with respect to the matters set forth in this Article III, Section 3.

     Section 4. Removal of Directors. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of a majority of the shares then entitled to vote at an election of directors.

     Section 5. Vacancies. Subject to the rights of any holder of any series of Preferred Stock then outstanding, vacancies and newly created directorships may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director, and each director so chosen shall hold office until the next annual meeting of stockholders or until his or her successor has been elected and qualified. When one or more directors shall resign from the Board, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office until the next annual meeting of stockholders or until his or her successor has been elected and has qualified.

     Section 6. Place of Meetings. The Board of Directors may hold both regular and special meetings either within or outside the State of Delaware, at such place as the Board of Directors from time to time deems advisable.

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     Section 7. Annual Organizational Meeting. The annual organizational meeting of the Board of Directors shall be held immediately following the annual meeting of stockholders, and no notice to the newly elected directors of such meeting shall be necessary for such meeting to be lawful, provided a quorum is present thereat.

     Section 8. Regular Meetings. Additional regular meetings of the Board of Directors may be held without notice, at such time and place as from time to time may be determined by the Board of Directors.

     Section 9. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the Lead Director, the President or a majority of the Whole Board, upon one day’s notice to each director. Special meetings of the Board of Directors may be held at such time and place either within or without the State of Delaware as may be determined by the Board or specified in the notice of any such special meeting.

     Section 10. Quorum; Adjournments. A majority of the directors then in office shall constitute a quorum for the transaction of business at a meeting of the Board of Directors, and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, except as may otherwise specifically be provided by law, the Certificate of Incorporation or these By-Laws. If a quorum is not present at any meeting of the Board of Directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

     Section 11. Compensation. Directors shall be entitled to such compensation for their services as directors as from time to time may be fixed by the Board of Directors and in any event shall be entitled to reimbursement of all reasonable expenses incurred by them in attending directors’ meetings. Any director may waive compensation for any meeting.

     Section 12. Action by Written Consent. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing or by electronic transmission and the writing(s) or electronic transmission(s) are filed with the minutes of proceedings of the Board of Directors. Such filing will be in paper form if the minutes are maintained in paper form and will be in electronic form if the minutes are maintained in electronic form.

     Section 13. Participation in Meetings by Remote Communications. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting will constitute presence in person at the meeting.

ARTICLE IV

COMMITTEES

     Section 1. Executive Committee.

          (a) By resolution duly adopted by a majority of the Whole Board, the Board of

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Directors may designate two or more directors to constitute an Executive Committee. One of such directors shall be designated as Chairman of the Executive Committee. Each member of the Executive Committee shall continue as a member thereof until the expiration of his or her term as a director, or until his or her earlier resignation from the Executive Committee, in either case unless sooner removed as a member of the Executive Committee or as a director by any means authorized by these By-Laws.

          (b) The Executive Committee shall have and may exercise all of the right, powers and authority of the Board of Directors, except as expressly limited by applicable law.

          (c) The Executive Committee shall fix its own rules of procedure and shall meet at such times and at such place or places as may be provided by its rules. The Chairman of the Executive Committee, or, in the absence of a Chairman, a member of the Executive Committee chosen by a majority of the members present, shall preside at meetings of the Executive Committee, and another member thereof chosen by the Executive Committee shall act as Secretary. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the members thereof shall be required for any action of the Executive Committee. The Executive Committee shall keep minutes of its meetings and deliver such minutes to the Board of Directors.

     Section 2. Other Committees. The Board of Directors, by resolution duly adopted by a majority of the Whole Board, may appoint such other committee or committees as it shall deem advisable and with such limited authority as the Board of Directors shall from time to time determine and in accordance with applicable law.

     Section 3. Other Provisions Regarding Committees.

          (a) The Board of Directors shall have the power at any time to fill vacancies in, change the membership of, or discharge any committee.

          (b) Members of any committee shall be entitled to such compensation for services as such as from time to time may be fixed by the Board of Directors and in any event shall be entitled to reimbursement of all reasonable expenses incurred in attending committee meetings. Any member of a committee may waive compensation for any meeting.

          (c) Unless prohibited by law or the Certificate of Incorporation, the provisions of Article III, Section 12, (“Action by Written Consent”) and Section 13 (“Participation in Meetings by Remote Communications”) shall apply to all committees from time to time created by the Board of Directors.

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ARTICLE V

OFFICERS

     Section 1. Positions. The officers of the Corporation shall be appointed by the Board of Directors and shall consist of a President and a Secretary. The Board of Directors also may choose a Chairman of the Board, one or more Vice Presidents, a Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers and such other officers and/or agents as the Board from time to time deems necessary or appropriate. The Board of Directors may delegate to the President of the Corporation the authority to appoint any officer or agent of the Corporation and to fill a vacancy other than the Chairman of the Board, President, Secretary or Treasurer. The election or appointment of any officer of the Corporation in itself shall not create contract rights for any such officer. All officers of the Corporation shall exercise such powers and perform such duties as from time to time shall be determined by the Board of Directors. Unless otherwise provided in the Certificate of Incorporation, any number of offices may be held by the same person.

     Section 2. Term of Office; Removal. Each officer of the Corporation shall hold office at the pleasure of the Board and any officer may be removed, with or without cause, at any time by the affirmative vote of a majority of the directors then in office, provided that any officer appointed by the President pursuant to authority delegated to the President by the Board of Directors may be removed, with or without cause, at any time whenever the President in his or her absolute discretion shall consider that the best interests of the Corporation shall be served by such removal. Removal of an officer by the Board or by the President, as the case may be, shall not prejudice the contract rights, if any, of the person so removed. Vacancies (however caused) in any office may be filled for the unexpired portion of the term by the Board of Directors (or by the President in the case of a vacancy occurring in an office to which the President has been delegated the authority to make appointments).

     Section 3. Compensation. The salaries of all officers of the Corporation shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving a salary by reason of the fact that he also receives from the Corporation compensation in any other capacity.

     Section 4. Chairman of the Board. The Chairman of the Board, if any, shall be an officer of the Corporation and, subject to the direction of the Board of Directors, shall perform such executive, supervisory and management functions and duties as from time to time may be assigned to him or her by the Board. The Chairman of the Board may also serve as the Chief Executive Officer of the Corporation if the independent members of the Board of Directors have elected a lead independent director.

     Section 5. President. The President shall be the chief executive officer of the Corporation and, subject to the direction of the Board of Directors, shall have general supervision of the business, affairs and property of the Corporation and general supervision over its other officers and agents. In general, the President shall perform all duties incident to the office of President of a stock corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. Unless otherwise prescribed by the Board of Directors, the President shall have full power and authority on behalf of the Corporation to attend, act and vote at any meeting of security holders of other corporations in which the

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Corporation may hold securities. At any such meeting the President shall possess and may exercise any and all rights and powers incident to the ownership of such securities which the Corporation possesses and has the power to exercise. The Board of Directors from time to time may confer like powers upon any other person or persons.

     Section 6. Vice Presidents. In the absence or disability of the President, the Vice President, if any (or in the event there is more than one, the Vice Presidents in the order designated by the Board of Directors, or in the absence of any designation, in the order of their election), shall perform the duties and exercise the powers of the President. The Vice President(s) also generally shall assist the President and shall perform such other duties and have such other powers as from time to time may be prescribed by the Board of Directors.

     Section 7. Secretary. The Secretary shall attend all meetings of the Board of Directors and of stockholders and shall record all votes and the proceedings of all meetings. The Secretary also shall perform like duties for the Executive Committee or other committees, if required by any such committee. The Secretary shall give (or cause to be given) notice of all meetings of stockholders and all special meetings of the Board of Directors and shall perform such other duties as from time to time may be prescribed by the Board of Directors, the Chairman of the Board or the President. The Secretary shall have custody of the seal of the Corporation, shall have authority (as shall any Assistant Secretary) to affix the same to any instrument requiring it, and to attest the seal by his or her signature. The Board of Directors may give general authority to officers other than the Secretary or any Assistant Secretary to affix the seal of the Corporation and to attest the affixing thereof by his or her signature.

     Section 8. Assistant Secretary. The Assistant Secretary, if any (or in the event there is more than one, the Assistant Secretaries in the order designated by the Board of Directors, or in the absence of any designation, in the order of their election), in the absence or disability of the Secretary, shall perform the duties and exercise the powers of the Secretary. The Assistant Secretary or Secretaries shall perform such other duties and have such other powers as from time to time may be prescribed by the Board of Directors.

     Section 9. Treasurer. The Treasurer, if any, shall have the custody of the corporate funds, securities, other similar valuable effects, and evidences of indebtedness, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as from time to time may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation in such manner as may be ordered by the Board of Directors from time to time and shall render to the Chairman of the Board, the President and the Board of Directors, at regular meetings of the Board or whenever any of them may so require, an account of all transactions and of the financial condition of the Corporation.

     Section 10. Assistant Treasurer. The Assistant Treasurer, if any (or in the event there is more than one, the Assistant Treasurers in the order designated by the Board of Directors, or in the absence of any designation, in the order of their election), in the absence or disability of the Treasurer, shall perform the duties and exercise the powers of the Treasurer. The Assistant Treasurer(s) shall perform such other duties and have such other powers as from time to time may be prescribed by the Board of Directors.

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ARTICLE VI

NOTICES

     Section 1. Form; Delivery. Any notice required or permitted to be given to any director, officer, stockholder or committee member shall be given in writing, either personally, by overnight courier or mail with postage prepaid, addressed to the recipient at his or her address as it appears in the records of the Corporation. Personally delivered notices shall be deemed to be given at the time they are delivered at the address of the named recipient as it appears in the records of the Corporation, and notices sent by overnight courier or mail shall be deemed to be given at the time they are deposited with such courier or in the United States mail, as applicable. Notice to directors may also be given by telephone, facsimile, electronic transmission or similar medium of communication or as otherwise may be permitted by these By-Laws.

     Section 2. Waiver; Effect of Attendance. Whenever any notice is required to be given by law, the Certificate of Incorporation or these By-Laws, a written waiver signed by the person entitled to such notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be the equivalent of the giving of such notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the meeting is not lawfully called or convened.

ARTICLE VII

INDEMNIFICATION AND EXCULPATION;
TRANSACTIONS BETWEEN AFFILIATED PERSONS

     Section 1. Indemnification and Exculpation. As provided in Article Seventh of the Certificate of Incorporation, the Corporation shall indemnify each of the individuals who may be indemnified to the fullest extent permitted by Section 145 of the General Corporation Law of Delaware, as it may be amended from time to time (“Section 145”), (i) in each and every situation where the Corporation is obligated to make such indemnification pursuant to Section 145, and (ii) in each and every situation where, under Section 145, the Corporation is not obligated, but is permitted or empowered, to make such indemnification. The Corporation shall promptly make or cause to be made any determination which Section 145 requires.

     Section 2. Common or Interested Officers and Directors. (a) The officers and directors shall exercise their powers and duties in good faith and with a view to the best interests of the Corporation. No contract or other transaction between the Corporation and one or more of its officers or directors, or between the Corporation and any corporation, firm, association or other entity in which one or more of the officers or directors of the Corporation are officers or directors, or are pecuniarily or otherwise interested, shall be either void or voidable solely because of such common directorate, officership or interest, solely because such officers or directors are present at or participate in the meeting of the Board of Directors or any committee thereof which authorizes, approves or ratifies the contract or transaction, or solely because his, her or their votes are counted for such purpose, if (unless otherwise prohibited by law) any of the conditions specified in the following paragraphs exist:

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          (i) the material facts of the common directorate or interest or contract or transaction are disclosed or known to the Board of Directors or committee thereof and the Board or committee authorizes or ratifies such contract or transaction in good faith by the affirmative vote of a majority of the disinterested directors, even though the number of such disinterested directors may be less than a quorum; or

          (ii) the material facts of the common directorate or interest or contract or transaction are disclosed or known to the stockholders entitled to vote thereon and the contract or transaction is specifically approved in good faith by vote of the stockholders; or

          (iii) the contract or transaction is fair and commercially reasonable to the Corporation at the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders, as the case may be.

          (b) Common or interested directors may be counted in determining whether a quorum is present at any meeting of the Board of Directors or committee thereof which authorizes, approves or ratifies any contract or transaction, and may vote thereat to authorize any contract or transaction with like force and effect as if he, she or they were not such officers or directors of such other corporation or were not so interested.

ARTICLE VIII

STOCK CERTIFICATES

     Section 1. Form; Signatures. Subject to Article VIII, Section 6 of these By-Laws, the shares of capital stock of the Corporation shall be represented by certificates and each stockholder who has fully paid for any stock of the Corporation shall be entitled to receive a certificate representing such shares, which certificate shall be signed by the Chairman of the Board (if any) or the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation. Signatures on the certificate may be facsimile, in the manner prescribed by law. Each certificate shall exhibit on its face the number and class (and series, if any) of the shares it represents. Each certificate also shall state upon its face the name of the person to whom it is issued and that the Corporation is organized under the laws of the State of Delaware. Each certificate may (but need not) be sealed with the seal of the Corporation or facsimile thereof. In the event any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate ceases to be such officer, transfer agent or registrar before the certificate is issued, the certificate nevertheless may be issued by the Corporation with the same effect as if such person were such officer at the date of issue of the certificate. All stock certificates representing shares of capital stock which are subject to restrictions on transfer or to other restrictions shall have imprinted thereon a notation of such restrictions.

     Section 2. Registration of Transfer. Subject to Article VIII, Section 6 of these By-Laws, upon surrender to the Corporation or to any transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation, or its transfer agent, shall issue a new certificate to the

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person entitled thereto, cancel the old certificate and record the transaction upon the Corporation’s books.

     Section 3. Registered Stockholders. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person who is registered on its books as the owner of shares of its capital stock to receive dividends or other distributions (to the extent otherwise distributable or distributed), to vote (in the case of voting stock) as such owner, and to hold liable for calls and assessments a person who is registered on its books as the owner of shares of its capital stock. The Corporation shall not be bound to recognize any equitable or legal claim to or interest in such shares on the part of any other person. The Corporation (or its transfer agent) shall not be required to send notices or dividends to a name or address other than the name or address of stockholders appearing on the stock ledger maintained by the Corporation (or by the transfer agent or registrar, if any), unless any such stockholder shall have notified the Corporation (or the transfer agent or registrar, if any), in writing, of another name or address at least ten days prior to the mailing of such notice or dividend.

     Section 4. Record Date. In order that the Corporation may determine the stockholders of record who are entitled (i) to notice of or to vote at any meeting of stockholders or any adjournment thereof, (ii) to receive payment of any dividend or other distribution, or allotment of any rights, or (iii) to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors, in advance, may fix a date as the record date for any such determination. Such date shall not be more than 60 days nor less than ten days before the date of such meeting, nor more than 60 days prior to the date of any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting taken pursuant to Article II, Section 6; provided, however, that the Board of Directors, in its discretion, may fix a new record date for the adjourned meeting.

     Section 5. Lost, Stolen or Destroyed Certificate. The Corporation may issue a new certificate in place of any certificate theretofore issued by the Corporation which is claimed to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Corporation may require as a condition precedent to issuance that the owner of such lost, stolen or destroyed certificate, or his or her legal representative, give the Corporation a bond in such sum, or other security in such form, as the Corporation may direct, as indemnity against any claim that may be made against the Corporation with respect to the certificate claimed to have been lost, stolen or destroyed.

     Section 6. Electronic Securities System. Notwithstanding the provisions of Article VIII, Sections 1 and 2, the Corporation may adopt a system of issuance, recordation and transfer of its shares by electronic or other means not involving any issuance of certificates, provided the use of such system by the Corporation is permitted in accordance with applicable law.

ARTICLE IX

GENERAL PROVISIONS

     Section 1. Dividends. Subject to the provisions of applicable law and the Certificate

15

of Incorporation, dividends upon the outstanding capital stock of the Corporation may be declared by the Board of Directors at any annual, regular or special meeting and may be paid in cash, in property or in shares of the Corporation’s capital stock.

     Section 2. Reserves. The Board of Directors, in its sole discretion, may fix a sum which may be set aside or reserved over and above the paid-in capital of the Corporation for working capital or as a reserve for any proper purpose, and from time to time may increase, diminish or vary such fund or funds.

     Section 3. Fiscal Year. The fiscal year of the Corporation shall begin January 1.

     Section 4. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its incorporation and the words “Corporate Seal” and “Delaware.”

     Section 5. Amendment of the By-Laws. As provided in Article Sixth of the Certificate of Incorporation, to the extent not prohibited by law, the Board of Directors shall have the power to make, alter and repeal these By-Laws, and to adopt new by-laws, in all cases by an affirmative vote of a majority of the Whole Board, provided that notice of the proposal to make, alter or repeal these By-Laws, or to adopt new by-laws, is included in the notice of the meeting of the Board of Directors at which such action takes place. These By-Laws may be amended or repealed at any meeting of stockholders called for that purpose by the affirmative vote of the holders of record of shares entitling them to exercise a majority of the voting power of the Corporation on such proposal; provided, however, that the provisions of Article II, Section 5 or 8, Article III, Sections 1, 2, 3, 4 or 5, Article VII and this Article IX, Section 5, may not be amended, modified, superseded or repealed, and no amendment to these By-Laws which is inconsistent therewith may be adopted, without the affirmative vote of the holders of record of shares entitling them to exercise at least 75% of the voting power of the Corporation on such proposal.

16

EX-10.4

Exhibit 10.4

OM GROUP, INC.
BENEFIT RESTORATION PLAN
(Frozen Post-2004/Pre-2008 Terms)

OM GROUP, INC.
BENEFIT RESTORATION PLAN
(Frozen Post-2004/Pre-2008 Terms)

TABLE OF CONTENTS

          Section        Page

ARTICLE I
DEFINITIONS

1.1	Definitions	2
1.2	Construction	5

ARTICLE II
ELIGIBILITY FOR PLAN PARTICIPATION

2.1	Continued Participation	6
2.2	New Participants	6

ARTICLE III
SUPPLEMENTAL 401(K) CONTRIBUTIONS

3.1	Amount of Supplemental Contributions	7
3.2	Earnings	7

ARTICLE IV
VESTING

4.1	Vesting Schedule	9
4.2	Forfeiture for Cause	9

ARTICLE V
DISTRIBUTIONS

5.1	Distribution Upon Separation from Service	10
5.2	Method of Distribution	10
5.3	Time of Payments	10
5.4	Distribution Elections of Participants	10
5.5	Special Transition Elections	11
5.6	Alternative Payment Forms	11
5.7	Payment upon Change in Control	12
5.8	Distributions upon Death	12
5.9	Taxes	12

ARTICLE VI
BENEFICIARIES 13

ARTICLE VII
ADMINISTRATIVE PROVISIONS

7.1	Administration	14
7.2	Powers and Authorities of the Committee	14
7.3	Indemnification	14

ARTICLE VII
AMENDMENT AND TERMINATION 15

ARTICLE IX
MISCELLANEOUS

9.1	Non-Alienation of Benefits	16
9.2	Payment of Benefits to Others	16
9.3	Plan Non-Contractual	16
9.4	Funding	16
9.5	Claims of Other Persons	17
9.6	Section 409A	17
9.7	Severability	18
9.8	Governing Law	18
Exhibit A		19

OM GROUP, INC.
BENEFIT RESTORATION PLAN
(Frozen Post-2004/Pre-2008 Terms)

     WHEREAS, effective as of January 1, 1995, Mooney Chemicals, Inc., the predecessor plan sponsor to OM Group, Inc. (hereinafter referred to as the “Company”), established the Mooney Chemicals, Inc. Benefit Restoration Plan, which is now known as the OM Group, Inc. Benefit Restoration Plan (hereinafter referred to as the “Plan”), for a select group of its management employees; and

     WHEREAS, in order to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (hereinafter referred to as “Section 409A”) and to facilitate the administration of benefits under the Plan, the Plan is hereby bifurcated effective as of January 1, 2005 into three parts, one part, which shall consist of the Plan, as in effect on October 3, 2004 (hereinafter referred to as the “Frozen Pre-2005 Terms”), and which is hereby frozen as of December 31, 2007, and shall not be modified, except as permitted under Section 409A, so as to preserve the grandfathered status of benefits and related earnings thereunder; the second part, which shall consist of the provisions of the Plan in effect from January 1, 2005 through December 31, 2007 (hereinafter referred to as the “Frozen Post-2004/Pre-2008 Terms”) and which is hereby frozen as of December 31, 2007, and the third part which shall consist of the provisions of the Plan on and after January 1, 2008 (hereinafter referred to as the “Post-2007 Terms”); and

     WHEREAS, the Frozen Post-2004/Pre-2008 Terms reflect the terms of the Plan adjusted to comply with Section 409A; and

     WHEREAS, the benefits under the Frozen Post-2004/Pre-2008 Terms portion of the Plan have been administered in good faith in accordance with the requirements of Section 409A and regulations and notices thereunder;

     NOW, THEREFORE, the Frozen Post-2004/Pre-2008 Terms are hereby set forth below.

ARTICLE I

DEFINITIONS

     1.1. Definitions. Except as otherwise required by the context, the terms used in the Plan shall have the meaning hereinafter set forth.

     (1) The term “Affiliate” shall mean any member of a controlled group of corporations (as determined under Section 414(b) of the Code) of which the Company is a member; any member of a group of trades or businesses under common control (as determined under Section 414(c) of the Code) with the Company; any member of an affiliated service group (as determined under Section 414(m) of the Code) of which the Company is a member; and any other entity which is required to be aggregated with the Company pursuant to the provisions of Section 414(o) of the Code.

     (2) The term “Beneficiary” shall mean the person or persons who, in accordance with the provisions of Article VI, shall be entitled to receive distribution hereunder in the event a Participant dies before his interest under the Plan has been distributed to him in full.

     (3) The term “Board” shall mean the Board of Directors of the Company.

     (4) The term “Capitol Accumulation Account” shall mean the account established in the name of a Participant to which Supplemental Contributions are credited in accordance with the provisions of Article III of the Plan.

     (5) The term “Cause” shall mean (i) an act or acts of dishonesty on the part of a Participant which are intended to result in his or her personal enrichment at the expense of the Company; (ii) any violation by a Participant of his or her obligations to the Company which is demonstrably willful and deliberate on his or her part and which results in material injury to the Company; (iii) the conviction of a Participant of a felony or of a crime involving moral turpitude; or (iv) any other intentional act (or failure to act) which is not in the best interests of the Company, specifically including but not limited to, those actions (or failures) which the Company has previously notified the Participant in writing are contrary to the best interest of the Company and which will constitute “Cause” under the Plan.

     (6) The term “Change in Control” shall mean a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company that constitutes a “change in control” under Section 409A.

2

     (7) The term “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. Reference to a section of the Code shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such section.

     (8) The term “Company” shall mean OM Group, Inc., its corporate successors, and the surviving corporation resulting from any merger of OM Group, Inc. with any other corporation or corporations.

     (9) The term “Committee” shall mean the committee appointed by the Board to administer the Plan.

     (10) The term “Compensation” shall mean the total wages which are paid to a Participant during a Plan Year by the Company or an Affiliate for his services as an Employee while he is a Participant, including incentive compensation, commissions, bonuses, and elective contributions made on behalf of such Participant under the Plan or any other plan that are not includible in gross income under Sections 125 and 402(e)(3) of the Code, but excluding moving or educational reimbursement expenses, amounts deferred under any non-qualified deferred compensation program, amounts realized from the exercise of stock options, imputed income attributable to any fringe benefit, any amounts received in lieu of benefits under a plan that meets the requirements of Section 125 of the Code, and any cash amounts received pursuant to the cash or deferred arrangement under the OMG Profit Sharing Plan.

     (11) The term “Earnings” shall mean the annual amount credited to a Participant’s Capital Accumulation Account and calculated by multiplying the balance of the Participant’s Capital Accumulation Account on the first day of a Plan Year by the five-year rolling average annual composite yield on Moody’s Corporate Bond Yield Index for the immediately preceding five years as determined from Moody Bond Record published by Moody’s Investors Services, Inc. (or any successor thereto).

     (12) The term “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. Reference to a section of ERISA shall include such section and any comparable section or sections of any future legislation that amends, supplements, or supersedes such Section.

     (13) The term “Frozen Post-2004/Pre-2008 Terms” shall mean the terms of the Plan, as in effect for the period beginning January 1, 2005, and ending December 31, 2007 and frozen as of December 31, 2007.

     (14) The term “Frozen Pre-2005 Terms” shall mean the terms of the Plan as in effect on October 3, 2004, and frozen as of December 31, 2004.

3

     (15) The term “Highly Compensated/Select Management Group Employee” shall mean a common law employee of the Company or an Affiliate and who satisfies the provisions of Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA.

     (16) The term “Maximum Contribution to the Profit Sharing Plan” shall mean the amount that the Company would contribute to the OMG Profit Sharing Plan on behalf of the Participant if the Participant did not elect to receive any of such amount in cash and the compensation and benefit limitations under the Code were of no effect.

     (17) The term “OMG Profit Sharing Plan’ shall mean the tax-qualified OMG Profit-Sharing and Retirement Savings Plan.

     (18) The term “Participant” shall mean any Highly Compensated/Select Management Group Employee who participates in the Plan pursuant to Article II of the Plan.

     (19) The term “Plan” shall mean the OM Group, Inc. Benefit Restoration Plan which shall consist of the Frozen Pre-2005 Terms, the Frozen Post-2004/Pre-2008 Terms, and the Post-2007 Terms.

     (20) The term “Plan Year” shall mean each calendar year beginning January 1 and ending December 31.

     (21) The term “Section 409A” shall mean Section 409A of the Code and the regulations and rulings promulgated thereunder.

     (22) The term “Separation from Service” shall mean the termination of employment of a Highly Compensated/Select Management Group Employee with the Company and all Affiliates for any reason other than death; provided, however, that an Company-approved leave of absence shall not be considered a termination of employment if the leave does not exceed six months or, if longer, so long as the Highly Compensated/Select Management Group Employee’s right to reemployment is provided either by statute or by contract. Notwithstanding the foregoing, whether or not a Highly Compensated/Select Management Group Employee has incurred a Separation from Service shall be determined in accordance with the provisions of Section 409A.

     (23) The term “Specified Employee” shall mean a “specified employee” within the meaning of Section 409A.

     (24) The term “Supplemental Contributions” shall mean the contributions credited to a Participant under the Plan pursuant to Section 3.1.

4

     (25) The term “Trust” shall mean the grantor trust maintained by the Company to provide a source of funds to provide benefits under the Plan.

     (26) The term “Valuation Date” shall mean the last day of the Plan Year and any other date determined and specified as such by the Committee.

     1.2 Construction. Where necessary or appropriate to the meaning hereof, the singular shall be deemed to include the plural, the plural to include the singular, the masculine to include the feminine, and the feminine to include the masculine.

5

ARTICLE II

ELIGIBILITY FOR PLAN PARTICIPATION

     2.1 Continued Participation. Only Highly Compensated/Select Management Employees who are listed on Exhibit A and who were participating in the Plan on December 31, 2004, shall continue to participate in the Plan under the Frozen Post-2004/Pre-2008 Terms.

     2.2 New Participants. Any individual who becomes a Highly Compensated/Select Management Employee on or after January 1, 2005, and who is designated by the Board to participate in the Plan, shall participate in the Plan within 30 days of first becoming designated as a Participant; provided, that such Highly Compensated/Select Management Employee has not previously been eligible to participate in the Plan or in any other nonqualified account balance plan of the Company or any Affiliate that is required to be aggregated with the Plan under Section 409A.

6

ARTICLE III

SUPPLEMENTAL CONTRIBUTIONS

     3.1 Amount of Supplemental Contributions. Within the first calendar quarter of each Plan Year, the Capital Accumulation Account of each Participant shall be credited with an annual Supplemental Contribution equal to the following amount: (i) product of the Compensation of such Participant for the immediately preceding Plan Year multiplied by the percentage of the annual Company contribution to the OMG Profit-Sharing Plan for such Plan Year; (ii) reduced by the Maximum Contribution to the OMG Profit Sharing Plan for such Participant for such Plan Year; and then (iii) multiplied by a fraction, the numerator of which is the Maximum Contribution to the OMG Profit-Sharing Plan for such Participant for such Plan Year reduced by any amount that the Participant elected to receive in cash under the cash or deferred arrangement of the OMG Profit Sharing Plan for such Plan Year and the denominator of which is the Maximum Contribution to the OMG Profit-Sharing Plan for such Participant for the Plan Year. Notwithstanding the foregoing, the final Supplemental Contribution under the Frozen Post-2004/Pre-2008 Terms for a Participant shall be calculated in the manner hereinafter set forth and shall be credited within the first calendar quarter of 2008 to his or her Capital Accumulation Account:

(a)	an amount under clauses (i) and (ii) above shall be determined multiplied by a fraction under clause (iii), the numerator and denominator of which shall be 1; plus
(b)	an additional amount equal to the percentage of the profit sharing amount set by the Board with respect to 2007 multiplied by the Compensation of such Participant and then reduced by the actual profit sharing amount (prior to taxes and any other adjustment) paid in cash to such Participant in the first calendar quarter of 2008 shall be determined.

     3.2 Earnings. The Capital Accumulation Account of each Participant shall be credited annually with Earnings as of the earlier of the last day of each Plan Year, or the date of such

7

Participant’s Separation from Service, regardless of the freezing of Supplemental Contributions as provided in Section 3.1.

8

ARTICLE IV

VESTING

     4.1 Vesting Schedule. Except as provided in Section 4.2, effective as of January 1, 2005, each Participant shall be fully vested in the balance of his Capital Accumulation Account at all times.

     4.2 Forfeiture for Cause. Notwithstanding the provisions of Section 4.1, in the event that a Participant incurs a Separation from Service due to Cause, he shall forfeit all right to his Capital Accumulation Account.

9

ARTICLE V

DISTRIBUTION

     5.1 Distribution Upon Separation From Service. Subject to the provisions of Sections 5.4, 5.5, and 5.6 the entire balance credited to a Participant’s Capital Accumulation Account under the Frozen Post-2004/Pre-2008 Terms shall be distributed to such Participant or his Beneficiary after termination of such Participant’s Separation from Service pursuant to Sections 5.2, 5.3 and 5.4; provided, however, that notwithstanding any other provision of the Frozen Post-2004/Pre-2008 Terms, in the event a Participant is a Specified Employee and would receive payment of his Capital Accumulation Account due to Separation from Service, such Participant shall receive payment of his Capital Accumulation Account under the Frozen Post-2004/Pre-2008 Terms on the first day of the seventh month following his Separation from Service.

     5.2 Method of Distribution. Except as otherwise provided in Sections 5.3, 5.4, 5.5 and 5.6, the balance of a Participant’s Capital Accumulation Account shall be paid to the Participant, or his Beneficiary, if applicable, in a single sum cash payment determined as of the most recent Valuation Date.

     5.3 Time of Payments.  Except as otherwise may be provided in Sections 5.4, 5.5, and 5.6, distribution of the value of a Participant’s Capital Accumulation Account shall be made upon a date which is not more than 30 days after the Participant’s Separation from Service; provided, however, that in the event a Participant is a Specified Employee, such Participant shall receive payment of his Capital Accumulation Account under the Frozen Post-2004/Pre-2008 Terms on the first day of the seventh month following his Separation from Service.

     5.4 Distribution Elections of Participants. To the extent permitted by Section 409A, each Participant shall have the opportunity to file an election with respect to the form and time of

10

his Capital Accumulation Account. Subject to the provisions of Section 409A, such election shall (i) specify a lump sum payment or substantially equal annual installment payments, not to exceed five years; and (ii) specify a fixed date or a fixed schedule which meets the requirements of Section 409A on which payments are to be made.

     5.5 Special Transition Elections. During 2005, 2006, 2007 and 2008, a Participant may make elections to receive payment of his Capital Accumulation Account without complying with the requirements of Section 5.4; provided that any such election shall only be effective if it does not accelerate a payment to be made, or defer a payment from being made, in the year in which such election is made.

     5.6 Alternative Payment Forms. Except as permitted under Section 409A, no acceleration of the time or form of payment of a Participant’s Capital Accumulation Account under the Frozen Post-2004/Pre-2008 Terms shall be permitted. Notwithstanding the foregoing and as permitted under Section 409A with the Company’s consent, a Participant may elect to delay payment or to change the form of payment of his Capital Accumulation Account if all the following conditions are met:

     (i) Such election will not take effect until at least twelve months after the date on which the election is made; and

     (ii) The payment with respect to which such election is made is deferred for a period of not less than five years from the date such payment would otherwise be made; and

     (iii) Any election for a “specified time (or pursuant to a fixed schedule)” within the meaning of Section 409A(a)(2)(A)(iv) of the Code, may not be made less than twelve months prior to the date of the first scheduled payment.

To the extent permitted under Section 409A, installment payments shall be treated as a single payment.

11

     5.7 Payment upon Change in Control. Notwithstanding any other provision of the Frozen Post-2004/Pre-2008 Terms to the contrary, to the extent permitted under Section 409A, upon a Change in Control, the balance of the Capital Accumulation Accounts of Participants under the Plan shall be paid to Participants within 15 days following the Change in Control.

     5.8 Distributions Upon Death. Upon the death of a Participant (including a Participant who is a Specified Employee), the balance of his Capital Accumulation Account shall be paid to his Beneficiary pursuant to the provisions of Sections 5.2 and 5.3 and Article VI.

     5.9 Taxes. In the event any taxes are required by law to be withheld or paid from any payments made pursuant to the Plan, the Company shall cause the withholding of such amounts from such payments and shall transmit the withheld amounts to the appropriate taxing authority. In addition, it is the intention of the Company that benefits credited to a Participant under the Plan shall not be included in the gross income of the Participants or their Beneficiaries until such time as benefits are distributed under the provisions of the Plan. If, at any time, it is determined that benefits under the Plan are currently taxable to a Participant or his Beneficiary, the amounts credited to the Participant’s Capital Accumulation Account which become so taxable shall be distributable immediately to him; provided, however, that in no event shall amounts so payable to a Participant exceed the value of his Capital Accumulation Account.

12

ARTICLE VI

BENEFICIARIES

     In the event a Participant dies before his interest under the Plan in his Capital Accumulation Account has been distributed in full, any remaining interest shall be distributed in a single sum to his Beneficiary, who shall be the person designated as such in writing by the Participant in the form and manner specified by the Company. In the event a Participant does not designate a Beneficiary or his designated Beneficiary does not survive him, his beneficiary under the OMG Profit Sharing Plan shall be his Beneficiary for Plan purposes.

13

ARTICLE VII

ADMINISTRATIVE PROVISIONS

     7.1 Administration. The Plan shall be administered by the Company as an unfunded plan that is not intended to meet the qualification requirements of Section 401 of the Code and that is intended to satisfy the provisions of Section 409A.

     7.2 Powers and Authorities of the Committee. The Committee, as appointed by the Company, shall have powers, authorities, or responsibilities for the operation and administration of the Plan so designated in writing by the Company and may employ such attorneys, agents, and accountants as it may deem necessary or advisable to assist it in carrying out such duties. No member of the Committee shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of the Plan unless attributable to his own willful misconduct or lack of good faith. Members of the Committee shall not participate in any action or determination regarding their own benefits, if any, payable under the Plan.

     7.3 Indemnification. In addition to whatever rights of indemnification a member of the Committee, or any other person or persons to whom any power, authority, or responsibility is delegated pursuant to Section 7.2, may be entitled under the articles of incorporation, regulations, or by-laws of the Company, under any provision of law, or under any other agreement, the Company shall satisfy any liability actually and reasonably incurred by any such member or such other person or persons, including expenses, attorneys’ fees, judgments, fines, and amounts paid in settlement, in connection with any threatened, pending, or completed action, suit, or proceeding which is related to the exercise or failure to exercise by such member or such other person or persons of any of the powers, authority, responsibilities, or discretion provided under the Plan.

14

ARTICLE VIII

AMENDMENT AND TERMINATION

     The Company may amend, modify, suspend or terminate the Plan for any purpose, except that no such amendment, modification, suspension or termination shall adversely affect any Participant who is receiving benefits under the Plan or whose Capital Accumulation Account is credited with any Supplemental Contributions thereto, unless an equivalent benefit is otherwise provided under another plan or program sponsored by the Company.

15

ARTICLE IX

MISCELLANEOUS

     9.1 Non-Alienation of Benefits. No benefit under the Plan shall at any time be subject in any manner to alienation or encumbrance. If any Participant or Beneficiary shall attempt to, or shall, alienate or in any way encumber his benefits under the Plan, or any part thereof, or if by reason of his bankruptcy or other event happening at any time any such benefits would otherwise be received by anyone else or would not be enjoyed by him, his interest in all such benefits shall automatically terminate and the same shall be held or applied to or for the benefit of such person, his spouse, children, or other dependents as the Board may select.

     9.2 Payment of Benefits to Others. If any Participant or Beneficiary to whom a benefit is payable is unable to care for his affairs because of illness or accident, any payment due (unless prior claim therefor shall have been made by a duly qualified guardian or other legal representative) may be paid to the spouse, parent, brother, or sister, or any other individual deemed by the Board to be maintaining or responsible for the maintenance of such person. Any payment made in accordance with the provisions of this Section 9.2 shall be a complete discharge of any liability of the Plan with respect to the benefit so paid.

     9.3 Plan Non-Contractual. Nothing herein contained shall be construed as a commitment or agreement on the part of any person employed by the Company to continue his employment with the Company, and nothing herein contained shall be construed as a commitment on the part of the Company to continue the employment or the annual rate of compensation of any such person for any period, and all Participants shall remain subject to discharge to the same extent as if the Plan had never been established.

     9.4 Funding. The Company may cause Plan benefits to be paid from the Trust, which is a grantor trust that provides a source for the funding of Plan benefits. Subject to the provisions of

16

the trust agreement governing the Trust, the obligation of the Company under the Plan to provide a Participant or a Beneficiary with a benefit constitutes the unsecured promise of the Company to make payments as provided herein, and no person shall have any interest in, or a lien or prior claim upon, any property of the Company.

     9.5 Claims of Other Persons. The provisions of the Plan shall in no event be construed as giving any person, firm or corporation any legal or equitable right as against the Company, its officers, employees, or directors, except any such rights as are specifically provided for in the Plan or are hereafter created in accordance with the terms and provisions of the Plan.

     9.6 Section 409A. Notwithstanding any provision to the contrary in the Plan, nothing shall restrict the Company’s right to amend the Plan, without the consent of Participants and without additional consideration to affected Participants, to the extent necessary to avoid taxation, penalties, and/or interest arising under Section 409A, even if such amendments reduce, restrict, or eliminate rights granted thereunder before such amendments. Although the Company shall use its best efforts to avoid the imposition of taxation, penalties, and/or interest under Section 409A, tax treatment of deferrals and other credits under the Plan is not warranted or guaranteed. If, at any time, it is determined that amounts deferred pursuant to the Plan are currently taxable to a Participant or his Beneficiary under Section 409A, the amounts credited to such Participant’s Capital Accumulation Account which become so taxable shall be distributed immediately to him; provided, however, that in no event shall amounts so payable under the Plan to a Participant exceed the value of his Separate Account. Notwithstanding the foregoing, the Company, any Affiliate, or any delegate shall not be held liable for any taxes, penalties, interest or other monetary amount owed by any Participant, Beneficiary, or other person as a result of the deferral or payment of any amounts under the Plan or as a result of the administration of amounts subject to the Plan.

17

     9.7 Severability. The invalidity or unenforceability of any particular provision of the Plan shall not affect any other provision hereof, and the Plan shall be construed in all respects as if such invalid or unenforceable provision were omitted herefrom.

     9.8 Governing Law. The provisions of the Plan shall be governed and construed in accordance with the laws of the State of Ohio.

     Executed at Cleveland, Ohio, this       day of                    , 2007.

OM GROUP, INC.
By:
	Title:

18

EXHIBIT A

Participant whose Vested Benefits are Payable at 65 in a Single Sum

1.	Mark Labovitz
2.	Paul D. Schulz
3.	Michael J. Scott

19

EX-10.5

Exhibit      

STOCK PURCHASE AGREEMENT

dated as of October 7, 2007

by and between

Rockwood Specialties Group, Inc.

and

OM Group, Inc.

TABLE OF CONTENTS

		Page
ARTICLE I PURCHASE AND SALE OF SHARES			1
1.1	Purchase and Sale		1
1.2	Purchase Price and Payment		1
1.3	Closing		2
1.4	Deliveries at the Closing		2
1.5	Closing Working Capital Adjustment		8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER			10
2.1	Organization and Good Standing		11
2.2	Capitalization		12
2.3	Authority, Approvals and Consents		13
2.4	Financial Statements		15
2.5	Absence of Undisclosed Liabilities		16
2.6	Absence of Certain Changes or Events		17
2.7	Taxes		19
2.8	Legal Matters		22
2.9	Property		23
2.10	Material Contracts		25
2.11	Labor Relations		29
2.12	Employee Benefits		30
2.13	Transactions with Affiliates		36
2.14	Environmental Matters		37
2.15	Intellectual Property		38
2.16	Brokers		40
2.17	Sufficiency		40
2.18	Customers and Suppliers		40
2.19	Inventories		41
2.20	Accounts Receivable and Payables		41
2.21	Banks		42
2.22	NO OTHER REPRESENTATIONS OR WARRANTIES		42
2.23	Environmental Representations and Warranties		43
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER			43
3.1	Organization and Good Standing		43
3.2	Authority, Approvals and Consents		43
3.3	Brokers		45
3.4	Investment Intent of Buyer		45
3.5	Financing		45
ARTICLE IV COVENANTS			45
4.1	Access; Confidentiality		45
4.2	Announcements		46
4.3	Conduct of Business Prior to the Closing		47

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		Page
4.4	Consents; Cooperation		51
4.5	Competition Filings		52
4.6	Use of Name		54
4.7	Notification of Certain Matters		55
4.8	Retention of Books and Records		56
4.9	Permits		57
4.10	Intercompany Agreements and Accounts; Debt		57
4.11	Restructurings		57
4.12	Guarantees		59
4.13	Covenant Not To Compete		60
4.14	Reporting Assistance		62
4.15	Title Insurance		62
4.16	Further Assurances		63
4.17	No Shop		63
4.18	Debt		63
4.19	Resignation of Directors		64
4.20	Taiwan Lease		64
4.21	Estoppel Certificates		64
4.22	Section 75 Payment		64
4.23	Confidentiality		64
4.24	Rockwood UK Plan		65
4.25	Compugraphics Plan		65
4.26	Insurance		69
ARTICLE V CONDITIONS TO THE OBLIGATIONS OF BUYER			69
5.1	Representations and Warranties; Covenants		69
5.2	Competition Law Clearances		70
5.3	No Injunctions or Restraints		70
5.4	Singapore Restructuring		70
5.5	No Material Adverse Change		71
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF SELLER			71
6.1	Representations and Warranties; Covenants		71
6.2	Competition Law Clearances		71
6.3	No Injunctions or Restraints		71
ARTICLE VII TERMINATION			72
7.1	Termination		72
7.2	Effect of Termination		73
ARTICLE VIII SURVIVAL AND INDEMNIFICATION			73
8.1	Survival		73
8.2	Indemnification Obligations of Seller		74
8.3	Indemnification Obligations of Buyer		75
8.4	Limitations on Indemnification		76
8.5	Mitigation and Recovery from Third Parties		79
8.6	Procedure		79

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		Page
8.7	Further Limitations on Indemnification		83
8.8	Tax Treatment of Payments		84
ARTICLE IX TAX AND EMPLOYEE MATTERS			84
9.1	Certain Tax Matters		84
9.2	Employee Benefit Plan Matters		91
9.3	Workers’ Compensation		95
9.4	No Third Party Beneficiary Rights; No Right to Employment		95
ARTICLE X MISCELLANEOUS			95
10.1	Expenses		95
10.2	Headings		96
10.3	Notices		96
10.4	Assignment		97
10.5	Entire Agreement		97
10.6	Amendment; Waiver		98
10.7	Counterparts		98
10.8	Governing Law; Consent to Jurisdiction; Waiver of Jury Trial		98
10.9	Interpretation; Absence of Presumption		99
10.10	Third Person Beneficiaries		100
10.11	Representations and Warranties; Schedules		100
10.12	Severability		101

EXHIBITS

Exhibit A	Certain Definitions
Exhibit B	List of Companies
Exhibit C	Allocation of Purchase Price
Exhibit D	Form of Local Share Transfer Agreement
Exhibit E	Principles Used in the Preparation of the Balance Sheet; Exchange Rates
Exhibit F	Singapore Restructuring
Exhibit G	Title Materials

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STOCK PURCHASE AGREEMENT

          THIS AGREEMENT is made as of October 7, 2007, by and between Rockwood Specialties Group, Inc., a Delaware corporation (“Seller”), and OM Group, Inc., a Delaware corporation (“Buyer”). Capitalized terms not otherwise defined in this Agreement are used as defined in Exhibit A.

          Buyer desires to purchase and Seller desires to sell, or cause to be sold, the issued and outstanding shares of capital stock or other equity interests of the entities listed on Exhibit B (collectively, the “Companies”), on the terms and subject to the conditions set forth herein.

          Accordingly, in consideration of the premises and mutual representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE I

PURCHASE AND SALE OF SHARES

          1.1 Purchase and Sale. Upon the terms and subject to the conditions set forth in this Agreement, and for the consideration set forth in Section 1.2, Seller will sell (and will cause the other Rockwood Sellers and, in the case of Taiwan Shares, the Taiwan Nominee Shareholders, to sell) to Buyer at the Closing, and Buyer will purchase from Seller and the other Rockwood Sellers (and the Taiwan Nominee Shareholders) at the Closing, all of the Shares.

          1.2 Purchase Price and Payment. The aggregate consideration for the Shares shall be (i) U.S. $274,809,000, (ii) increased or reduced on a dollar-for-dollar basis by the amount by which Closing Working Capital is more than U.S. $26.5 million or less than U.S. $22.5 million, (iii) increased by Retained Cash Balances, if any and (iv) reduced by agreed

adjustments of U.S. $10 million (the “Purchase Price”). The Purchase Price will be allocated among the Shares in accordance with Exhibit C.

          1.3 Closing. The consummation of the purchase and sale of the Shares provided for in Section 1.2 and the other transactions contemplated hereunder (the “Closing”) will take place at the New York offices of Hughes Hubbard & Reed LLP, at 10:00 a.m., Eastern Standard Time, on (i) if the last of the conditions required to be satisfied or waived pursuant to Articles V and VI (other than those requiring the delivery of a certificate or other document or the taking of other action at the Closing) are satisfied or waived during the period from November 27 through December 11, 2007, December 14, 2007 (ii) if the last of the conditions required to be satisfied or waived pursuant to Articles V and VI (other than those requiring the delivery of a certificate or other document or the taking of other action at the Closing) are satisfied at another time, the last Business Day of the month in which such conditions are so satisfied or waived or (iii) such other time, on such other date and such other place as may be mutually agreed upon by Buyer and Seller. The date on which the Closing occurs is referred to herein as the “Closing Date.” The Closing shall be deemed to be effective between the parties as of 11:59 p.m. (E.S.T.) on the Closing Date.

          1.4 Deliveries at the Closing. At the Closing:

               (a) Seller shall deliver or cause to be delivered to Buyer:

                    (i) certificates representing all U.S. Shares accompanied by stock powers executed in blank, with all necessary stock transfer and other documentary stamps attached;

                    (ii) share certificates (or indemnities in a form reasonably satisfactory to Buyer in respect of any such share certificates that are lost) representing all

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Singapore Shares and all UK Shares together with duly executed stock transfers in respect of the Singapore Shares and the UK Shares;

                    (iii) irrevocable powers of attorney in a form reasonably satisfactory to Buyer executed by each of the registered holders of the UK Shares authorizing Buyer or its nominees to exercise all voting and other rights attaching to the UK Shares until registration of Buyer or such nominees as the holder(s) of the UK Shares;

                    (iv) a working sheet in the form prescribed by the Inland Revenue Authority of Singapore signed by a director or secretary of the Singapore Transferred Company computing the net asset value per Singapore Share;

                    (v) (1) share certificates representing all Taiwan Shares, each duly endorsed on the reverse by the Taiwan Shares Seller or relevant Taiwan Nominee Shareholder as appropriate, (2) the Foreign Investment Approval (the “FIA”) issued by the Taiwanese Investment Commission of Ministry of Economic Affairs to Taiwan Shares Seller and Taiwan Nominee Shareholders in respect of the transfer of the Taiwan Shares to Buyer or its designee, and (3) notice of the transfer of the Taiwan Shares from Taiwan Shares Seller and Taiwan Nominee Shareholders to the Taiwan Transferred Company;

                    (vi) except as Buyer may otherwise specify to Seller in writing prior to the Closing, the written resignation of each director and executive officer and, as applicable, each secretary of the Transferred Companies (or such officers or directors shall have been otherwise removed), such resignation to be executed as a deed in the Agreed Form and to confirm that the person resigning has no claims against the Company from which he is resigning for compensation, for loss of office or otherwise;

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                    (vii) the written resignations of the auditors of each UK Transferred Company with such resignation to be in the form required by Section 394 of the Companies Act 1985, as amended (the “UK Companies Act”) and to confirm that such auditors are of the opinion that there are no circumstances of the nature referred to in Section 394(1) of the UK Companies Act that need to be brought to the attention of the members or creditors of such UK Transferred Company in connection with their resignation;

                    (viii) the certificate(s) of incorporation, the common seal, minute books, statutory registers, share certificate books (to the extent shares of the applicable Transferred Company were issued in certificated form) and all other statutory records of each Transferred Company, and a certificate of good standing for each U.S. Transferred Company (or the equivalent in other jurisdictions for other Transferred Companies, if readily available) in their jurisdictions of organization, dated a date reasonably close to the Closing Date;

                    (ix) a transition services agreement, in form and substance reasonably satisfactory to Buyer and Seller, pursuant to which Buyer shall cause the Business to provide Seller and Seller shall provide the Business such transition services as each may reasonably request, at cost, for a reasonable period of time (the “Transition Services Agreement”), duly executed by Seller;

                    (x) in respect of each U.S. Transferred Company, a certificate executed by Seller, in form and substance reasonably satisfactory to Buyer, that satisfies Buyer’s obligations under Treasury Regulation Section 1.1445-2;

                    (xi) U.C.C. termination statements (and comparable instruments in other jurisdictions) in recordable form and other appropriate releases, in form and substance

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reasonably satisfactory to Buyer, with respect to all recorded Liens (other than Permitted Liens) in the Assets of the Transferred Companies;

                    (xii) certified copies of the minutes of the board meetings referred to in 1.4(b) below, certified as true by a director or the secretary of the relevant UK Transferred Company or Singapore Transferred Company;

                    (xiii) copies of resolutions adopted by the Board of Directors of Seller, certified as of the Closing Date by the secretary or an assistant secretary of Seller, approving the execution and delivery of this Agreement, the Ancillary Documents to be executed and delivered by Seller and the performance by Seller of its obligations hereunder and thereunder;

                    (xiv) copies of resolutions adopted by the Board of Directors of Rockwood Specialties, certified as of the Closing Date by the secretary or an assistant secretary of Rockwood Specialties, approving the sale of all of the issued and outstanding shares of capital stock of the US Transferred Companies pursuant to the terms of this Agreement and execution and delivery of the Ancillary Documents to be executed and delivered by Rockwood Specialties and the performance by Rockwood Specialties of its obligations thereunder;

                    (xv) a copy of a resolution of the Board of Directors of Caledonian, approving the sale of the whole of the issued share capital of Caledonian Applied Technologies Limited pursuant to the terms of this Agreement and the execution and delivery by Caledonian of all transfers and other documents required to be executed by it pursuant to this Agreement or any Local Share Transfer Agreement, certified as true by a director or the secretary of Caledonian;

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                    (xvi) a copy of a resolution of the Board of Directors of Mustardgrange, approving the sale of the whole of the issued share capital of Rockwood Electronic pursuant to the terms of this Agreement and the execution and delivery by Mustardgrange of all transfers and other documents required to be executed by it pursuant to this Agreement or any Local Share Transfer Agreement, certified as true by a director or the secretary of Mustardgrange; and

                    (xvii) the certificate required to be delivered by Seller pursuant to Section 5.1.

               (b) Seller shall have ensured that meetings of the boards of directors of the UK Transferred Companies and the Singapore Transferred Company are held at which the directors, subject to and with effect from the Closing:

                    (i) in respect of such UK Transferred Companies that are also Companies and the Singapore Transferred Company, approve the registration of Buyer or its nominee(s) as member(s) of the respective UK Transferred Company or Singapore Transferred Company, as applicable, in respect of the relevant UK Shares or Singapore Shares, as applicable (subject to only the production of properly stamped transfers);

                    (ii) in respect of such UK Transferred Companies that are also Companies and the Singapore Transferred Company, authorize the issuance of new share certificates in respect of the UK Shares or Singapore Shares, as applicable, in favor of Buyer or its nominee(s);

                    (iii) in respect of such UK Transferred Companies that are also Companies, subject only to the transfers of the UK Shares being duly stamped, and in respect of the Singapore Transferred Company, subject to the transfer of the Singapore Shares being duly

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stamped, approve the entry into the register of members of such Companies, the name of Buyer or its nominee(s) as the holder of the UK Shares or Singapore shares, as applicable, and the making of such other entries into other corporate records of such Companies as may be necessary;

                    (iv) appoint Ernst & Young LLP to replace the existing auditors of the UK Transferred Companies;

                    (v) appoint persons nominated by Buyer as directors and secretary of each UK Transferred Company and the Singapore Transferred Company with effect from the Closing; and

                    (vi) except as Buyer may otherwise specify to Seller in writing prior to the Closing, accept resignations of the directors and secretary of each UK Transferred Company, and in the case of the Singapore Transferred Company, the directors and secretary of the Singapore Transferred Company, so as to take effect from the Closing.

               (c) Buyer shall deliver to Seller:

                    (i) the Estimated Purchase Price in immediately available funds by wire transfer to a bank account (or bank accounts) designated by Seller, which designation shall be made at least two (2) Business Days prior to the Closing Date;

                    (ii) the Transition Services Agreement, duly executed by Buyer;

                    (iii) (1) the FIA issued by the Taiwanese Investment Commission of the Ministry of Economic Affairs to Buyer in respect of the transfer of the Taiwan Shares to Buyer, and (2) a receipt for payment of the Taiwan Securities Transaction Tax;

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                    (iv) copies of resolutions adopted by the Board of Directors of Buyer, certified as of the Closing Date by the Secretary of Buyer, approving the execution and delivery of this Agreement and the Ancillary Documents to be executed and delivered by Buyer and the performance by Buyer of its obligations hereunder and thereunder; and

                    (v) the certificate required to be delivered by Buyer pursuant to Section 6.1.

               (d) At the request of Buyer or Seller, Buyer and Seller will enter into, and will cause their applicable Affiliates to enter into, one or more agreements, substantially in the form of Exhibit D (a “Local Share Transfer Agreement”), memorializing the transfer of the Shares of one or more Companies in a particular jurisdiction, including, in the case of the transfer of the Shares of the UK Transferred Companies, appropriate language to transfer such Shares to Buyer with a “full title guarantee.”

          1.5 Closing Working Capital Adjustment.

               (a) At least five (5) Business Days prior to the Closing Date, Seller shall prepare and deliver to Buyer, or shall cause to be prepared and delivered to Buyer, a statement substantially in the form attached hereto as Exhibit E (the “Estimated Closing Statement”) setting forth its good faith estimate of Closing Working Capital determined in accordance with GAAP applied using the same principles, practices, methodologies and policies used in the preparation of the Balance Sheet, and Retained Cash Balances.

               (b) The Purchase Price payable on the Closing Date shall be calculated in accordance with Section 1.2 as if Seller’s estimate of Closing Working Capital and Retained Cash Balances set forth in the Estimated Closing Statement was the actual amount of Closing

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Working Capital and Retained Cash Balances. The Purchase Price as so estimated is referred to as the “Estimated Purchase Price.”

               (c) On or prior to the date forty-five (45) days following the Closing Date, Buyer shall prepare and deliver to Seller a statement (the “Final Closing Statement”) setting forth in reasonable detail its calculation of Closing Working Capital, Retained Cash Balances and the Purchase Price. The Final Closing Statement shall be accompanied by a certificate executed by a senior financial officer of Buyer to the effect that the Final Closing Statement has been prepared in good faith in accordance with this Section 1.5(c). The Final Closing Statement shall also set forth, and explain, in reasonable detail, any differences between Buyer’s calculation of Closing Working Capital and Retained Cash Balances from that set forth on the Estimated Closing Statement.

               (d) Buyer shall make available to Seller all workpapers and other books and records utilized by Buyer in the preparation of the Final Closing Statement, and shall make available to Seller those employees and representatives involved in the preparation of the Final Closing Statement. Seller shall notify Buyer in writing within thirty (30) days after Seller’s receipt of the Final Closing Statement that it accepts the Final Closing Statement or that there is a dispute as to an item reflected thereon. Such notice will set forth Seller’s objections, if any, to the Final Closing Statement in reasonable detail. The failure by Seller to give Buyer such notice within such period shall be deemed to constitute Seller’s acceptance of the Final Closing Statement. The parties will use all reasonable efforts to resolve any such dispute, but if such dispute cannot be resolved by the parties within forty-five (45) days after Seller gives notice of such dispute, it shall be referred to KPMG LLP (the “Selected Accountants”) pursuant to a writing signed by Buyer and Seller adequately describing the dispute. The Selected Accountants

9

shall have authority to resolve the dispute described in the writing and no other matter. The written determination of the Selected Accountants with respect to such dispute shall be conclusive and binding on each party. The fees and expenses of the Selected Accountants shall be shared equally by Seller and Buyer.

               (e) If the Purchase Price as finally determined pursuant to this Section 1.5 (i) is less than the Estimated Purchase Price, Seller shall pay to Buyer an amount equal to the shortfall, or (ii) is more than the Estimated Purchase Price, Buyer shall pay to Seller an amount equal to the excess. Any such payment pursuant to the preceding sentence will be made by wire transfer of immediately available funds, to an account (or accounts) designated by Buyer or Seller, as the case may be, on the later of (x) the second (2nd) Business Day after acceptance by Seller of the Final Closing Statement or (y) the second (2nd) Business Day following resolution (as contemplated by paragraph (d) above) of any dispute concerning the Final Closing Statement; provided, however, that if the parties are disputing the final calculation of the Purchase Price, to the extent part of any payment that would be payable pursuant to this paragraph (e) is not in dispute, the payor shall pay the amount not in dispute on the date the payment would otherwise be due but for such dispute by wire transfer of immediately available funds to an account designated by the recipient. All payments made pursuant to this paragraph (e) shall be accompanied by interest at a rate equal to 5% per annum from the Closing Date through (but excluding) the date such payment is made.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

          Except as set forth in the Disclosure Letter, Seller hereby represents and warrants to Buyer as follows:

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          2.1 Organization and Good Standing. Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. Each of the other Rockwood Sellers is a corporation (or other Person) validly existing and (if such Person is organized in a jurisdiction in which the concept of good standing or its functional equivalent is applicable) in good standing or its functional equivalent under the Laws of its jurisdiction of organization. Schedule 2.1 of the Disclosure Letter lists each Subsidiary of each Company (together with the Companies, the “Transferred Companies”) and the business entity form and place of organization for each of the Transferred Companies. Each Transferred Company is (x) validly existing and (if such Transferred Company is organized in a jurisdiction in which the concept of good standing or its functional equivalent is applicable) in good standing or its functional equivalent under the Laws of its jurisdiction of organization, and (y) qualified to do business as a foreign corporation and (if such concept of good standing or its functional equivalent is applicable in such jurisdiction) in good standing or its functional equivalent in each jurisdiction in which the conduct of its business or the ownership of its Assets requires such qualification, except for such failures to be so qualified and in good standing or its functional equivalent which would not be reasonably expected to have a Material Adverse Effect. Each Transferred Company has the corporate (or other equivalent) authority under the Laws pursuant to which it is organized to own or lease the Assets owned or leased by it and to carry on its business as now being conducted by it. Seller has made available to Buyer true and complete copies of each Transferred Companies’ articles of incorporation and by-laws (or other comparable governing instruments) and all amendments thereto to the date hereof, as in effect on the date hereof. The minute books (containing the records of meetings (and actions by written consent in lieu of meetings) of the stockholders, the board of directors, and any committees of

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the board of directors), the stock certificate books and the stock record books of each of the Transferred Companies have been made available for inspection by Buyer prior to the date hereof.

          2.2 Capitalization. The authorized capital stock, share capital or other equity interests of each Transferred Company and the number of shares of such stock or capital or equity interests that are issued and outstanding, and any such stock or equity interests held by the applicable Transferred Company as treasury stock, are set forth on Schedule 2.2 of the Disclosure Letter. There are no other shares of capital stock or other equity securities of any Transferred Company issued, reserved for issuance or outstanding. The ownership of all issued and outstanding shares or other equity interests of the Transferred Companies is set forth in Schedule 2.2 of the Disclosure Letter. All the Shares and Subsidiary Shares have been validly authorized and issued, are fully paid and, in respect of such jurisdictions where such concept is applicable, nonassessable and have not been issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any organizational document of any Transferred Company, any applicable Law or any Contract to which any Rockwood Seller or Transferred Company is a party or otherwise bound. There are not any bonds, debentures, notes or other indebtedness of any Transferred Company having the right to vote, or convertible into, or exchangeable for, securities having the right to vote, on any matters on which holders of Shares or Subsidiary Shares may vote (“Voting Debt”). There are not any options, warrants, calls, rights, convertible or exchangeable securities, stock appreciation rights, stock-based performance units, commitments or Contracts of any kind to which any Transferred Company is a party or by which any of them is bound (i) obligating any Transferred Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of

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capital stock or other equity interests in, or any security convertible into or exercisable or exchangeable for any capital stock of or other equity interest in, any Transferred Company or any Voting Debt, (ii) obligating any Transferred Company to issue, grant, extend or enter into any such option, warrant, call, right, security, unit, commitment or Contract or (iii) that give any Person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of Shares or Subsidiary Shares. There are not any outstanding contractual obligations (contingent or otherwise) of any Transferred Company to repurchase, redeem or otherwise acquire any shares of capital stock of any Transferred Company. No Transferred Company is a party to, or otherwise bound by, any voting trust, proxy or other Contract, restricting or otherwise relating to the voting, dividend rights or disposition of any Shares or Subsidiary Shares. Except for their interests in the Subsidiaries set forth in Schedule 2.2 of the Disclosure Letter, none of the Transferred Companies own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interests in any Person. The Transferred Companies have, and at the Closing will have, good and valid title to the Subsidiary Shares, free and clear of any Liens. The Rockwood Sellers (and Taiwan Nominee Shareholders) have, and will transfer to Buyer at the Closing, good and valid title to the Shares, free and clear of any Liens.

          2.3 Authority, Approvals and Consents.

               (a) Seller has the corporate power and authority to execute, deliver and perform this Agreement and at the Closing each Rockwood Seller will have the corporate power and authority (or equivalent power and authority) to execute, deliver and perform the Ancillary Documents to be executed and delivered by such Rockwood Sellers and, in each case, to consummate the transactions contemplated hereby and thereby by such party. The execution,

13

delivery and performance by Seller of this Agreement and the consummation of the transactions contemplated hereby have been, and at the Closing the execution, delivery and performance by each Rockwood Seller of the Ancillary Documents to which they are, or are specified to be, a party and the consummation of the transactions contemplated thereby by the Rockwood Sellers will have been, duly authorized and approved by the Board of Directors (or comparable governing body) of Seller and each of the other Rockwood Sellers, as applicable, and no other corporate (or other equivalent) proceedings on the part of the Rockwood Sellers or the shareholders or other equity holders of the Rockwood Sellers are necessary to authorize and approve this Agreement and the Ancillary Documents to be executed and delivered by the Rockwood Sellers and the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by Seller, and the Ancillary Documents to be executed and delivered by any Rockwood Seller at the Closing will be duly executed and delivered by such Rockwood Seller. This Agreement constitutes, and at the Closing each Ancillary Document to be executed and delivered by any Rockwood Seller will constitute, a valid and binding obligation of Seller or such Rockwood Seller, as the case may be, enforceable against Seller or such Rockwood Seller, as the case may be, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar Laws affecting creditors’ rights generally.

               (b) The execution and delivery by Seller of this Agreement does not, the execution and delivery by any Rockwood Seller of each Ancillary Document to which it is, or is specified to be, a party will not, and the consummation by the Rockwood Sellers of the transactions contemplated hereby and thereby, and the performance by the Rockwood Sellers and the Transferred Companies of their respective obligations hereunder and thereunder and

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compliance by the Rockwood Sellers and the Transferred Companies with the terms hereof and thereof will not, in any material respect conflict with, or result in any material violation of or material default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the Assets of any Transferred Company under, any provision of (i) the certificate of incorporation or by-laws (or comparable governing instruments), each as in effect, of any Rockwood Seller or Transferred Company, (ii) any Contract to which any Rockwood Seller is a party or by which any of their respective Assets is bound or (iii) any Order or Law applicable to any Rockwood Seller or any Transferred Company or their respective Assets. No Approval or material Consent is required to be obtained or made by or with respect to any Rockwood Seller or any Transferred Company in connection with the execution, delivery and performance of this Agreement or any Ancillary Document by any Rockwood Seller or the consummation by any Rockwood Seller of the transactions contemplated hereby or thereby, other than (u) Approvals in respect of Company Permits, (v) the Approvals set forth on Schedule 2.3 of the Disclosure Letter, (w) compliance with and filings under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (x) Non-US Antitrust Approvals (y) Consents in respect of Material Agreements, Leases and Benefit Plans and (z) Approvals and Consents that may be required solely by reason of Buyer’s (as opposed to any other third party’s) participation in the transactions contemplated hereby and by the Ancillary Documents.

          2.4 Financial Statements. Attached as Schedule 2.4 of the Disclosure Letter are (a) the unaudited consolidated balance sheet of the Business as of December 31, 2006 and the related unaudited consolidated statement of operations for the twelve-month period then ended,

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and (b) the unaudited consolidated balance sheet of the Business as of June 30, 2007 (the “Balance Sheet”) and the related consolidated unaudited statement of operations for the six-month period then ended (all such financial statements, including the related notes and schedules thereto, are referred to herein as the “Financial Statements”). The Financial Statements fairly present in all material respects the consolidated financial position of the Business as of the dates indicated and the consolidated results of operations of the Business for the periods indicated, in conformity with GAAP applied on a consistent basis throughout the periods specified, except (i) that the Financial Statements omit footnotes and the disclosures required therein and (ii) the Financial Statements as of and for the six-month period ended on June 30, 2007 are subject to normal year-end adjustments upon audit consistent with past practices.

          All books of account of the Transferred Companies are in all material respects accurate and complete. The Transferred Companies maintain systems of internal accounting controls sufficient in all material respects to enable officers of Rockwood Holdings, Inc. to give the certifications called for by Rule 13a-14(a) and (b) under the Securities Exchange Act of 1934, as amended.

          2.5 Absence of Undisclosed Liabilities. The Transferred Companies do not have any material Liabilities (whether or not required under GAAP to be reflected on a balance sheet or the notes thereto), except (i) as and to the extent reflected or reserved against on the Balance Sheet, (ii) Liabilities incurred or arising in the Ordinary Course of Business after the date of the Balance Sheet, (iii) those arising in the Ordinary Course of Business under Benefit Plans, Contracts, Leases and Permits, (iv) as disclosed in the Disclosure Letter and (v) liabilities for Taxes.

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          2.6 Absence of Certain Changes or Events. Since the date of the Balance Sheet, (a) the Business has been operated only in the Ordinary Course of Business and (b) there has not been any change, event or occurrence that has had, or could reasonably be expected to have a Material Adverse Effect. Without limiting the foregoing, since the date of the Balance Sheet:

                    (i) there has not been (prior to the date of this Agreement) any damage, destruction or loss with respect to any material Business Asset (to the extent not covered by insurance payable to the applicable Transferred Company);

                    (ii) no Transferred Company has (x) awarded or paid any bonuses to employees of any Transferred Company with respect to the six-months ended June 30, 2007, except to the extent accrued on the Balance Sheet, or (y) except as set forth on Schedule 2.6 of the Disclosure Letter or as otherwise required by the terms of any written agreement in effect on the date hereof or applicable Law, entered into any employment, deferred compensation, severance or similar agreement (nor amended any such agreement) or agreed to increase the compensation payable or to become payable by it to any of its directors, officers, employees, agents or representatives or agreed to increase the coverage or benefits available under any severance pay, termination pay, vacation pay, company awards, salary continuation for disability, sick leave, deferred compensation, bonus or other incentive compensation, insurance pension or other employee benefit plan, payment or arrangement made to, for or with such directors, officers, employees, agents or representatives, in each case of clause (y) outside the Ordinary Course of Business;

                    (iii) as of the date hereof, except as required by applicable Laws, there has not been any material change by any Transferred Company in Tax accounting

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methods nor has there been any change or rescission by any Transferred Company of any material election in respect of Taxes, any filing of any material amended Tax Return by any Transferred Company, or any settlement of any material Tax claim or assessment by any Transferred Company, in each case, which could reasonably be expected to affect the Tax liability of any Transferred for any taxable period beginning after the Closing Date;

                    (iv) no Transferred Company has entered into any transaction or Contract other than in the Ordinary Course of Business;

                    (v) the Transferred Companies have paid and discharged current Liabilities in the Ordinary Course of Business, except where disputed in good faith;

                    (vi) no Transferred Company has (A) mortgaged, pledged or subjected to any Lien any of its Assets (other than Permitted Liens and Liens securing Indebtedness to be released on prior to the Closing), or (B) acquired any Assets or sold, assigned, transferred, conveyed, leased or otherwise disposed of any Assets of any Transferred Company, except for Assets acquired, sold, assigned, transferred, conveyed, leased or otherwise disposed of in the Ordinary Course of Business;

                    (vii) no Transferred Company has made any loans or advances, other than in the Ordinary Course of Business, or any capital contributions to, or investments in, any Person (other than a Transferred Company);

                    (viii) no Transferred Company has canceled or compromised any debt or claim or amended, canceled, terminated, relinquished, waived or released any Contract or right except in the Ordinary Course of Business;

                    (ix) no Transferred Company has made or committed to make any capital expenditures in excess of U.S. $50,000 individually or U.S. $500,000 in the

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aggregate, except as provided in the capital expenditure budgets of the Transferred Companies provided to Buyer;

                    (x) no Transferred Company has granted any license or sublicense of any rights under or with respect to any Intellectual Property owned by any Transferred Company except in the Ordinary Course of Business; and

                    (xi) no Transferred Company has instituted or settled any Proceeding in excess of U.S. $50,000; and

                    (xii) none of the Rockwood Sellers or the Transferred Companies has agreed, committed, arranged or entered into any understanding to do anything set forth in clauses (i) — (xi).

          2.7 Taxes.

               (a) The Transferred Companies have timely filed, or have had filed on their behalf, all Tax Returns which are required to be filed by them, and all such Tax Returns are true, correct and complete in all material respects.

               (b) All Taxes required to be paid by the Transferred Companies, whether or not shown on any Tax Return, have been timely paid, after giving effect to any applicable extensions.

               (c) The Transferred Companies have withheld and timely paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder, or other third party.

               (d) As of the date hereof, there are no Proceedings, investigations, written requests for information, audits, or claims pending or, to the Knowledge of Seller, threatened

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against the Transferred Companies relating to Taxes, and no Tax Return of any Transferred Company has been audited within the three year period ending on the date hereof.

               (e) No Transferred Company has granted any extension or waiver of the limitation period applicable to the assessment or collection of any Tax.

               (f) No Transferred Company has any liability for the Taxes of any Person 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, other than in its capacity as a withholding agent or pursuant to financing arrangements, leases or other commercial agreements and other than as a result of its inclusion in a consolidated, combined or unitary group all the members of which are Transferred Companies.

               (g) No written claim has ever been made by a Governmental Authority in a jurisdiction in which any Transferred Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

               (h) There is no outstanding power of attorney authorizing anyone to act on behalf of any Transferred Company in connection with any Tax, Tax Return or proceeding relating to a Tax that will remain in effect following the Closing, other than any such power of attorney authorizing a person to act on behalf of a consolidated, combined or unitary group in which a Transferred Company is included.

               (i) There is no outstanding closing agreement, ruling request, or request to change a method of accounting with respect to the Taxes of any Transferred Company.

               (j) No Transferred Company will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) application of Section 481(a)

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of the Code as a result of a change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Law) made on or prior to the Closing Date, or (iii) installment sale or open transaction disposition made on or prior to the Closing Date.

               (k) No Transferred Company has distributed the stock of another Person, or had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 of the Code within the two year period ending on the date hereof.

               (l) No “ownership change” (as described in Section 382(g) of the Code) has occurred or will occur prior to the Closing Date that would have the effect of limiting the use of “pre-change tax losses” (as described in Section 382(d) of the Code) of any Transferred Company following the Closing Date.

               (m) The reserves for Taxes appearing in the Balance Sheet are sufficient to cover all Taxes for which any Transferred Company was liable at the date to which the Balance Sheet was drawn up or may after that date become or have become liable on or in respect of or by reference to any profits, gains or income (whether deemed or actual) for any period ended on or before such date or in respect of any distribution or transaction made or entered into or deemed made or entered into on or before such date.

               (n) Seller (or its appropriate Affiliates) or each Transferred Company is in possession and control of all records and documentation that it is obliged to hold, preserve and retain for the purposes of any Tax and such information is sufficient to enable it to compute

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correctly its liability for Taxes in so far as it relates to any event occurring during a Straddle Period.

               (o) Schedule 2.7 of the Disclosure Letter sets forth the classification of each of the Transferred Companies for federal Income Tax purposes.

               (p) No Transferred Company is a party to any transaction that is described in Section 6707A(c) of the Code or in Treasury Regulation Section 1.6011-4 (or any predecessor provision thereto) and not exempt from reporting pursuant to any administrative guidance.

          2.8 Legal Matters.

               (a) Schedule 2.8 of the Disclosure Letter sets forth a list as of the date of this Agreement and for the 36 months prior to the date hereof, of each Proceeding pending, resolved or settled or, to the Knowledge of Seller, threatened in writing against any Transferred Company or any Business Assets and that (a) related or relates to or involved or involves more than U.S. $50,000, (b) sought or seeks any injunctive relief or (c) related or relates to the transactions contemplated by this Agreement. No Transferred Company is a party or subject to or in any material respect in default under any Order. As of the date of this Agreement, there is no Proceeding by any Transferred Company pending against any other Person.

               (b) The Transferred Companies are, and for the three (3) years prior to the date of this Agreement have been, in compliance in all material respects with all applicable Laws. During the three (3) years prior to the date of this Agreement, the Transferred Companies have not received any written notice asserting any noncompliance by any Transferred Company in any material respect with any applicable Law. To the Knowledge of Seller, as of the date of this Agreement, no Transferred Company is under investigation with respect to the violation of any Laws.

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               (c) The Transferred Companies have been granted and hold, all material Approvals required to conduct the Business in all material respects in the manner in which it is conducted as of the date of this Agreement (“Company Permits”). No Transferred Company is in default or violation, and no event has occurred which, with notice or the lapse of time or both, would constitute a default or violation, in any material respect, of any Company Permit. As of the date of this Agreement, there are no Proceedings pending or, to the Knowledge of Seller, threatened, relating to the suspension, revocation or modification of any Company Permit. Other than the requirement to obtain Approvals in respect of Permits, the execution and delivery by Seller of this Agreement does not, the execution and delivery by any Rockwood Seller of each Ancillary Document to which it is, or is specified to be, a party will not, and the consummation by the Rockwood Sellers of the transactions contemplated hereby and thereby, and the performance by the Rockwood Sellers and the Transferred Companies of their respective obligations hereunder and thereunder and compliance by the Rockwood Sellers and the Transferred Companies with the terms hereof and thereof will not, in any material respect conflict with, or result in any material violation of or material default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the Assets of any Transferred Company under, any provision of any Company Permit.

          2.9 Property.

               (a) Attached as Schedule 2.9(a) of the Disclosure Letter is a list of each parcel of real property owned by the Transferred Companies and used in the Business (the “Owned Property”). The (i) U.S. Transferred Companies have good and marketable fee simple

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title to the Owned Property, and (ii) Compugraphics International Limited is the registered proprietor of the property at Unit B, Newark Road North, Eastfield Industrial Estate, Glenrothes, and accordingly has a valid title to this property in accordance with the laws of Scotland, in each case free and clear of all Liens (other than Permitted Liens). To the Knowledge of Seller, as of the date of this Agreement, no condemnation or eminent domain proceeding against or affecting, or resolution/proposal for the compulsory acquisition by a local or other Governmental Authority of, all or any portion of the Owned Property is pending or threatened. No Transferred Company has leased or sublet, as lessor or sublessor, any of the Owned Property.

               (b) Attached as Schedule 2.9(b) of the Disclosure Letter is a list of all leases of real property leased or licensed by the Transferred Companies and used in the Business (the “Leases”) as of the date of this Agreement. Each Lease is in all material respects in full force and effect and is valid, binding and enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar Laws affecting creditors’ rights generally. Neither any Transferred Company nor, to the Knowledge of Seller, any other party to any Lease is in material breach or default of or under any such Lease, and to the Seller’s Knowledge no event has occurred which (with due notice or lapse of time or both) could reasonably be expected to constitute a material breach or default under any such Lease. The execution, delivery and performance by Seller of this Agreement and the Ancillary Agreements to be executed and delivered by Seller or any of its Affiliates, and the consummation of the transactions contemplated hereby and thereby by Seller and its Affiliates, do not and will not, in any material respect, conflict with, result in the modification or cancellation of, or give rise to any right of termination in respect of (with due notice or lapse of time or both) any such Lease. As of the date of this Agreement, no notice of

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material breach or of any event which (with lapse of time) could reasonably be expected to constitute a material breach from the landlord, any other Person or Governmental Authority has been received in relation to any such Lease that has not been resolved. No Affiliate of any Transferred Company is the owner or lessor of any Leased Property. No Transferred Company has leased or sublet, as lessor or sublessor, any of the Leased Property.

               (c) Except as disposed of in the Ordinary Course of Business, the Transferred Companies have good and valid title to all material tangible personal property reflected on the Balance Sheet or acquired by it after the date thereof, and such property is held free and clear of all Liens (other than Permitted Liens).

               (d) All material improvements and fixtures on all the Real Property, and all material machinery, equipment and other tangible property owned or leased to the Transferred Companies and currently used by the Business (“Property”), are in all material respects in good condition, except for ordinary wear and tear and after giving effect to capital expenditures being undertaken, and are, together with the Administrative Assets and after taking into account goods and services purchased or leased by the Transferred Companies (including mechanical, electrical and HVAC services provided under Leases), sufficient for the conduct of the Business in all material respects as currently conducted.

               (e) The Real Property constitutes all real property on which the Transferred Companies conduct their operations (other than Administrative Services). The location of the Owned Property is reflected in the Title Materials.

          2.10 Material Contracts. Seller has made available to Buyer for inspection true and complete copies of all Material Agreements. Schedule 2.10 of the Disclosure Letter sets forth a list of each of the following contracts to which any Transferred Company or its Assets are

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bound as of the date of this Agreement (excluding insurance policies, it being understood and agreed that from and after the Closing, the Transferred Companies shall cease to be insured under such policies) (collectively, the “Material Agreements”):

               (a) any Contract pursuant to which Indebtedness of the Transferred Company has been incurred, other than Seller’s group wide debt facilities under which the Transferred Companies will have no obligations following the Closing;

               (b) any obligation to make payments, contingent or otherwise, arising out of the prior acquisition of the Assets or businesses of other Persons (other than accounts payable constituting current liabilities);

               (c) any Contract containing (x) non-competition covenants or (y) other covenants restricting the current or future development, manufacture, marketing or distribution of the products and services of any Transferred Company (other than, in the case of clause (y), confidentiality, employment, management, consulting and other similar agreements entered into in the Ordinary Course of Business and those contained in license, distribution, toll manufacturing and similar agreements, in each case which are not material);

               (d) any lease, sublease or similar Contract with any Person (other than a Transferred Company) under which any Transferred Company is a lessor or sublessor of, or otherwise grants any interest to any Person (other than a Transferred Company) in any Owned Property or any Leased Property;

               (e) lease, sublease or similar Contract with any Person (other than a Transferred Company) under which (A) any Transferred Company is lessee or sublessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by any Person or (B) any Transferred Company is a lessor or sublessor of, or makes available for

26

use by any Person, any tangible personal property owned or leased by any Transferred Company, in any such case which has an aggregate future liability or receivable, as the case may be, in excess of U.S. $50,000;

               (f) (A) continuing Contract for the future purchase of materials, supplies or equipment, or (B) management, service, consulting or other similar Contract in any such case which has an aggregate future liability to any Person (other than a Transferred Company) in excess of U.S. $50,000 and which is not terminable by the relevant Transferred Company on 180 days (or less) notice;

               (g) Contract under which any Transferred Company has made any advance, loan, extension of credit or capital contribution to, or other investment in, any Person (other than a Transferred Company and other than extensions of trade credit in the Ordinary Course of Business);

               (h) Contract granting a Lien upon any Intellectual Property or any other material Asset of any Transferred Company (other than a Permitted Lien);

               (i) Contract entered into outside the Ordinary Course of Business providing for indemnification of any Person with respect to material Liabilities relating to any current or former business of any Transferred Company or any predecessor Person;

               (j) Contract for the sale of any material Asset of any Transferred Company (other than inventory sales in the Ordinary Course of Business) or the grant of any preferential rights to purchase any such material Asset;

               (k) hedging agreement (such as a currency exchange, interest rate exchange, commodity exchange or similar Contract) that will be binding on a Transferred Company after the Closing;

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               (l) Contract for any joint venture, partnership or similar arrangement;

               (m) Contract pursuant to which a Transferred Company is the licensee or licensor of material Intellectual Property or otherwise granted any right, title or interest in, to or under any material Intellectual Property; and

               (n) Contract providing for the services of any dealer, distributor, sales representative, franchisee or similar representative involving the payment or receipt over the life of such Contract following the Closing in excess of U.S. $50,000 by any Transferred Company.

          Neither any Transferred Company nor, to the Knowledge of Seller, any other party to any Material Agreement is in material breach or default of or under any such Material Agreement, and to the Seller’s Knowledge no event has occurred that with the lapse of time or the giving of notice, or both, would constitute a material breach or default of any other party thereto. Each Material Agreement is in all material respects a valid and binding obligation of each of the parties thereto and are enforceable against such parties in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar Laws affecting creditors’ rights generally. The execution, delivery and performance by Seller of this Agreement and the Ancillary Agreements to be executed and delivered by Seller or any of its Affiliates, and the consummation of the transactions contemplated hereby and thereby by Seller and its Affiliates, do not and will not, in any material respect, conflict with, result in the modification or cancellation of, render unenforceable, or give rise to any right of termination in respect of (with due notice or lapse of time or both) any Material Agreement. As of the date of this Agreement, no party to any of the Material Agreements has exercised any termination rights with respect thereto, and to the Knowledge of Seller no party has given notice of any material dispute with respect to any

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Material Agreements. Seller has made available to Buyer true, correct and complete copies of all of the Material Agreements, together with all amendments, modifications or supplements thereto. The Transferred Companies are not party to any Contract (other than this Agreement, Benefit Plans, Contracts relating to employment or termination of employment and Contracts that will not remain in effect following the Closing) with (A) any Rockwood Seller or any Affiliate of any Rockwood Seller (other than a Transferred Company) or (B) any current or former officer, employee or director of any Transferred Company, any Rockwood Seller or any Affiliate of any Rockwood Seller.

          2.11 Labor Relations.

               (a) As of the date of this Agreement, there is no labor strike, organized work stoppage, or lockout (each, an “Industrial Action”) in effect or, to the Knowledge of Seller, threatened against the Transferred Companies in relation to the Business and there has been no Industrial Action in relation to the Transferred Companies in the three years prior to the date of this Agreement.

               (b) To the Knowledge of Seller on the date of this Agreement, there is no union organization campaign or dispute with any works council or other employee representative body relating to any of the employees of the Transferred Companies that perform services primarily for the Business (“Business Employees”) as of the date of this Agreement. As of the date of this Agreement, there is no material unfair labor practice charge or complaint pending in the United States or, to the Knowledge of Seller, threatened against any Transferred Company.

               (c) Schedule 2.11 of the Disclosure Letter lists any collective bargaining agreements or other material Contracts with labor organizations, unions or associations binding upon any of the Transferred Companies in relation to the Business on the date of this Agreement.

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               (d) As at the date of this Agreement no current executive of a Transferred Company whose basic annual salary exceeds U.S. $100,000 per annum has given or received notice terminating his employment.

               (e) Except as set forth in Schedule 2.11 of the Disclosure Letter, no person is entitled to any payment or benefit which results from a change of control of a Transferred Company or to terminate his or her employment with any of the Transferred Companies following a change of control of a Transferred Company and receive an enhanced severance benefit solely as a result thereof.

               (f) In the 12 months’ period ending with the date of this Agreement, no UK Transferred Company has given notice of any redundancies to the UK Secretary of State or started consultations with any appropriate representatives under the Trade Union and Labour (Consolidation) Act 1992, nor has any UK Transferred Company been a party to a relevant transfer (as defined in the Transfer of Undertakings (Protection of Employment) Regulations 2006).

               (g) All UK Business Employees are employed by Rockwood Electronic or Compugraphics. None of the employees of the Transferred Companies whose employment will be transferred to Affiliates of Seller in the Restructurings perform a material function for the Business.

          2.12 Employee Benefits.

               (a) Seller has furnished or otherwise made available to Buyer true and complete copies (or to the extent no copies exist, accurate descriptions) of all “employee benefit plans” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), including multiemployer plans within the meaning of Section

30

3(37) of ERISA), all severance, termination, salary continuation, change in control, retention, parachute, employment, incentive, bonus, stock option, stock purchase, restricted stock, retirement pension, redundancy, profit sharing, deferred compensation, employee loan, retiree welfare, fringe benefit and all other employee benefit plans, programs, agreements, policies or arrangements, whether or not subject to ERISA, whether formal or informal (A) to the extent that U.S. Business Employees have any present or future right to benefits and which are contributed to, entered into, sponsored by or maintained by any Rockwood Seller and any Affiliates, and (B) under which Seller or its Affiliates have had or have any present or future liability (each a “U.S. Benefit Plan”). Schedule 2.12(a) of the Disclosure Letter contains a list of: (i) the U.S. Benefit Plans that are maintained by one or more of the Transferred Companies solely for Continuing Employees (and former employees of the Business (“U.S. Company Benefit Plans”)); and (ii) employment agreements of U.S. Business Employees under which one or more of the Transferred Companies may have future material liability.

               (b) With such exceptions as would not, individually or in the aggregate, be material, (i) each U.S. Benefit Plan is in compliance with all applicable Laws and has been administered in accordance with its terms; (ii) 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 any U.S. Benefit Plan that could result in any liability or excise tax under ERISA or the Code being imposed on Seller or any Affiliate; (iii) each U.S. Benefit Plan intended to be tax-qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS as to its tax-qualified status under the Code and, to the Knowledge of Seller, there are no existing circumstances likely to result in the revocation of any such determination letter or the disqualification of any such U.S. Benefit Plan; (iv) no event

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has occurred and no condition exists with respect to any U.S. Benefit Plan that would subject Seller or its Affiliates, either directly or by reason of their affiliation with any member of their “controlled group” (defined as an organization which is a member of a controlled group of organizations within the meaning of Sections 414(b), (c), (m) or (o) of the Code, or which would be considered to be a single employer with that entity pursuant to Section 4001(b) of ERISA), to any material tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other Laws; (v) no “reportable event” (as such term is defined in Section 4043 of ERISA), or “accumulated funding deficiency” (as such term is defined in Section 406 of ERISA and Section 412 of the Code (whether or not waived)) has occurred with respect to any U.S. Benefit Plan; (vi) all premiums due to the Pension Benefit Guaranty Corporation (“PBGC”) with respect to any U.S. Benefit Plan have been timely paid in full; (vii) the PBGC has not instituted proceedings to terminate any U.S. Benefit Plan; (viii) no Liability under Title IV of ERISA has been or could reasonably be expected to be incurred by any of Seller and its Affiliates; and (ix) to the Knowledge of Seller, there are no Proceedings or claims pending (other than routine claims for benefits) with respect to any U.S. Benefit Plan or the Assets thereof, which could result in the imposition of liability on such U.S. Benefit Plan or any Transferred Company.

               (c) As of the date of this Agreement, no audit or investigation of any U.S. Benefit Plan by any Governmental Authority is pending, nor, to the Knowledge of Seller, is there any threatened assessment, complaint, Proceeding, or investigation of any kind in any court or Government Authority with respect to any such U.S. Benefit Plan (other than routine claims for benefits).

               (d) All contributions (including all employer matching or other contributions and employee salary reduction contributions) to and payments from any U.S.

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Benefit Plan in respect of any U.S. Business Employees that are required in accordance with the terms of such U.S. Benefit Plan, any related document, the Code or ERISA have been timely made, or, if not yet due, have been properly reflected in the Financial Statements; and (ii) all such contributions to, and payments from, any U.S. Benefit Plan, except those to be made from a trust qualified under Section 501(a) of the Code, that are required to be made as of the Closing Date will be timely made.

               (e) Except as set forth in Schedule 2.12 of the Disclosure Letter, no U.S. Benefit Plan provides benefits, including death or medical benefits, beyond termination of service, including retirement, other than (i) coverage mandated by Law or (ii) death or retirement benefits under any such U.S. Benefit Plan that is intended to be qualified under Section 401(a) of the Code.

               (f) Except as set forth in Schedule 2.12 of the Disclosure Letter, the execution and performance of this Agreement will not (i) constitute a stated triggering event under any such U.S. Benefit Plan that will result in payment (whether severance pay or otherwise) becoming due from any U.S. Transferred Company 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 due to any current or former officer, employee, director or consultant (or dependents of such individuals) of any U.S. Transferred Company.

               (g) Seller has reserved all rights necessary to amend or terminate any U.S. Company Benefit Plan without the consent of any other Person.

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               (h) No U.S. Company Benefit Plan provides benefits to any individual who is not a current or former employee of any U.S. Transferred Company, or dependents or other beneficiaries of any such current or former employee.

               (i) No amount that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any employee, officer or director of any U.S. Transferred Company who is a “disqualified individual” (as such term is defined in Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or U.S. Benefit Plan currently in effect would be characterized as an “excess parachute payment” (as such term is defined in Section 280G(b)(1) of the Code).

               (j) No U.S. Benefit Plan is a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA), and neither Seller, nor any member of its controlled group has any unpaid liability or obligation in respect of any multiemployer plan.

               (k) With respect to individuals who are located in the U.S. and who provide services to the U.S. Transferred Companies, (i) all persons classified as independent contractors of Seller or its Affiliates satisfy and have at all times satisfied in all material respects all applicable Laws to be so classified; (ii) Sellers and its Affiliates have fully and accurately reported such persons’ compensation of IRS Form 1099 when required to do so; (iii) neither Seller nor any Affiliate has had any obligations to provide benefits with respect to such persons under any U.S. Benefit Plan or otherwise, and (iv) neither Seller nor its Affiliates have employed or employ any “leased employees” as defined in Section 414(n) of the Code.

               (l) In relation to the Rockwood UK Retirement Plan (“Rockwood UK Plan”) and the Compugraphics International Limited Pension and Life Assurance Plan (the

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“Compugraphics Plan”, and together with the Rockwood UK Plan, “UK Benefit Plans”), neither Seller nor any Transferred Company has given any legally enforceable undertaking or assurance as to the continuance or improvement of the UK Benefit Plans.

               (m) All Transferred Companies have complied with any obligations under Section 3 of the UK Welfare Reform and Pensions Act 1999 to facilitate access to a stakeholder pension scheme.

               (n) To the Knowledge of Seller, none of UK Benefit Plans, Rockwood Sellers or Transferred Companies is engaged or involved in any proceedings which relate to or are in connection with any UK Benefit Plan or the benefits thereunder and, to the Knowledge of Seller, there are no facts likely to give rise to any such proceedings. In this sub-section, “proceedings” shall mean any litigation or arbitration and also includes any investigation or determination by the Pensions Ombudsman or the Occupational Pension Advisory Service, any notice or order issued by the Pensions Regulator or any complaint under any internal dispute resolution procedure established in connection with any UK Benefit Plan.

               (o) Each UK Benefit Plan is a registered scheme within the meaning of Chapter 2 of Part 4 of the UK Finance Act 2004 and, to the Knowledge of Seller, there is no reason why deregistration may occur.

               (p) All contributions and premiums which are payable by Transferred Companies under UK Benefit Plans and all contributions due from Transferred Employees and payable by way of Transferred Companies’ payroll to UK Benefit Plans have been duly paid when due.

               (q) The Compugraphics Plan has at all times been administered in all material respects in accordance with the trusts, powers and provisions of its governing

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documentation and has been administered in all material respects in accordance with, and complies in all material respects with all applicable legislation and the general requirements of trust law and other applicable Laws regulations or requirements (including those of HM Revenue and Customs and any European Union law) and UK Transferred Companies and any other participating employers under UK Benefit Plans have fulfilled all their obligations in all material respects under such UK Benefit Plans.

               (r) All lump sum death benefits which may be payable under the UK Benefit Plans on members’ death in service (other than a refund of members’ contributions with interest where appropriate) are fully insured under a policy with an insurance company.

               (s) All levies due to the Board of the UK Pension Protection Fund in respect of the Compugraphics Plan have been paid when due.

               (t) None of the trustees of any UK Benefit Plan has appeared at any time on the Pensions Regulator’s list of prohibited trustees.

               (u) No UK Transferred Company has been a party to any act or omission that falls within the description under Section 38(5) of the UK Pensions Act 2004.

          2.13 Transactions with Affiliates. Set forth on Schedule 2.13 of the Disclosure Letter hereto is a true and complete list of all Contracts (other than intercompany purchase orders entered into in the Ordinary Course of Business) to which any Affiliate of the Transferred Companies (other than a Transferred Company), on one hand, and any Transferred Company, on the other hand, is a party, that will remain in effect following the Closing. No employee, officer, director or stockholder of any Transferred Company, any member of his or her immediate family or any of their respective Affiliates (“Related Persons”) (i) owes any amount to any Transferred Company nor does any Transferred Company owe any amount to, or has any Transferred

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Company committed to make any loan or extend or guarantee credit to or for the benefit of, any Related Person (in the case of employees, other than those relating to the employment of such person), (ii) is involved in any business arrangement or other relationship with any Transferred Company (whether written or oral) (in the case of employees, not relating to their employment (if any)) or (iii) owns any material property or right, tangible or intangible, that is used by any Transferred Company.

          2.14 Environmental Matters.

               (a) The Transferred Companies are, and for the three years prior to the date of this Agreement have been, in all material respects, in compliance with all Environmental Requirements.

               (b) The Transferred Companies have not received any written notice prior to the date of this Agreement from any Governmental Authority or third party regarding any material actual or alleged liability of, or material failure to comply by, the Transferred Companies under Environmental Requirements which (x) remain outstanding and/or unresolved or (y) within the three years prior to the date of this Agreement, whether or not remaining outstanding and/or unresolved.

               (c) To the Knowledge of Seller, the Transferred Companies have not undertaken or assumed any material liability with respect to the Business, including any investigatory, corrective or remedial obligation, under Environmental Requirements (except that the Leases, Material Contracts and Permits may contain indemnities and agreements regarding such liabilities).

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               (d) The consummation of the transactions contemplated by this Agreement will not trigger any material investigation or remediation requirements under any Environmental Requirement.

               (e) None of the Transferred Companies nor any of their directors or employees or officers has in the three year period prior to the date of this Agreement incurred any civil or criminal liability under Environmental Requirements.

               (f) Buyer has been supplied with copies of all environmental surveys, audits or assessments in the possession of Seller or the Transferred Companies relating to the Owned Property and the Leased Property.

          2.15 Intellectual Property.

               (a) The Transferred Companies either own or by license or otherwise have the right to use all material rights under all trade secrets, patents, trademarks, trade names, copyrights, Internet domain names, databases and data collections, mask works and other intellectual property rights recognized by any Governmental Authority (“Intellectual Property”) which are used in the operation of the Business or which relate to products made or processes practiced by the Business as of the date of this Agreement. Schedule 2.15(a) of the Disclosure Letter sets forth a list of all such Intellectual Property registered or patented on the date of this Agreement and owned, in whole or in part, by any Transferred Company or any Affiliate thereof with the United States Patent and Trademark Office or comparable offices in foreign jurisdictions, together with applications for the foregoing as of the date of this Agreement, excluding registrations and applications of the Seller Marks, listing for each patent and trademark: (i) the title or mark as applicable, (ii) jurisdiction of registration and (iii) owner(s) as

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of the date hereof. The Transferred Companies have taken or cause to be taken all actions required to maintain such registrations or patents in full force and effect in all material respects.

               (b) Except as set forth on Schedule 2.15(b) of the Disclosure Letter, (x) no Transferred Company nor any of its Affiliates (including any Rockwood Seller) is on the date of this Agreement, and during the preceding three (3) years prior to the date hereof has not been, a party to or the subject of any material infringement, interference, opposition or similar Proceeding challenging the right or title to or use of any material Intellectual Property used in connection with the Business, and (y) no such Proceeding has, to the Knowledge of Seller, been threatened in writing during such three (3) year period.

               (c) To the Knowledge of Seller, the conduct of the Business as currently conducted and as conducted in the three (3) year period prior to the date hereof does not and has not infringe(d), misappropriate(d) or otherwise violate(d) or conflict(ed) with, in any material respect, any material Intellectual Property rights of any other Person, including Seller and its Affiliates.

               (d) Immediately following the Closing, the Transferred Companies shall own, or by license or otherwise have the right to use, all Intellectual Property required to conduct the Business in all material respects in the manner in which it is conducted on the date hereof, except the right to use the Seller Marks.

               (e) Except as described on Schedule 2.15(e) to the Disclosure Letter, the Transferred Companies own, lease or license all material information systems used in connection with the Business as operated on the date hereof.

               (f) Schedule 2.15(a) to the Disclosure Letter indicates those United States and European patents (the “Shadow Patents”) owned by the Transferred Companies that

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include claims that relate to the two products sold by the Transferred Companies under the Shadow name (“Shadow Products”). The claims of the Shadow Patents cover a substantial portion of the method of application of Shadow Products in the manufacture of printed circuit boards as provided for in the specifications and instructions for use of the Shadow Products by the Transferred Companies as of the date of this Agreement.

          2.16 Brokers. Except for Credit Suisse Securities (USA) LLC, whose fees and expenses will be paid by Seller, no broker, finder or investment banker or other Person is entitled to any brokerage, finder’s or other fee or commission in connection with this Agreement, the Ancillary Documents or the transactions contemplated hereby or thereby based upon any agreements, written, oral or otherwise made by or on behalf of Seller or any of its Affiliates (including the Transferred Companies).

          2.17 Sufficiency. After giving effect to the Restructurings, the Business Assets will comprise all of the material Assets used by the Rockwood Sellers and their Affiliates in connection with the Business (other than Administrative Assets). The Business Assets (together with the Administrative Assets) are sufficient in all material respects for the conduct of the Business immediately following the Closing in the same manner as currently conducted.

          2.18 Customers and Suppliers.

               (a) Schedule 2.18 of the Disclosure Letter sets forth a list of the ten (10) largest customers and the ten (10) largest suppliers of the Transferred Companies, as measured by the dollar amount of purchases therefrom or thereby, during each of the fiscal years ended December 31, 2005 and 2006, showing the approximate total sales by the Transferred Companies to each such customer and the approximate total purchases by the Transferred Companies from each such supplier, during such period.

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               (b) Between the date of the Balance Sheet and the date of this Agreement, no customer or supplier listed on Schedule 2.18 of the Disclosure Letter has terminated its relationship with any Transferred Company or materially reduced or changed the pricing or other terms of its business with any Transferred Company and, to the Knowledge of Seller, no customer or supplier listed on Schedule 2.18 of the Disclosure Letter has notified any Transferred Company that it intends to terminate or materially reduce or change the pricing or other terms of its business with any Transferred Company.

          2.19 Inventories. The Transferred Companies have good title to all of the inventories of the Transferred Companies (including raw materials and work in process) and no such inventories are consigned. The inventories of the Transferred Companies are in good and marketable condition, and are usuable and of a quantity and quality saleable in the Ordinary Course of Business, subject to applicable reserves. The inventories of the Transferred Companies constitute in all material respects sufficient quantities for the normal operation of the Business in the Ordinary Course of Business. To the Knowledge of Seller, the reserves reflected on the Balance Sheet in respect of inventory are adequate.

          2.20 Accounts Receivable and Payables.

               (a) All accounts receivable of the Transferred Companies have arisen from bona fide transactions in the Ordinary Course of Business and are payable on ordinary trade terms. To the Knowledge of Seller, the reserves reflected on the Balance Sheet in respect of accounts receivable are adequate.

               (b) All accounts payable of the Transferred Companies reflected in the Balance Sheet or arising after the date thereof are the result of bona fide transactions in the Ordinary Course of Business.

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          2.21 Banks. To the Knowledge of Seller, Schedule 2.21 of the Disclosure Letter contains a complete and correct list of the names and locations of all banks in which each Transferred Company has accounts.

          2.22 NO OTHER REPRESENTATIONS OR WARRANTIES. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE II, SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WRITTEN OR ORAL, AND SELLER HEREBY DISCLAIMS TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW ANY SUCH REPRESENTATION OR WARRANTY (INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE), WHETHER BY SELLER, THE OTHER ROCKWOOD SELLERS, THE TRANSFERRED COMPANIES, THEIR AFFILIATES OR ANY OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OR ANY OTHER PERSON, WITH RESPECT TO THE TRANSFERRED COMPANIES, THE BUSINESS OR THE SHARES, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO BUYER, ANY AFFILIATE OF BUYER OR ANY OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OR ANY OTHER PERSON OF ANY DOCUMENTATION OR OTHER INFORMATION (INCLUDING ANY PROJECTIONS OR DUE DILIGENCE REPORTS) BY SELLER, THE OTHER ROCKWOOD SELLERS, THE TRANSFERRED COMPANIES OR ANY OF THEIR AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES OR ANY OTHER PERSON WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING. BUYER ACKNOWLEDGES THAT IN ENTERING INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY IT IS NOT

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RELYING ON ANY INFORMATION OTHER THAN THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT.

          2.23 Environmental Representations and Warranties. Section 2.14 contains the exclusive representations and warranties of Seller concerning (i) compliance by the Transferred Companies and the Business with Environmental Requirements, (ii) obligations and liabilities of the Transferred Companies and the Business under Environmental Requirements and (iii) obligations and liabilities of the Transferred Companies and the Business in respect of contamination of real and personal property with hazardous materials or pollution.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF BUYER

          Buyer hereby represents and warrants to Seller as follows:

          3.1 Organization and Good Standing. Buyer is a corporation, duly organized, validly existing and in good standing under the Laws of Delaware.

          3.2 Authority, Approvals and Consents.

               (a) Buyer has the corporate power and authority to execute, deliver and perform this Agreement and the Ancillary Documents to be executed and delivered by Buyer and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Buyer of this Agreement and the Ancillary Documents to which it is, or is specified to be, a party and the consummation of the transactions contemplated hereby and thereby by Buyer have been duly authorized and approved by the Board of Directors (or other comparable governing bodies) of Buyer and no other corporate proceedings on the part of Buyer or the shareholders or other equity holders of Buyer are necessary to authorize and approve this Agreement and the Ancillary Documents to be executed and delivered by Buyer and the transactions contemplated hereby and thereby. This Agreement has been duly executed and

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delivered by Buyer, and the Ancillary Documents to be executed and delivered by Buyer at the Closing will be duly executed and so delivered by Buyer. This Agreement constitutes, and at the Closing each Ancillary Document to be executed and delivered by Buyer will constitute, a valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar Laws affecting creditors’ rights generally.

               (b) The execution and delivery by Buyer of this Agreement does not, the execution and delivery by Buyer of each Ancillary Document to which it is, or is specified to be, a party will not, and the consummation by Buyer of the transactions contemplated hereby and thereby, and the performance by Buyer of its obligations hereunder and thereunder and compliance by Buyer with the terms hereof and thereof will not, conflict with, or result in any material violation of or material default (with or without notice on lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to loss of a material benefit under, or result in the creation of any material Lien upon any of the Assets of Buyer under, any provision of (i) the certificate of incorporation or by-laws (or comparable governing instruments), each as in effect, of Buyer, (ii) any Contract to which Buyer is a party or by which any of its Assets is bound or (iii) any Order or Law applicable to Buyer or its Assets. No material Approval or other Person is required to be obtained or made by or with respect to Buyer in connection with the execution, delivery and performance of this Agreement or any Ancillary Document by Buyer or the consummation by Buyer of the transactions contemplated hereby or thereby other than (w) the Approvals set forth on Schedule 3.2 of the Buyer Disclosure Letter, (x) compliance with and filings under the HSR Act, (y) Non-U.S. Antitrust Approvals and (z) those that may be required solely by reason of the Rockwood

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Seller’s and the Transferred Companies’ (as opposed to any other third party’s) participation in the transactions contemplated hereby and by the Ancillary Documents.

          3.3 Brokers. No broker, finder or investment banker or other Person is entitled to any brokerage, finder’s or other fee or commission in connection with this Agreement, the Ancillary Documents or the transactions contemplated hereby or thereby based upon any agreements, written, oral or otherwise made by or on behalf of Buyer or any of its Affiliates.

          3.4 Investment Intent of Buyer. Buyer is acquiring the Shares pursuant to this Agreement for its own account for investment purposes only, and not with the view to or in connection with any distribution thereof.

          3.5 Financing. Buyer has available cash or has existing borrowing facilities or firm commitments which, together with its available cash, are sufficient to enable it to consummate the transactions contemplated hereby and by the Ancillary Documents and to pay all fees and expenses incurred by Buyer in connection therewith. True and complete copies of all such facilities and commitments (including all exhibits or schedules thereto, and any separate agreements or letters bearing on such facilities and commitments) have been provided to Seller prior to the date of this Agreement.

ARTICLE IV

COVENANTS

          4.1 Access; Confidentiality.

               (a) Between the date hereof and the Closing, Seller will cause the Transferred Companies, during normal business hours and upon reasonable prior notice, to (i) provide to Buyer and its representatives full access to the premises, property, books and records of the Transferred Companies related to the Business, (ii) furnish to Buyer and its representatives financial information, operating data and other information pertaining to the Business and the

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Business Assets, (iii) make available for inspection and copying by Buyer copies of any documents relating to the foregoing and (iv) permit Buyer and its representatives to conduct reasonable interviews of executive officers of the Transferred Companies; provided, however, that (x) Buyer shall exercise its right under this Section 4.1(a) in such a manner as to not unreasonably interfere with the operation of the Business and (y) Seller may limit such access described in clauses (i) through (iv) above to the extent such access (A) would, in the opinion of Seller’s counsel, violate or give rise to liability under applicable Law or (B) would require Seller or any of its Affiliates to waive any attorney-client privilege.

               (b) All information provided to Buyer or its representatives by or on behalf of Seller, the other Rockwood Sellers, the Transferred Companies, their Affiliates or their representatives (whether pursuant to this Section 4.1 or otherwise) will be governed and protected by the Confidentiality Agreement between Rockwood Holdings, Inc. and OM Group, Inc. dated June 6, 2007 (the “Confidentiality Agreement”).

          4.2 Announcements. Prior to the Closing, no party (or any Affiliate thereof) will issue any press release or otherwise directly or indirectly make any public statement or furnish any statement or make any announcement generally to its customers with respect to the transactions contemplated hereby without the prior consent of the other party, except as may be required by applicable Law or the rules of any stock exchange on which their securities (or securities of any of their Affiliates) are listed or traded (in which case the party required (or whose Affiliate is required) to make the release, statement or announcement shall, to the extent practicable under the circumstances, allow the other party reasonable time to comment on such release or announcement in advance of its issuance (the first party being under no obligation to accept any such comments)).

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          4.3 Conduct of Business Prior to the Closing. (a) Except as otherwise expressly provided in this Agreement or with the prior written consent of Buyer (not to be unreasonably withheld or delayed) or as required by applicable Law or set forth on Schedule 2.6 of the Disclosure Letter, between the date hereof and the Closing, the Rockwood Sellers shall, and the Rockwood Sellers shall cause the Transferred Companies to:

                    (i) conduct the respective businesses of the Transferred Companies only in the Ordinary Course of Business;

                    (ii) use their commercially reasonable efforts to (A) preserve the present business operations, organization (including officers and employees) and goodwill of the Transferred Companies and (B) preserve the present relationships with Persons having business dealings with the Transferred Companies (including customers and suppliers);

                    (iii) use commercially reasonable efforts (A) to maintain all of the Business Assets in their current condition, ordinary wear and tear excepted, and (B) continue to maintain insurance in respect of the Transferred Companies in accordance with past practices; and

                    (iv) (A) maintain the books and records of the Transferred Companies in the Ordinary Course of Business and (B) continue to collect accounts receivable and pay accounts payable in the Ordinary Course of Business.

               (b) Without limiting the generality of the foregoing, except as otherwise expressly provided in this Agreement or with the prior written consent of Buyer (not to be unreasonably withheld or delayed) or as required by applicable Law, the Rockwood Sellers shall not, and the Rockwood Sellers shall cause the Transferred Companies not to:

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                    (i) repurchase, redeem or otherwise acquire any outstanding shares of the capital stock or other securities of, or other ownership interests in, any Transferred Company;

                    (ii) transfer, issue, allot, sell, pledge, encumber or dispose of any shares of capital stock or other securities of, or other ownership interests in, any Transferred Company or grant options, warrants, calls or other rights to purchase or otherwise acquire shares of the capital stock or other securities of, or other ownership interests in, any Transferred Company;

                    (iii) effect any recapitalization, reclassification, stock split, combination or like change in the capitalization of any Transferred Company or amend the terms of any outstanding securities of any Transferred Company;

                    (iv) amend the certificate of incorporation or by-laws or equivalent organizational or governing documents of any Transferred Company;

                    (v) except as required by applicable Law or any Material Agreement or Benefit Plans in effect on the date hereof (in accordance with such Material Agreement or Benefit Plan), (A) increase the salary or other compensation of any director, officer or employee of any Transferred Company, except for normal increases in the Ordinary Course of Business, (B) grant any unusual or extraordinary bonus, benefit or other direct or indirect compensation to any director, officer, employee or consultant, (C) increase the coverage or benefits available under any (or create any new) severance pay, termination pay, vacation pay, company awards, salary continuation for disability, sick leave, deferred compensation, bonus or other incentive compensation, insurance, pension or other employee benefit plan or arrangement made to, for, or with any of the directors, officers, employees, agents or representatives of any

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Transferred Company or otherwise modify or amend or terminate any such plan or arrangement or (D) enter into any employment, deferred compensation, severance, special pay, consulting, non-competition or similar agreement or arrangement with any directors or officers of any Transferred Company (or amend (except for Section 409A amendments) any such agreement to which any Transferred Company is a party);

                    (vi) voluntarily subject to any Lien (other than Permitted Liens) or otherwise encumber or, except for Permitted Liens, permit, allow or suffer to be encumbered, any of the Business Assets (whether tangible or intangible);

                    (vii) acquire any material Assets or sell, assign, license, transfer, convey, lease or otherwise dispose of any of the material Business Assets other than in the Ordinary Course of Business;

                    (viii) enter into or agree to enter into any merger or consolidation with any Person, engage in any new material line of business or invest in, make a capital contribution to, or otherwise acquire the securities, of any other Person;

                    (ix) make a loan or advance to any other Person, except for loans and advances which are not material which are made in the Ordinary Course of Business;

                    (x) cancel or compromise any debt or claim or waive or release any material right of any Transferred Company except in the Ordinary Course of Business;

                    (xi) enter into any commitment for capital expenditures of the Transferred Company in excess of U.S. $50,000 for any individual commitment and U.S. $500,000 for all commitments in the aggregate, other than those provided for in the capital expenditure budgets of the Transferred Companies provided to Buyer;

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                    (xii) enter into, modify or terminate any labor or collective bargaining agreement of any Transferred Company, through negotiation or otherwise;

                    (xiii) introduce any material change with respect to the operation of the Transferred Company, including any material change in the types, nature or composition of its products or services, or, other than in the Ordinary Course of Business, make any change in product specifications or terms of distribution of such products or change its discount, allowance or return policies or grant any discount, allowance or return terms for any customer or supplier not in accordance with such policies;

                    (xiv) enter into any transaction or enter into, modify or renew any Contract which by reason of its size, nature or otherwise is not in the Ordinary Course of Business;

                    (xv) make any investments in or loans to, or pay any fees or expenses to, or enter into or modify any Contract with any Related Persons, except, in the case of employees, in the Ordinary Course of Business;

                    (xvi) make a material change in its Tax accounting methods;

                    (xvii) change or rescind any material election in respect of Taxes, other than entity classification elections with respect to Transferred Companies (other than U.S. Transferred Companies), amend any material Tax Return, enter into any material closing agreement, or settle any material claim or assessment in respect of Taxes, in each case, which could reasonably be expected to affect the Tax liability of any Transferred Company for any taxable period beginning after the Closing Date;

                    (xviii) enter into any Contract that restrains, restricts, limits or impedes the ability of any Transferred Company to (A) compete with or conduct any business or

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line of business in any geographic area or (B) solicit the employment of any persons (in the case of clause (B), other than confidentiality, employment, management, consulting and other similar agreements entered into in the Ordinary Course of Business and those contained in license, distribution, toll manufacturing and similar agreements, in each case which are not material);

                    (xix) in any material respect, terminate, amend, restate, supplement or waive any rights under any Material Agreement, Lease, or Company Permit;

                    (xx) settle or compromise any pending or threatened Proceeding or any claim or claims for an amount that would, individually or in the aggregate, reasonably be expected to be greater than U.S. $100,000; or

                    (xxi) change or modify its credit, collection or payment policies, procedures or practices, including acceleration of collections or receivables (whether or not past due) or fail to pay or delay payment of payables or other liabilities, in each case except in the Ordinary Course of Business.

          Notwithstanding any provision of this Agreement, the Transferred Companies may distribute some or all of their cash to their stockholders or other equity holders at or prior to the Closing and, prior to the Closing, the Rockwood Sellers may continue to manage the Transferred Companies’ cash through intercompany accounts and cash management arrangements consistent with past practices. Notwithstanding the foregoing, Seller will consult with Buyer and at Buyer’s reasonable request, not distribute funds it intended to distribute.

          4.4 Consents; Cooperation. Subject to the terms and conditions hereof, including Section 4.5, Seller and Buyer will use commercially reasonable efforts (and to the extent necessary, will use commercially reasonable efforts to cause their Affiliates to use commercially reasonable efforts):

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               (a) to obtain, secure or make prior to the earlier of the date required (if so required) or the Closing Date, any Consents or Approvals of, to or with any Governmental Authority or any other third party that are required for the consummation of the transactions contemplated by this Agreement, including in connection with assignment by an Affiliate of Seller of all Material Contracts to which a Transferred Company is not a contract party;

               (b) to defend, consistent with applicable Law, any Proceeding, whether judicial or administrative, whether brought derivatively or on behalf of third parties (including Governmental Authorities) challenging this Agreement or the transactions contemplated hereby;

               (c) to furnish to each other such information and assistance as may reasonably be requested in connection with the foregoing; and

               (d) to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement including satisfaction, but not waiver, of the closing conditions set forth in Articles V and VI.

          4.5 Competition Filings. In furtherance of the respective obligations of Buyer and Seller contained in Section 4.4, Seller and Buyer shall (a) as promptly as practicable, but in no event later than ten (10) Business Days, following the execution and delivery of this Agreement, file or cause to be filed with the Federal Trade Commission (“FTC”) and the United States Department of Justice (“DOJ”) the initial notification and report form under the HSR Act required for the transactions contemplated hereby, (b) as promptly as practicable prepare and file or cause to be filed all Non-US Antitrust Approvals, (c) cooperate in responding promptly to any Request for Additional Information and Documentary Material under the HSR Act or other request for further information from any Governmental Authority in respect of such filings and

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the transactions contemplated by this Agreement, (d) seek to terminate any waiting periods under the HSR Act or applicable to Non-US Antitrust Approvals as soon as practicable and (e) furnish the other party and the other party’s counsel as promptly as practicable with all such information and reasonable assistance as may be reasonably required in order to effectuate the foregoing actions. Subject to the terms and conditions herein provided and without limiting the foregoing, each party hereto shall use commercially reasonable efforts to take, or cause to be taken, all other actions and do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective the transactions contemplated hereby, including taking all such further action as reasonably may be necessary to resolve such objections, if any, as the FTC, the DOJ or any other Governmental Authority may assert under Antitrust Laws with respect to the transactions contemplated hereby, and to avoid or eliminate each and every impediment under any Law that may be asserted by any Governmental Authority with respect to the transactions contemplated hereby so as to enable the Closing to occur as soon as expeditiously possible. In furtherance thereof, the parties agree that if any administrative or judicial action or proceeding, including any action or proceeding by a private party, is instituted (or threatened to be instituted) challenging any transaction contemplated by this Agreement as violative of any Antitrust Law, Seller and Buyer shall cooperate in all respects with each other and shall use their respective best efforts to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by this Agreement. Notwithstanding anything to the contrary contained herein, in no event will Buyer, the Transferred Companies or any of their respective Affiliates be required to make any proposals, execute or carry out any agreements or submit to

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any Antitrust Law seeking to impose any limitations on the ability of Buyer, the Transferred Companies or any of their respective Affiliates to acquire, operate or hold, or to require Buyer, the Transferred Companies or any of their respective Affiliates to dispose of or hold separate, any portion of their assets or business. Subject to applicable Law, the preservation of the attorney-client privilege and the instructions of any Governmental Authority, Seller and Buyer shall each keep the other informed of the status of matters relating to the completion of the transactions contemplated thereby, including promptly furnishing the other with copies of notices or other communications between Seller or Buyer, as the case may be, or any of their respective Affiliates (with any competitively sensitive information being provided on an external counsel basis only), and any third party and/or any Governmental Authority with respect to such transactions. Seller and Buyer shall permit counsel for the other party reasonable opportunity to review in advance, and consider in good faith the views of the other party in connection with, any proposed written communication to any Governmental Authority with respect to such transaction. Seller and Buyer each agree not to participate in any substantive meeting or discussion, either in person or by telephone, with any Governmental Authority in connection with Buyer’s proposed purchase of the Transferred Companies unless it consults with the other party in advance and, to the extent not prohibited by such Governmental Authority, gives the other party the opportunity to attend and participate.

          4.6 Use of Name.

               (a) Buyer agrees that (except as set forth in the next sentence) neither Buyer nor its Affiliates (including the Transferred Companies) shall have any right to use of the name “Rockwood” or any service marks, trademarks, trade names, identifying symbols, logos, emblems, signs or insignia related thereto or containing or comprising the foregoing, including

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any name or mark confusingly similar thereto (collectively, the “Seller Marks”), and will not at any time hold itself out as having any affiliation with Seller or any of its Affiliates; provided, however, that Buyer and its Affiliates (including the Transferred Companies) shall have the right to use the names of the Transferred Companies (or any derivative thereof, excluding the word “Rockwood”) or any service marks, trademarks, trade names, identifying symbols, logos, emblems, signs or insignia related thereto or containing or comprising the foregoing (other than those containing the word “Rockwood”). After the Closing, Buyer agrees that if any of the Business Assets, including any promotional materials or printed forms, bear the “Rockwood” name (or any derivative thereof), Buyer shall, prior to the use of such Business Assets, delete or cover the “Rockwood” name and clearly indicate that the Transferred Companies are no longer affiliated with Seller or any Affiliate thereof, except that it may, for a period of ninety (90) days after the Closing Date, use the remaining inventory of business cards, stationery, packaging materials, displays, signs, promotional materials and other similar materials (“Supplies”) which contain the name “Rockwood,” provided such Supplies are used only in connection with the sale of the Transferred Companies’ products of the type sold prior to the Closing.

               (b) Buyer agrees to cause each Transferred Company that contains the name “Rockwood” to promptly following the Closing, and in any event within ninety (90) days after the Closing Date, change its name such that its name does not include the name “Rockwood” (or one confusingly similar).

          4.7 Notification of Certain Matters. Between the date hereof and the Closing, (i) Seller will give prompt notice in writing to Buyer of any event, fact, change, occurrence, non-occurrence or circumstance of which it has Knowledge, or of which it receives notice, that (x) has had or could reasonably be expected to have, individually or in the aggregate, taken together

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with other events or circumstances, a Material Adverse Effect or (y) will result, or has a reasonable prospect of resulting, in the failure to satisfy a condition specified in Article V, (ii) Seller will give Buyer prompt notice upon acquiring knowledge of the institution of or the threat of institution of any Proceeding against any Rockwood Seller or any Transferred Company related to this Agreement or the transactions contemplated hereby, (iii) Buyer will give prompt notice in writing to Seller of any event, fact, change, occurrence, non-occurrence or circumstance of which it has knowledge, or of which it receives notice, that will result, or has a reasonable prospect of resulting, in the failure to satisfy a condition specified in Article VI, and (iv) Buyer will give Seller prompt notice upon acquiring knowledge of the institution of or the threat of institution of any Proceeding against Buyer or any of its Affiliates related to this Agreement or the transactions contemplated hereby. The delivery of any notice pursuant to this Section 4.7 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice, or the representations, or warranties of, the indemnification obligations of, or the conditions to the obligations of, the parties hereto.

          4.8 Retention of Books and Records. Buyer will cause the Transferred Companies to make available after the Closing Date all books, records and other documents pertaining to the Transferred Companies in existence on the Closing Date and in the possession of the Transferred Companies at such time for examination and copying by Seller or its representatives, at Seller’s expense, upon reasonable notice and for a reasonable purpose, such as defending litigation or preparing Tax Returns and financial statements. Buyer agrees to cause the Transferred Companies to preserve such books, records or documents in accordance with Buyer’s document retention policy from time-to-time, provided that no such books, records or

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documents relating to Taxes will be destroyed by Buyer or the Transferred Companies for seven (7) years following the Closing.

          4.9 Permits. Buyer shall be responsible for effecting the updates and amendments and reissuances of Permits required in connection with the change in ownership of the Transferred Companies provided for herein. Seller will reasonably cooperate with Buyer in effecting such updates, amendments and reissuances and as promptly as practical after the date hereof, will identify for Buyer all Permits of the Business.

          4.10 Intercompany Agreements and Accounts; Debt. Except as set forth in Schedule 4.10 of the Disclosure Letter, as of the Closing all Contracts to which a Seller or an Affiliate of a Seller (other than the Transferred Companies), on the one hand, and a Transferred Company, on the other hand, is a party will be terminated without further liability to any party thereto with respect to periods following the Closing. Seller will cause all intercompany Indebtedness owing from Seller and its Affiliates (other than the Transferred Companies) to the Transferred Companies to be repaid and/or canceled immediately prior to Closing. All Indebtedness of the Transferred Companies owing to Seller or any of its Affiliates shall be released, satisfied or defeased at or prior to the Closing.

          4.11 Restructurings.

               (a) Seller shall use its reasonable efforts to cause the Singapore Restructuring to be consummated as promptly as practicable and, in any event, prior to the Closing. The Singapore Restructuring shall be implemented substantially in accordance with the steps set forth in Exhibit F.

               (b) Subject to the satisfaction and implementation of the steps set out at in clause (i) below, Seller will cause the Wafer Reclaim Area Lease to be assigned to an Affiliate of

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Seller that is not a Transferred Company at or prior to the Closing and the Ultra Pure Chemicals Lease will continue as a lease of Rockwood Electronic following the Closing. In connection therewith and subject to the consent and agreement of the current landlord of the Wafer Reclaim Area Lease, Walbrook Trustees (Jersey) Limited and Walbrook Properties Limited, the parties will seek to take the following steps in relation to the Wafer Reclaim Area Lease and the Ultra Pure Chemicals Lease prior to the Closing:

                    (i) Seller will use reasonable efforts to seek to (1) agree with the landlord of the Wafer Reclaim Area Lease to either (x) a surrender of the part of the area currently demised on which the Ultra Pure Chemicals effluent treatment plant is located (the “Effluent Treatment Plant”) and agree upon a new lease for a term coterminous with the term of the Ultra Pure Chemicals Lease to Rockwood Electronic of the surrendered area on which the Effluent Treatment Plant is situated (the “New Lease”) or (y) vary the boundary between the Wafer Reclaim Area Lease and the Ultra Pure Chemicals Lease such that the Effluent Treatment Plant is subject to the Ultra Pure Chemicals Lease, (2) assign the Wafer Reclaim Area Lease to Excalibur Realty UK Limited and (3) have the rents on the leases adjusted so that the total rent cost under the Ultra Pure Chemicals Lease and the New Lease equal the rent that would have been paid on the Ultra Pure Chemicals lease alone or alternatively cause the surrendered area to be made subject to the existing Ultra Pure Chemicals Lease without a rent increase.

                    (ii) Seller shall use reasonable efforts to cause the Ultra Pure Chemicals water treatment plant (the “Water Treatment Plant”) currently located within the area demised by the Wafer Reclaim Area Lease to be relocated to an area within the demise of the Ultra Pure Chemicals Lease. The terms of such relocation are to be agreed on a reasonable basis, with the expense of such relocation to be borne by Seller.

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               (c) If the current landlord’s consent to the steps proposed in clause (i) above has not been received prior to the Closing), then the Wafer Reclaim Area Lease and the Ultra Pure Chemicals Lease shall be retained by Rockwood Electronic and shall transfer as part of the consummation of the sale of the Shares of Rockwood Electronic hereunder. In such event, (i) Seller shall be responsible for all incremental costs to Buyer above the costs that it would have incurred had the steps proposed in clause (i) above been implemented at or prior to the Closing during all periods following the Closing in which such steps are not implemented, (ii) all Losses incurred by Seller Indemnitees in relation to the premises subject to the Wafer Reclaim Area Lease (other than the Effluent Treatment Plant) during any period in which such steps are not implemented shall be deemed to be Retained Liabilities and (iii) the parties shall continue to use their reasonable efforts for a period of one year from the Closing to secure such consent and implement such steps.

          4.12 Guarantees. Buyer shall use its reasonable efforts to obtain, on or before the Closing Date (to the extent Seller so requests), and in any event within ninety (90) days following the Closing Date, the release of each of the obligations of Seller (or any Affiliate thereof, other than the Transferred Companies) to guaranty any liability of any Transferred Company, which guarantees are listed on Schedule 4.12 of the Disclosure Letter and, to that end, shall provide such guarantees or other credit support as shall be required to obtain such release. If Buyer fails to obtain any such release or the terms of such release are unreasonable in Seller’s good faith judgment, Buyer shall enter into an agreement (a “Guaranty Agreement”), in form reasonably satisfactory to Seller, containing covenants to indemnify Seller in respect of any liability or expense incurred by Seller (or an Affiliate thereof, other than the Transferred Companies) in respect of any claim made in respect of any such guaranty.

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          4.13 Covenant Not To Compete.

               (a) Seller agrees, to the maximum extent not violative of applicable Law, for a period of four (4) years following the Closing Date, Seller will not, and will not permit any of its Affiliates, to engage anywhere in the world in the Restricted Business provided, however, that nothing herein shall be construed to prevent Seller or its Affiliates from (w) owning, directly or indirectly, up to 5% of a class of equity securities issued by any Person engaged in the Restricted Business that is publicly traded or listed on any securities exchange or automated quotation system; (x) conducting any business conducted by them on the Closing Date (other than those conducted through the Transferred Companies, with the exception of the Wafer Reclaim Business, the Pigments Business and the Additives Business), including, without limitation, the Chemetall Business, the Wafer Reclaim Business, the Pigments Business and the Additives Business, (y) the business carried on by Rockwood Electronic Materials SAS as of the Closing Date or (z) acquiring any Entity or business, which is not substantially engaged in the Restricted Business; provided, however, that if more than 15% of the revenues of the acquired Entity or business is attributed to the Restricted Business, Seller will or will cause its applicable Affiliate, as the case may be, to use reasonable efforts to dispose of such portion of such Entity or business to the extent that it engages in the Restricted Business within twelve (12) months of the consummation of such acquisition by Seller or such Affiliate. For purposes of this Section 4.13(a), “not substantially engaged in the Restricted Business” shall mean that no more than 30% of the revenue derived from the last complete fiscal year of such acquired Entity or business (calculated on a consolidated basis) was attributed to the Restricted Business.

               (b) For a period of 18 months year from and after the Closing Date, Seller shall not, and shall cause its Affiliates not to solicit any Business Employees to leave

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employment with the Transferred Companies; provided, however, this paragraph (b) will not prohibit Seller or its Affiliates from making generalized searches for employees by the use of advertisements in the media (including trade media, newspapers or internet advertising) or by engaging search firms to engage in searches, in each case, that are not targeted or focused on the employees of the Transferred Companies.

               (c) The provisions of paragraphs (a) and (b) of this Section 4.13 will apply only to Rockwood Holdings, Inc. and entities Controlled by Rockwood Holdings, Inc.

               (d) Seller acknowledges and agrees that the covenants set forth in this Section 4.13 are reasonable in geographical and temporal scope and in all other respects.

               (e) The covenants and undertakings contained in this Section 4.13 relate to matters which are of a special, unique and extraordinary character and a violation of any of the terms of this Section 4.13 will cause irreparable injury to Buyer, the amount of which will be impossible to estimate or determine and which cannot be adequately compensated. Accordingly, the remedy at law for any breach of this Section 4.12 will be inadequate. Therefore, Buyer will be entitled to seek a temporary and permanent injunction, restraining order or other equitable relief from any court of competent jurisdiction in the event of any breach of this Section 4.13. The rights and remedies provided by this Section 4.13 are cumulative and in addition to any other rights and remedies which Buyer may have hereunder or at law or in equity.

               (f) If any court of competent jurisdiction determines that any provision included in this Section 4.13 is unenforceable, such court will have the power to reduce the duration or scope of such provision, as the case may be and, in reduced form, such provision shall be enforceable. It is the intention of the parties hereto that the foregoing restrictions shall not be terminated, but shall be deemed amended to the extent required to render them valid and

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     enforceable, such amendment to apply only with respect to the operation of this Agreement in the jurisdiction of the court that has made the adjudication.

          4.14 Reporting Assistance. After the Closing, each of Seller and Buyer will (and will cause its respective Affiliates to) reasonably assist the other party in preparing information for various Governmental Authorities after the Closing to the extent that such information relates to the transactions contemplated by this Agreement, the Business, the Business Assets and/or the liabilities of the Business. Such information includes, but is not limited to, information required to comply with financial reporting requirements. The requesting party shall reimburse the non-requesting party for all reasonable out-of-pocket expenses (excluding internal costs) actually incurred by such non-requesting party in connection with the compliance of this Section 4.14. In the event that Buyer is required to prepare audited financial statements for the Business during the 18-month period following the Closing, Seller shall cooperate fully and provide information in its possession in a timely fashion as may be reasonably requested by Buyer in order for Buyer’s independent auditor to conduct and complete such audit.

          4.15 Title Insurance. (a) Prior to the Closing, Seller will cause the Transferred Companies to reasonably cooperate with Buyer in Buyer’s efforts to obtain title insurance in respect of the Owned Property located in the United States. Such cooperation will include the execution by Seller of such instruments reasonably requested to enable Buyer to obtain such insurance and desired endorsements, including the execution of an ALTA statement reasonably and customarily given in real estate transactions in the location of the applicable United States Owned Property; provided, however, that Seller and its Affiliates (other than the Transferred Companies) shall not be required to execute any instrument which expands in any way the

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representations and warranties contained herein or the liabilities of Seller hereunder (for purposes of this Agreement, any instrument executed by the Transferred Companies pursuant to this Section shall be deemed to have been executed and delivered following the Closing). The premiums for such title insurance will be Buyer’s responsibility.

               (b) Prior to the Closing, Seller will cause the Transferred Companies to reasonably cooperate with Buyer in Buyer’s efforts to obtain at Buyer’s expense a current survey for each parcel of Owned Property located in the United States, prepared by a licensed surveyor and conforming to current ALTA/ACSM Minimum Standard Detail Requirements for Land Title Surveys.

          4.16 Further Assurances. Seller and Buyer will, and Buyer will cause the Transferred Companies to, promptly execute, acknowledge and deliver any other assurances or documents reasonably requested by Buyer or Seller, as the case may be, to satisfy its obligations hereunder or to consummate or implement the transactions and agreements contemplated hereby.

          4.17 No Shop. From the date hereof to the termination of this Agreement, Seller will not, and will not permit or authorize any of its Affiliates, or its or their officers, directors, employees, representatives or agents to, directly or indirectly, (i) initiate, solicit, encourage, agree to or take any other action to facilitate or accept any inquiries, proposals or offers from, (ii) enter into any discussions or negotiations with or (iii) disclose any confidential information, or afford any access to the properties, books and records of the Transferred Companies to, any Person (other than Buyer and its Affiliates and their representatives and advisors) in connection with the sale or other disposition of the Shares or the Business.

          4.18 Debt. Prior to the Closing, Seller shall provide Buyer with evidence reasonably satisfactory to Buyer that all Indebtedness of the Transferred Companies will, as of

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the Closing, be discharged, and that all Liens securing such Indebtedness will be released effective as of the Closing.

          4.19 Resignation of Directors. Seller shall cause each of the directors of the Transferred Companies specified by Buyer to submit a letter of resignation effective on or before the Closing Date.

          4.20 Taiwan Lease. Prior to the Closing, Seller will cause the Taiwan Transferred Company to reasonably cooperate with Buyer in Buyer’s efforts to obtain an extension of the lease by the Taiwan Transferred Company of its premises at No. 5—1 Chi Lin North Road, Chung-Li Industrial Park R.O.C. Chung-Li, Taiwan, through May 2009 on terms specified by Buyer.

          4.21 Estoppel Certificates. Prior to the Closing, Seller will cause the Transferred Companies to reasonably cooperate with Buyer in Buyer’s efforts to obtain estoppel certificates, Lien waivers and non-disturbance agreements relating to the Leased Properties as requested by Buyer and its lenders, each in a form reasonably acceptable to Buyer and its lenders.

          4.22 Section 75 Payment. Seller will cause Compugraphics and Rockwood Electronics or such other entity nominated by Seller to pay £800,001 to the Rockwood UK Plan on or prior to the Closing Date in full and final discharge of their debt under section 75 or 75A of the Pensions Ac 1995.

          4.23 Confidentiality. Seller agrees that, except as required by Law, it shall not, and shall cause its Affiliates not to disclose to any Person any Confidential Information. For purposes of this Section 4.23, “Confidential Information” shall mean any non-public confidential information with respect to the conduct or details of the Business, including methods of

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operation, customers, and customer lists, products, proposed products, former products, proposed, pending or completed acquisitions of any company, division product line or other business unit, prices, fees, costs, plans, designs, technology, inventions, trade secrets, know-how, software, marketing methods, policies, plans, personnel, suppliers, competitors, markets or other specialized information or proprietary matters.

          4.24 Rockwood UK Plan. Seller shall use commercially reasonable efforts to procure that the trust deed of the Rockwood UK Plan is amended, with effect from the day before the Closing or earlier, by adding the following new clause:

“Notwithstanding anything to the contrary in the Definitive Deed and Rules, where an employment—cessation event (as defined in Regulation 6(4) of the Occupational Pension Schemes (Employer Debt) Regulations 2005 (the “Regulations”)) occurs in relation to Rockwood Electronic Material (“REM”) and Compugraphics International Limited (“Compugraphics”), the “share of the difference” for the purposes of section 75A of the Pensions Act 1995 and Regulations 6(1)(b) of the Regulations shall be “otherwise apportioned” between “employers” (as defined the Regulations) in accordance with Regulation 6(2)(b) of the Regulations as follows: REM’s “share of difference” pursuant to Regulation 6(1)(b) and 6(2)(b) of the Regulations shall be £800,000; and Compugraphics’ “share of the difference” pursuant to Regulation 6(1)(b) and 6(2)(b) of the Regulations shall be £1.”

     4.25 Compugraphics Plan. (a) On or before Closing, the Seller shall use its best efforts to replace Compugraphics with the Seller or an undertaking which is, on the date of

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this Agreement, a subsidiary undertaking or parent undertaking of the Seller or a subsidiary undertaking of a parent undertaking of the Seller (“Seller’s Group Undertaking”) as the principal employer in relation to the Compugraphics Plan. To the extent that the Seller encounters any diffculty or delay in effecting such change of principal employer, it shall forthwith inform the Buyer of the same and the Buyer may take whatever action of a non-financial nature it sees fit, with such assistance from the Seller as it reasonably requires, to assist in the effecting of such change of principal employer. Subject to the action envisaged by this paragraph not causing a liability under Section 75 or 75A of the Pensions Act 1995 (or any statutory modificaiton or re-enactment thereof) to arise in respect of Compugraphics, where the Seller or a Seller’s Group Undertaking replaces Compugraphics as the principal employer of the Compugraphics Plan, the Seller will procure that the new principal employer admits at least two of its employees to active membership in the Compugraphics Plan for a period of its choosing which commences as soon as reasonably practicable after Compugraphics ceases to participate in the Compugraphics Plan and ceases to employ any active members in the Compugraphics Plan.

               (b) In the event that such substitution of principal employer has not taken place by the Closing Date, the Seller and the Buyer shall use their respective reasonable efforts to replace Compugraphics with the Seller or a Seller’s Group Undertaking as the principal employer in relation to the Compugraphics Plan as soon as reasonably practicable after the Closing Date.

               (c) The Seller (where clause (a) applies) and the Buyer (where clause (b) applies) will procure that:

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                    (i) Compugraphics shall cease for the purposes of the rules of the Compugraphics Plan to participate in the Compugraphics Plan immediately on ceasing to be the principal employer of such scheme; and

                    (ii) the Compugraphics Plan shall be amended or trustee agreement obtained to ensure that following Compugraphics’ cessation of participation in the Compugraphics Plan the liability for benefits shall be retained within the Compugraphics Plan as envisaged by the proviso to clause 24.3 of the Compugraphics Plan’s definitive deed.

               (d) Where Compugraphics has not ceased to participate in the Compugraphics Plan prior to the Closing Date, the Seller will procure that all active membership of the Compugraphics Plan shall terminate prior to the Closing Date.

               (e) The Buyer will procure that it and its Affiliates and their successors (excluding Compugraphics) shall not participate in or exercise any powers in relation to the Compugraphics Plan on or after the Closing Date. The Buyer will further procure that in respect of any period on or after the Closing Date when Compugraphics is a participating employer in the Compugraphics Plan, no other entity shall be admitted as a participating employer.

               (f) The Buyer will procure that no liability will accrue in the Compugraphics Plan on or after the Closing Date as a result of employees of Compugraphics participating in the Compugraphics Plan as active members on or after the Closing Date or as a result of Compugraphics taking any other action (such as augmenting benefits or exercising a discretion to increase benefits) on or after the Closing Date which results in additional liabilities accruing in the Compugraphics Plan.

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               (g) In the event that Compugraphics has power to terminate the Compugraphics Plan on or after Closing Date, the Buyer will procure that such power is only exercised if instructed in writing by the Seller to exercise such power.

               (h) Where Compugraphics holds a discretionary power in relation to the Compugraphics Plan or the agreement of Compugraphics is required on or after the Closing Date in respect of any matters to be determined in respect of the Compugraphics Plan (including agreement to items relating scheme funding set out in Part 3 of the Pensions Act 2004), the Buyer will procure that Compugraphics only gives its agreement or exercises its discretion in accordance with the written instructions of the Seller. The Buyer will also use all reasonable efforts, where Compugraphics is a participating employer in the Compugraphics Plan, to facilitate the Seller’s access to the trustees of the Compugraphics Plan for the purposes of discussing matters relating to the Compugraphics Plan.

               (i) The Seller shall indemnify the Buyer and its Affiliates (including Compugraphics) and any of their successors (“Specified Indemnified Parties”) from and against all Losses of the Specified Indemnified Parties arising or which may arise, out of or in connection with any liability relating to the Compugraphics Plan provided that this indemnity shall not apply in respect of (i) any liability arising pursuant to section 75 of the Pensions Act 1995 (or any statutory modification or re-enactment thereof) in relation to a relevant event (as defined in section 75(6A) of the Pensions Act 1995 (or any statutory modification or re-enactment thereof)) occurring in respect of the Specified Indemnified Parties or (ii) in respect of any liability to the extent arising from a breach of clause (e), clause (f), clause (g) or clause (h).

               (j) The Seller will use its best efforts to ensure that within three years of the Closing Date, the assets and liabilities of the Compugraphics Plan are transferred into another

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pension plan and the Compugraphics Plan is then terminated, provided that no such action shall be required to be taken to the extent that it triggers a requirement to fund any such transferring liabilities or such receiving plan on a higher basis than a scheme funding basis.

               (k) The Seller shall procure that, prior to the Closing Date, consultation shall be carried out with the employees who are members of the Compugraphics Plan (the “Compugraphics Members”) to comply, so far as is possible subject to the other provisions of this Section 4.25 and the remainder of this clause (k), with the obligations to consult with Compugraphics Members under section 259 of the Pensions Act 2004, having first agreed the content of any communications to the Compugraphics Employees with the Buyer, whose agreement may not be unreasonably withheld or delayed.

          4.26 Insurance. Seller will reasonably cooperate with Buyer in providing Buyer with information regarding insurance maintained for the Transferred Companies prior to Closing and the loss experiences of the Transferred Companies, in each case in connection with Buyer’s efforts to procure insurance for the Transferred Companies.

ARTICLE V

CONDITIONS TO THE OBLIGATIONS OF BUYER

          The obligations of Buyer under this Agreement to consummate the purchase of the Shares and the other transactions contemplated by this Agreement are subject to the satisfaction at or prior to the Closing of the following conditions (each of which may be waived in whole or in part by Buyer to the extent permitted by applicable Law):

          5.1 Representations and Warranties; Covenants. Each of the representations and warranties of Seller contained in (i) Section 2.2 shall be true and correct in all material respects at and as of the date of this Agreement and the Closing Date, with the same effect as though made at and as of the Closing Date and (ii) the other Sections of this Agreement shall be

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true and correct (disregarding for purposes of this condition any materiality or Material Adverse Effect qualification therein) at and as of the date of this Agreement and the Closing Date, with the same effect as though made at and as of the Closing Date (or, if given as of a specific date or time other than the Closing Date, as of such date or time), except in the case of clause (ii) for such failures of the representations and warranties to be true and correct as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Seller shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by Seller at or prior to the Closing. At the Closing, Seller shall have furnished to Buyer a certificate dated the Closing Date, and signed by a senior executive officer of Seller to the effect that the conditions set forth in this Section 5.1 have been satisfied.

          5.2 Competition Law Clearances. All applicable waiting periods under the HSR Act shall have expired or been terminated, and the Approvals listed on Schedule 5.2 of the Disclosure Letter shall have been obtained (and, to the extent relevant, shall remain in full force and effect).

          5.3 No Injunctions or Restraints. No Order shall have been issued by a Governmental Authority, and shall remain in effect, that restrains, enjoins or otherwise prohibits in any material respect the consummation of the transactions contemplated by this Agreement to be consummated at the Closing.

          5.4 Singapore Restructuring. The Singapore Restructuring shall have been completed.

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          5.5 No Material Adverse Change. There shall not have been any event, change, occurrence, development or circumstance that, individually or in the aggregate, has had a Material Adverse Effect.

ARTICLE VI

CONDITIONS TO THE OBLIGATIONS OF SELLER

          The obligations of Seller to consummate the sale of the Shares and the other transactions contemplated by this Agreement are subject to the satisfaction at or prior to the Closing of the following conditions (each of which may be waived in whole or in part by Seller to the extent permitted by applicable Law):

          6.1 Representations and Warranties; Covenants. Each of the representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects (disregarding for purposes of this condition any materiality qualification therein) at and as of the date of this Agreement and the Closing Date, with the same effect as though made at and as of the Closing Date. Buyer shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by Buyer at or prior to the Closing. At the Closing, Buyer shall have furnished to Seller a certificate dated the Closing Date, and signed by a senior executive officer of Buyer to the effect that the conditions set forth in this Section 6.1 have been satisfied.

          6.2 Competition Law Clearances. All applicable waiting periods under the HSR Act shall have expired or been terminated, and the Approvals listed on Schedule 5.2 of the Disclosure Letter shall have been obtained (and, to the extent relevant, shall remain in full force and effect).

          6.3 No Injunctions or Restraints. No Order shall have been issued by a Governmental Authority, and shall remain in effect, that restrains, enjoins or otherwise prohibits

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in any material respect the consummation of the transactions contemplated by this Agreement to be consummated at the Closing.

ARTICLE VII

TERMINATION

          7.1 Termination. This Agreement may be terminated at any time prior to the Closing:

               (a) by mutual written consent of Buyer and Seller;

               (b) by Buyer or Seller, if there shall be in effect a final, nonappealable Order of any Governmental Authority restraining, enjoining or otherwise prohibiting in any material respect the consummation of the transactions contemplated hereby; provided, however, that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose failure (or whose Affiliate’s failure) to fulfill any obligation under this Agreement has been the primary cause of, or resulted in, such Order;

               (c) by Buyer, if any condition contained in Article V shall become incapable of satisfaction (other than as a result of actions by Buyer or its Affiliates in contravention of the provisions hereof);

               (d) by Seller, if any condition contained in Article VI shall become incapable of satisfaction (other than as a result of actions by Seller or its Affiliates in contravention of the provisions hereof); or

               (e) by Buyer or Seller, on or after the date that is six (6) months after the date of this Agreement, if the Closing has not occurred (other than as a result of action by the party seeking to terminate this Agreement (or its Affiliates) in contravention of the provisions hereof).

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          If Buyer or Seller terminates this Agreement pursuant to the provisions hereof, such termination will be effected by written notice to the other party specifying the provision hereof pursuant to which such termination is made.

          7.2 Effect of Termination. Upon termination of this Agreement pursuant to Section 7.1 hereof, except for the obligations contained in Section 4.1(b), this Section 7.2, Article X, the representations and warranties contained in Sections 2.16 and 3.3, which will survive any termination of this Agreement, this Agreement will forthwith become null and void, and no party hereto or any of their respective officers, directors, employees, agents, consultants, stockholders or principals will have any liability hereunder or with respect hereto, except that nothing contained herein shall relieve any party from liability for any willful failure to comply with any covenant or agreement contained herein prior to the effective date of termination.

ARTICLE VIII

SURVIVAL AND INDEMNIFICATION

          8.1 Survival. The representations and warranties contained in or made pursuant to this Agreement will survive the Closing, but will terminate on, and be of no further force after, the date that is the 18-month anniversary of the Closing Date, the obligations of Seller under Section 8.2(d) shall survive the Closing and terminate on the fifth anniversary of the Closing Date, the obligations of Seller under Section 8.2(e) shall survive the Closing and terminate on the seventh anniversary of the Closing Date, and the obligations of Seller under Section 8.2(g) shall survive the Closing and terminate on the third anniversary of the Closing Date; provided, however, that (a) the representations and warranties set forth in the Sections 2.14 and 2.17 shall survive the Closing and terminate on the third anniversary of the Closing Date, (b) the representations and warranties set forth in Sections 2.7, 2.12 and 2.16, and the first sentence of Section 2.8(b) and in Article III shall survive the Closing until the date that is ninety

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(90) days after the expiration of the statute of limitation applicable to the matter to which such representation or warranty relates and (c) the representations and warranties set forth in the first sentence of Section 2.1, and Sections 2.2 and 2.3(a) shall survive the Closing indefinitely; provided further, however, that such representations, warranties and rights of indemnification shall survive to the extent a claim for indemnification or other claim based upon, resulting from or arising out of a breach or inaccuracy of such a representation and warranty or under such rights of indemnification is made with reasonable specificity prior to such date until such claim is finally resolved. All other provisions of this Agreement will survive the Closing indefinitely in accordance with their terms.

          8.2 Indemnification Obligations of Seller. If the Closing shall occur, Seller, subject to the limitations set forth in this Article, shall indemnify and hold harmless Buyer and its Affiliates (including the Transferred Companies) and each of their respective officers, directors, employees, stockholders, agents, representatives, successors and assigns (collectively, the “Buyer Indemnitees”), on a Net After-Tax Basis against and in respect of any and all Losses, which may be incurred by Buyer Indemnitees arising from, relating to or otherwise in respect of:

               (a) any failure of any representation or warranty made by Seller in Article II of this Agreement to be true and correct as of the Closing Date;

               (b) any breach by Seller of or failure by Seller to perform any of its covenants or agreements contained in this Agreement;

               (c) any Liabilities arising from or in connection with any business or activities other than the Business, including the Wafer Reclaim Business, the Pigments Business and Additives Business or any Liability (including with respect to Taxes) arising from or in connection with the Restructurings (“Retained Liabilities”);

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               (d) any Third Party Claims asserted against the Transferred Companies, or any action required under any Environmental Requirements, in each case as a result of any Environmental Condition in existence on the Closing Date;

               (e) any Third Party Claims asserted against the Transferred Companies under Environmental Requirements, or any action required under any Environmental Requirements, in each case based upon, resulting from or arising out of any storage, transportation or release into the Environment (in each case, at sites other than the Real Property) of any Hazardous Substance generated by the Transferred Companies prior to the Closing;

               (f) any Third Party Claims asserted against the Transferred Companies, or any action required under any applicable Environmental Requirements attributable to or as a result of any Legacy Site Environmental Matter, which are asserted against or required of the Transferred Companies as a result of their past ownership or leasing of the relevant site;

               (g) any Proceeding (including settlements thereof) asserted against the Transferred Companies arising out of the operation of the Business of the Transferred Companies prior to the Closing (excluding those described in paragraph (d) of this Section 8.2);

               (h) all Company Transaction Expenses; and

               (i) the Rockwood UK Plan by virtue of section 75 and 75A of the Pensions Act 1995, the Occupational Pensions Scheme (Deficiency on Winding-Up etc.) Regulations 1996 or any legislation amending or replacing the same, except to the extent that such liability is reduced or extinguished by the payment of the amounts referred to in Section 4.22.

          8.3 Indemnification Obligations of Buyer. If the Closing shall occur, Buyer, subject to the limitations set forth in this Article, shall indemnify Seller and its Affiliates and

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each of their respective officers, directors, employees, stockholders, agents, representatives, successors and assigns (collectively, the “Seller Indemnitees”), on a Net After-Tax Basis against and in respect of any and all Losses which may be incurred by Seller Indemnitees arising from, relating to or otherwise in respect of:

               (a) any failure of any representation or warranty made by Buyer in Article III of this Agreement to be true and correct as of the Closing Date; and

               (b) any breach by the Buyer of or failure by Buyer to perform any of its covenants or agreements contained in this Agreement.

               8.4 Limitations on Indemnification. Notwithstanding anything to the contrary in this Agreement:

               (a) the aggregate liability of Seller for Losses pursuant to Sections 8.2(a), (d) and (g) shall not exceed 20% of the Purchase Price (determined for this purpose without regard to Retained Cash Balances), except that the aggregate liability of Seller for Losses pursuant to Section 8.2(a) related to the breach of any of the representations and warranties contained in the first sentence of Section 2.1 and in Sections 2.2, 2.3(a), 2.7, 2.12, 2.16 and 2.17 (together with the aggregate liability of Seller pursuant to Sections 8.2(a), (d) and (g)) shall not exceed the Purchase Price;

               (b) the aggregate liability of Buyer for Losses pursuant to Sections 8.3(a) shall not exceed 20% of the Purchase Price (determined for this purpose without regard to Retained Cash Balances), except that the aggregate liability of Buyer for Losses pursuant to Section 8.3(a) related to the breach of any of the representations and warranties contained in Section 3.1, 3.2(a), 3.3, 3.4 and 3.5 shall not exceed the Purchase Price;

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               (c) no Indemnified Party will be entitled to recover indirect, special, consequential, incidental, punitive or business interruption damages or lost revenues, profits, cost savings or synergies pursuant to Sections 8.2(a) or 8.3(a); provided, however, that the parties acknowledge and agree that for purposes of this Article VIII, any damages actually paid by either of them to a third party (other than an Affiliate) shall be considered direct damages for which recovery may be sought in accordance with the terms hereof;

               (d) no claim for indemnification may be made by a Buyer Indemnitee pursuant to Section 8.2 or by a Seller Indemnitee pursuant to Section 8.3 unless notice of such claim (describing the basic facts or events, the existence or occurrence of which constitute or have resulted in the alleged breach of a representation or warranty made in this Agreement or which otherwise form the basis of the claim) has been given to the party from whom indemnification is sought (the “Indemnifying Party”) during the relevant survival period set forth in Section 8.1 (which, for purposes of Sections 8.2(a) and 8.3(a), will be the survival period of the representation and warranty alleged to have been breached);

               (e) Seller shall have no liability pursuant to Sections 8.2(a) and (d) (x) for any Losses with respect to an individual matter or series of related matters until the cumulative aggregate amount of the Losses with respect to such matter or series of related matters exceeds U.S. $25,000 (the “Threshold Amount”), in which case the amount of all such Losses (including those that are less than the Threshold Amount) shall be included for purposes of computing the Losses that are indemnifiable hereunder and/or applicable against the Basket Amount pursuant to clause (y) below; and (y) until the aggregate amount of the Losses of the Buyer Indemnitees for which indemnification would otherwise be available under Sections 8.2(a) and (d) exceeds 1% of the Purchase Price (determined for this purpose without regard to Retained Cash Balances) (the

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“Basket Amount”), after which Seller will be obligated to indemnify for only that portion of such Losses of the Buyer Indemnitees Company that exceed the Basket Amount; provided that the limitations set forth in sub clause (y) of this paragraph (e) shall not apply to Losses related to the breach of any of the representations or warranties contained in Sections 2.1, 2.2, 2.3(a), 2.7, 2.12, 2.16 and 2.17; and

               (f) Seller shall have no liability pursuant to Section 8.2 for any Loss to the extent a reserve with respect to such Loss is included in or taken into account in the calculation or determination of Closing Working Capital or reflected in the Balance Sheet or for any Loss associated with periodic groundwater monitoring at the St. Cheron and St. Fromond facilities to the extent such monitoring is in all material respects of the same nature, magnitude and frequency as that conducted as of the Closing.

               (g) Notwithstanding any other provision of this Agreement, (x) in the event that Buyer, the Transferred Companies or their Affiliates initiate any communication with or make any notice to any Person (including Governmental Authorities) not reasonably required by applicable Environmental Requirements that could reasonably be expected to result in or prompt Losses for which indemnification would otherwise be available pursuant to Sections 8.2(d) or (e) or Section 8.2(a) (in respect of a breach of a representation and warranty contained in Section 2.14), Seller shall not be responsible (and shall not indemnify Buyer Indemnitees) for any such Losses and (y) Seller shall have no liability under Section 8.2(d) and Section 8.2(a) (in respect of a breach of a representation and warranty contained in Section 2.14) for Losses to the extent occurring as a result of or triggered by (A) the closure or demolition after the Closing of any part of any facility of a Transferred Company, or (B) environmental testing conducted on the

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Real Property following the Closing, except for such testing required to be undertaken by applicable Environmental Requirements.

          8.5 Mitigation and Recovery from Third Parties.

               (a) Buyer and Seller shall each take, and shall cause their Affiliates to take, all reasonable steps to mitigate any Loss for which indemnification may be sought hereunder, and neither Buyer nor Seller shall be liable for any Loss to the extent the Indemnified Party or its Affiliates shall fail to comply with this Section 8.5(a).

               (b) The amount of any Loss for which indemnification is provided under this Article VIII (before giving effect to the other limitations on indemnification set forth in this Article VIII) shall be net of any amounts actually recovered by the Indemnified Party (or any Affiliate thereof) under insurance policies, or otherwise actually recovered by the Indemnified Party (or any Affiliate thereof) from other Persons (net of any costs incurred for the recovery of such amounts), with respect to such Loss. Buyer and Seller each agree that, unless the other party shall otherwise direct in writing, it will (and cause its Affiliates to) use reasonable efforts to recover any such amounts to the extent such recoveries would reduce amounts required to be paid by the other party pursuant to this Article VIII.

          8.6 Procedure.

               (a) Any claim for indemnification under Section 8.2 or Section 8.3 will be made in accordance with this Section 8.6. In the case of any claim for indemnification arising from a claim or demand of a third Person (a “Third-Party Claim”), the Indemnified Party will give prompt written notice, and in any event no more than ten (10) days following such Indemnified Party’s receipt of such claim or demand, to the Indemnifying Party describing in reasonable detail the basis of such claim or demand as to which it may request indemnification

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hereunder, provided that the failure to notify or delay in notifying an Indemnifying Party as provided in this sentence or the next sentence will not relieve the Indemnifying Party of its obligations pursuant to Sections 8.2 or 8.3 above, as applicable, except to the extent that such failure actually prejudices the Indemnifying Party (it being understood that any claim for indemnity pursuant to Sections 8.2 or 8.3 above must be made by notice given as provided in this sentence or the next sentence within the applicable survival period specified in Section 8.1 above).

               (b) If a Third Party Claim is made against an Indemnified Party, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses, to assume sole control over the defense, settlement, management and handling of the Third Party Claim with counsel selected by the Indemnifying Party and not reasonably objected to by the Indemnified Party so long as (i) the Indemnifying Party notifies the Indemnified Party in writing within 30 days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party elects to assume the defense of such claim, (ii) such notice provides that the Indemnifying Party shall indemnify (subject to Section 8.4) the Indemnified Party from and against all Losses the Indemnified Party may suffer arising from, relating to or otherwise in respect of such Third Party Claim, and (iii) the Third Party Claim involves only money damages and does not seek injunctive or other equitable relief from an Indemnified Party; provided, however, the Indemnifying Party will have no indemnification obligations with respect to any such Third Party Claim which is settled by the Indemnified Party without the prior written consent of the Indemnifying Party (which consent may not be unreasonably withheld, delayed or conditioned). Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses

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subsequently incurred by the Indemnified Party in connection with the defense thereof. If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to participate (but not control) in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party. If the Indemnifying Party chooses to defend or prosecute a Third Party Claim, all the Indemnified Parties shall cooperate in the defense or prosecution thereof. Such cooperation shall include the retention and (upon the Indemnifying Party’s request) the provision to the Indemnifying Party of records and information that are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Indemnifying Party may not settle or compromise any such claim or demand without the consent of the Indemnified Party (which consent may not be unreasonably withheld, delayed or conditioned) if injunctive or other equitable relief would be imposed against the Indemnified Party as a result thereof, and any such settlement or compromise shall provide for a full and unconditional discharge and release of the Indemnified Party with respect to such Third Party Claim (given against a customary cross-release). In the event the Indemnifying Party shall fail to assume the defense of a Third Party Claim as provided herein, the Indemnified Party may defend against the Third Party Claim and the Indemnifying Party will remain responsible for any Losses the Indemnified Party may suffer arising from, relating to or otherwise in respect of such Third Party Claim to the fullest extent provided by this Article VIII; provided, however, the Indemnifying Party will have no indemnification obligations with respect to any such Third Party Claim which is settled by the Indemnified Party without the prior written consent of the Indemnifying Party (which consent may not be unreasonably withheld, delayed or conditioned).

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               (c) Any investigatory, remedial, cleanup, corrective or compliance action taken pursuant to Environmental Requirements in connection with any Third Party Claim arising under Section 8.2(d) and Section 8.2(a) (in respect of a breach of a representation and warranty contained in Section 2.14 related to the Real Property) shall be conducted in a commercially reasonable manner and be deemed to have been adequately completed to the extent that it attains compliance with action levels and clean up standards applicable to industrial properties under relevant Environmental Requirements, unless a more stringent action level or clean-up standard is required under any lawful order or directive of an appropriate Governmental Authority, or a less stringent action level or clean-up standard is authorized by a Governmental Authority with jurisdiction over such matter.

               (d) In the event any Indemnified Party should have a claim against any Indemnifying Party under this Article VIII 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 with as promptly as practicable after the Indemnified Party becomes aware of the claim to the Indemnifying Party. Subject to Section 8.1, the failure by any Indemnified Party to so notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability that it may have to such Indemnified Party under this Article VIII, except to the extent that such failure actually prejudices the Indemnifying Party. Upon receipt of any notice that the Indemnifying Party disputes its responsibility for all or a portion of the liability to the Indemnified Party under this Article VIII, the parties will negotiate in good faith to resolve, as promptly as possible, any such dispute.

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          8.7 Further Limitations on Indemnification.

               (a) The rights of the parties under Section 4.25 and Article VIII and Article IX will be the exclusive remedy of the parties with respect to breaches of representations, warranties, covenants or agreements contained in or made pursuant to this Agreement.

               (b) Buyer, on behalf of itself and its Affiliates (and from and after the Closing, the Transferred Companies) and their respective shareholders, managers, officers, directors, employees and agents), hereby to the maximum extent permitted by applicable Law waives and releases Seller and its Affiliates (and their respective shareholders, managers, officers, directors, employees and agents) from any statutory or other rights of contribution or indemnity (except as set forth in Sections 1.5 or 4.25, this Article VIII and Article IX and claims or causes of action arising from fraud and claims or causes of action with respect to any breach of any covenant or agreement to be performed after the Closing) with respect to Seller’s ownership of the Shares or control or operation of, or otherwise relating to, the Transferred Companies and the Business. Buyer consents to the execution by the Transferred Companies prior to or at the Closing of an instrument by which they agree to be bound by the provisions of (and in any event waive and release those matters specified in) this Section 8.7(b) to the maximum extent permitted by applicable Law.

               (c) Each Rockwood Seller, effective upon the Closing, hereby fully, finally and forever releases, discharges and covenants not to sue and otherwise agrees not to enforce any claim, cause of action, right, title or interest against, any Transferred Company and each director, officer and employee of each Transferred Company and their respective successors and permitted assigns (collectively, the “Released Persons”), of, from and with respect to any and all claims, debts, covenants, agreements, obligations, Liabilities, actions or demands of any

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kind or character, based upon any fact or circumstance, whether known or unknown, suspected or unsuspected, which presently exists or has ever existed in the past, that such Rockwood Sellers have or may have in any manner whatsoever, either singly or jointly with others against any of the Released Persons; provided, however, that the Rockwood Sellers are not releasing any claims related to the enforcement of this Agreement or accounts payable included in the calculation of Closing Working Capital.

               (d) 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 rights of the Indemnified Party with respect to claims to which such indemnification relates.

               (e) Notwithstanding anything to the contrary herein, this Article VIII shall have no application with respect to indemnification for Taxes, which shall be covered exclusively by Section 9.1.

          8.8 Tax Treatment of Payments. Any indemnification payment made pursuant to this Article VIII shall be treated for all Tax purposes as an adjustment to the Purchase Price, except to the extent required by Law.

ARTICLE IX

TAX AND EMPLOYEE MATTERS

          9.1 Certain Tax Matters.

               (a) Seller will cause to be prepared and filed all Income Tax Returns (including any consolidated, unitary or combined Income Tax Returns) required to be filed with respect to any Transferred Company for any taxable period ending on or before the Closing Date (any such period, a “Pre-Closing Period”). Buyer will cause to be prepared and filed all Tax Returns other than Income Tax Returns (any such Tax Returns, “Non-Income Tax Returns”)

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required to be filed with respect to any Transferred Company for any Pre-Closing Tax Period that are due after the Closing; provided, however, that (i) drafts of any such Non-Income Tax Returns shall be provided to Seller for its review and comment prior to filing and the parties will use all reasonable efforts to resolve any dispute, but if such dispute cannot be resolved by the parties within fifteen (15) days after Buyer receives notice of such dispute, it shall be referred to the Selected Accountants, (ii) such Non-Income Tax Returns shall be prepared in a manner consistent with past practice, except as otherwise required by applicable Law or change in circumstances, and (iii) Seller may assume responsibility for preparing any such Non-Income Tax Returns upon notice to Buyer at least thirty (30) days before any such Non-Income Tax Return is due. Following the Closing, Seller will pay, and will indemnify and hold harmless Buyer and its Affiliates from and against, on a Net After-Tax Basis, (i) any Taxes imposed upon any Transferred Company for any Pre-Closing Period (except to the extent that the liability for such Taxes was included in the calculation of Closing Working Capital) and (ii) any Taxes allocable to a Pre-Closing Period or the portion of a Straddle Period ending on the Closing Date resulting from the Restructurings or any check-the-box election made by Seller or its Affiliates for the French Transferred Company or any foreign Transferred Company; provided, however, that Buyer will pay, and will indemnify and hold harmless Seller and its Affiliates from and against, on a Net After-Tax Basis, any such Taxes imposed as a result of any action outside the ordinary course of business after the Closing effected by Buyer or its Affiliates (including, after the Closing, the Transferred Companies) or any Tax election made by Buyer or its Affiliates (including, after the Closing, the Transferred Companies), except for any such election directed by Seller. Neither Buyer nor any of its Affiliates (including, after the Closing, the Transferred Companies) shall amend any Tax Return for a Pre-Closing Period if such amendment could

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reasonably be expected to affect Seller’s liability for Taxes for any Pre-Closing Period or the portion of a Straddle Period ending on the Closing Date pursuant to Sections 9.1(a) or (b) or the Tax liability of Seller or its Affiliates (other than the Transferred Companies) for any period without Seller’s prior consent, which consent shall not be unreasonably delayed or withheld.

               (b) Buyer will cause to be prepared and filed all Tax Returns required to be filed by or on behalf of any Transferred Company for any taxable period beginning before and ending after the Closing Date (any such period, a “Straddle Period”); provided, however, that drafts of any such Tax Returns shall be provided to Seller at least thirty (30) days prior to filing, and such Tax Returns shall be subject to Seller’s review and reasonable approval. Except as otherwise consented to by Seller, any such Tax Returns will be prepared on a basis consistent with the last Tax Returns previously filed by the Transferred Companies except as required by Law or change in circumstances. Buyer will pay, and will indemnify and hold harmless Seller and its Affiliates from and against, on a Net After-Tax Basis, any Taxes imposed upon Seller or its Affiliates for any Straddle Period; provided, however, that Seller will, within fifteen (15) days after the date on which the Straddle Period Tax Return is filed, reimburse Buyer for, and will indemnify and hold harmless Buyer and its Affiliates from and against, on a Net After-Tax Basis, the amount of Taxes for the Straddle Period attributable to the portion of the Straddle Period ending on the Closing Date, other than any such Taxes imposed as a result of any action outside the ordinary course of business effected by Buyer or its Affiliates (including, after the Closing, the Transferred Companies) or any Tax election made by Buyer or its Affiliates (including, after the Closing, the Transferred Companies) which affects the liability of the applicable Transferred Company for the portion of the Straddle Period ending on the Closing Date, except for any such election directed by Seller. Any Taxes (including estimated Taxes)

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paid by the Transferred Companies with respect to any Straddle Period prior to the Closing shall be credited against Seller’s liability pursuant to this Section 9.1(b), and, to the extent such prepaid Taxes exceed such liability, Buyer shall cause the Transferred Companies to pay the excess to Seller within fifteen (15) days after filing the Tax Return for the Straddle Period. Neither Buyer nor any of its Affiliates (including, after the Closing, the Transferred Companies) shall amend any Tax Return for a Straddle Period without Seller’s consent, which consent shall not be unreasonably delayed, conditioned or withheld. For purposes of Section 9.1(a) and this Section 9.1(b), in the case of any Taxes that are imposed on a periodic basis and are payable for a Straddle Period, the portion of such Tax which relates to the portion of such Straddle Period ending on the Closing Date shall (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 (other than conveyances pursuant to this Agreement, which are governed by Section 9.1(g), be deemed to be the amount of such Tax for the entire tax period multiplied by a fraction, the numerator of which is the number of days in the portion of the Straddle Period ending on the Closing Date and the denominator of which is the number of days in the entire 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, be deemed equal to the amount which would be payable if the relevant tax period ended on the Closing Date, except that exemptions, allowances and deductions (such as depreciation deductions) calculated on an annual basis shall be prorated between the portion of the applicable Straddle Period that ends on the Closing Date and the portion after the Closing Date on a per diem basis.

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               (c) Buyer shall be responsible for, and shall indemnify and hold harmless Seller and its Affiliates from and against, on a Net After-Tax Basis, any Taxes of the Transferred Companies for periods beginning on or after the Closing Date.

               (d) Seller will be entitled to retain, or receive prompt payment from Buyer or any Transferred Company of, any refund or credit for overpayment of Taxes for which Seller is responsible pursuant to Sections 9.1(a) or (b) plus any interest received with respect thereto from the relevant Governmental Authorities. Buyer will, if Seller reasonably requests and at Seller’s expense, cause the Transferred Companies to promptly file for and obtain any refunds or credits to which Seller is entitled under this Section 9.1(d). Buyer will permit Seller to control (at Seller’s expense) the prosecution of any such claim for refund and, when deemed appropriate by Seller, will cause the relevant entity to authorize, by appropriate power of attorney, such person as Seller may designate to represent such entity with respect to such refund claim; provided, however, that any action taken by Seller that could reasonably be expected to affect the Tax liability of the Transferred Companies for taxable periods after the Closing Date shall be subject to the prior consent of Buyer which consent shall not be unreasonably delayed or withheld. For purposes of this Section 9.1(d), a party will be deemed to have made prompt payment of a refund or credit if such payment is made within ten (10) days of the receipt by such party of such refund or of the use by such party of such credit.

               (e) Buyer will promptly notify Seller in writing upon receipt by Buyer or any of its Affiliates (including, after the Closing, the Transferred Companies) of notice of any pending or threatened audit or assessment with respect to Taxes for which Seller would be required to pay or indemnify Buyer or any of its Affiliates pursuant to Sections 9.1(a) or (b). Seller will have the sole right to represent the Transferred Companies’ interest in any audit,

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administrative or court proceeding relating solely to any Pre-Closing Period, including the right to control, compromise and settle any such proceeding, and to decide whether any consents or waivers to extend applicable statutes of limitations will be granted, and to employ counsel of its choice at its expense. The party that can reasonably be determined to have the larger Tax liability at stake shall control any audit, administrative or court proceeding relative to any Straddle Period with the participation of the other party (or, if the party that would have the larger Tax liability at stake cannot be determined, Buyer and Seller shall jointly control such audit, administrative or court proceeding relative to any Straddle Period), which control shall be exercised reasonably and in good faith with due regard to the relative Tax liability potentially incurred by either party.

               (f) After the Closing Date, each of Buyer and Seller will provide the other (subject to reimbursement by the other party for any reasonable out-of-pocket expenses), with such assistance as may reasonably be requested by the other party in connection with the preparation of any return, report, or form with respect to Taxes or any administrative or judicial proceeding relating to liability for Taxes of the Transferred Companies (or any affiliated, consolidated, combined or unitary group in which any of the Transferred Companies is included), Seller, Buyer or any of their respective Affiliates. For the avoidance of doubt, Buyer shall timely provide Seller with any information and assistance reasonably required by Seller in connection with any IRS Form 5471 that Seller is required to file with respect to any Transferred Company. The parties further agree to retain and provide each other with reasonable access to all books and records relevant to the liabilities of the Transferred Companies or Seller (or any of its Affiliates) for Taxes for any periods prior to the Closing for at least seven years after the

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Closing and to give each other notice and an opportunity to receive such books or records prior to destroying or discarding any such books or records.

               (g) All documentary, stamp, transfer, sales, use, excise and similar Taxes imposed upon Seller or Buyer or their respective Affiliates (including the Transferred Companies) as a result of the transactions contemplated by this Agreement, other than any Taxes resulting from the Restructurings or any check-the-box election made by Seller or its Affiliates for the French Transferred Company or any foreign Transferred Company, will be paid 50% by Buyer and 50% by Seller. Buyer and Seller will cooperate in preparing and filing any forms required with respect to any such Taxes. Each party will provide to the other party a true copy of each such return as filed and evidence of the timely filing thereof.

               (h) Any Tax sharing or allocation agreement or arrangement between Seller or any of its Affiliates (other than the Transferred Companies), on the one hand, and the Transferred Companies, on the other hand, shall be terminated as of the Closing Date and will have no further effect for any taxable year (whether the current year, a future year or a past year).

               (i) Any amount paid by or on behalf of any party to or on behalf of another party pursuant to this Section 9.1 shall be treated for all Tax purposes as an adjustment to the Purchase Price unless otherwise required by Law.

               (j) Seller shall be subrogated to any rights that Buyer or its Affiliates (including the Transferred Companies) may have against third parties with respect to Taxes paid or indemnified by Seller pursuant to this Section 9.1.

               (k) Buyer and Seller and their Affiliates agree to amend the allocation schedule set forth in Exhibit C (the “Allocation Schedule”) as necessary to reflect any amounts paid pursuant to Section 1.5, and a final Allocation Schedule (the “Final Allocation Schedule”)

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shall be prepared by Buyer and Seller on a basis consistent with the Allocation Schedule within thirty (30) days following the final determination of any amounts to be paid pursuant to Section 1.5. Buyer and Seller and their Affiliates shall report, act, and file all Tax Returns in all respects and for all purposes consistent with the Final Allocation Schedule. Buyer and Seller shall each timely and properly prepare, execute, file and deliver all such documents, forms and other information as either Buyer or Seller may reasonably request in preparing the Allocation Schedule or the Final Allocation Schedule. Neither Buyer nor Seller shall take any position (whether in audits, Tax Returns or otherwise) that is inconsistent with the Final Allocation Schedule unless required by applicable Law.

          9.2 Employee Benefit Plan Matters.

               (a) Effective as of the Closing, Buyer shall cause the appropriate Transferred Company to (i) continue the employment immediately after the Closing of each person who is a U.S. Business Employee as of the Closing, whether or not then actively at work, including any U.S. Business Employees who are on vacation leave, leave of absence or disability leave (“Continuing U.S. Employee”), (ii) provide each Continuing U.S. Employee (other than Continuing Employees who are represented by unions or whose services are performed pursuant to an employment agreement) with compensation, benefits and other terms of employment which are substantially equivalent to the compensation, benefits and other terms of employment in effect for similarly situated employees of Buyer and (iii) recognize the service of each Continuing U.S. Employee with the Transferred Companies or any Affiliate of the Transferred Companies before the Closing Date as service with Buyer and its Affiliates for purposes of eligibility to participate and vesting (but not for any other purpose, such as benefit accrual or level of benefits) under the benefit plans provided to Continuing U.S. Employees by Buyer and

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its Affiliates on and after Closing (but only to the extent such service was recognized under similar plans maintained by Seller and its Affiliates prior to Closing).

               (b) Effective as of the Closing, Seller shall amend its Benefit Plans to the extent necessary to provide that the Transferred Companies shall withdraw from participation in all Benefit Plans maintained by Seller for Continuing Employees, and Buyer, or the appropriate Transferred Company, shall continue to be responsible for any Benefit Plan that is maintained by one or more of the Transferred Companies solely for Continuing Employees (and former employees of the Business) (“Company Benefit Plans”).

               (c) Effective as of the Closing, Buyer shall cause the appropriate Transferred Companies to honor the terms of any collective bargaining agreement covering any of the Continuing U.S. Employees and to continue to provide any compensation or employee benefits required to be provided under the terms of any such collective bargaining agreement.

               (d) Buyer shall credit, or cause to be credited, and pay if and when due, each Continuing U.S. Employee with the unused vacation days and any personal days and sick days accrued in accordance with applicable Law and the vacation and personnel policies and labor agreements applicable to Continuing U.S. Employees as of the Closing Date. All such amounts shall be reflected as liabilities in the determination of Closing Working Capital.

               (e) Effective as of the Closing, Buyer shall (i) establish or maintain, or cause to be established or maintained, one or more group health plans which shall cover all Continuing U.S. Employees and dependents who immediately prior to the Closing were covered under any group health plan maintained by Seller or any of its Affiliates, (ii) waive any waiting period and any exclusion or limitation for preexisting conditions under any such group health plan (but only to the extent such waiting period and pre-existing condition limitation were

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satisfied) under any group health plan maintained by Seller or any of its Affiliates as of the Closing Date and (iii) grant credit (for purposes of annual deductibles, co-payments and out-of-pocket limits) for the dollar amount of such similar amounts satisfied by such individual prior to the Closing Date and during the calendar year in which the Closing Date occurs under any group health plan maintained by Seller or any of its Affiliates.

               (f) Seller shall be responsible for providing continuation of group health coverage required by Section 4980B of the Code or Sections 601 through 608 of ERISA (“COBRA”) or other similar applicable Laws to any U.S. Business Employee, former employee of the Business conducted in the United States or any “qualified beneficiary” (within the meaning of Section 4980B of the Code) of any such U.S. Business Employee or former employee of the Business conducted in the United States who incurs a “qualifying event” (within the meaning of Section 4980B of the Code) prior to the Closing Date. Buyer shall be responsible on and after the Closing Date for providing continuation of group health coverage required by COBRA or other similar applicable Laws to any Continuing U.S. Employee, or any “qualified beneficiary” (within the meaning of Section 4980B of the Code) of any such U.S. Business Employee who incurs a “qualifying event” (within the meaning of Section 4980B of the Code) on or after the Closing Date.

               (g) Seller shall be responsible for any covered claims incurred prior to the Closing by U.S. Business Employees under any Benefit Plan (other than under any U.S. Company Benefit Plan), and Buyer shall be responsible for any covered claim incurred under any U.S. Company Benefit Plan (whether before or after the Closing) or under any employee benefit plan maintained by Buyer or its Affiliates on and after the Closing. For purposes of the foregoing, a claim shall be deemed to be incurred at the time services, with respect to such claim,

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are rendered and not at the time claim for payment is made. Seller shall be responsible for providing long term disability benefits to any U.S. Business Employee who is receiving long term disability benefits under Seller’s long term disability plan as of the Closing; and Buyer shall be responsible for providing long term disability benefits to any U.S. Business Employee who has incurred an injury or illness prior to Closing but has not qualified for long term disability benefits under Seller’s long term disability plan as of the Closing (including any requirement to complete a waiting or elimination period).

               (h) Buyer shall take all steps necessary to permit each U.S. Continuing Employee who has received an eligible rollover distribution (as defined in Section 402(c)(4) of the Code) from Seller’s Profit Sharing/401(k) Plan for the Employees of Rockwood Specialties, Inc. to roll over such eligible rollover distribution, including any associated loans, as part of any lump sum cash distribution into an account(s) under a 401(k) plan maintained by Buyer or a Transferred Company.

               (i) Seller shall, as promptly as practicable following the date of this Agreement, notify U.S. Business Employees who have health care spending accounts or dependent care spending accounts under any Benefit Plan that claims under such plans will not be allowed following the Closing.

               (j) Buyer shall take all steps necessary to permit each Continuing US. Employee who has received an eligible rollover distribution (as defined in Section 402(c)(4) of the Code) from Seller’s Profit Sharing/401(k) Plan for Employees of Rockwood Specialties, Inc. to roll over such eligible rollover distribution as part of any lump sum cash distribution into an account(s) under a 401(k) plan maintained by Buyer or a Transferred Company and will use

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reasonable efforts to permit the rollover of outstanding loan balances of Continuing U.S. Employees who elect to roll over their distributions.

               (k) Upon request, Seller shall provide to Buyer, and Buyer shall provide to Seller, such documents, data and information as may reasonably be necessary to implement the provisions of this Section 9.2 and to administer their respective benefit plans.

          9.3 Workers’ Compensation. Seller will bear the entire cost and expense of workers’ compensation claims arising out of injuries sustained by any current or former U.S. Business Employee prior to the Closing Date (including treatment provided after the Closing Date which is required to treat injuries sustained before the Closing Date). Except as provided in the preceding sentence, Buyer will bear the entire cost and expense of workers’ compensation claims arising out of injuries identifiably sustained on or after the Closing by Continuing U.S. Business Employees.

          9.4 No Third Party Beneficiary Rights; No Right to Employment. Nothing herein expressed or implied shall confer upon any of the employees of the Seller, the Buyer, the Transferred Companies or any of their Affiliates, any rights or remedies, including any right to benefits or employment, or continued benefits or employment, for any specified period, of any nature or kind whatsoever under or by reason of this Agreement.

ARTICLE X

MISCELLANEOUS

          10.1 Expenses. The fees and expenses (including the fees of any lawyers, accountants, investment bankers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated will be paid by Buyer with respect to Buyer and will be paid by Seller with respect to Seller and the Transferred Companies.

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          10.2 Headings. The headings, subheadings and captions in this Agreement, the Disclosure Letter and in any Exhibit or Schedule hereto or thereto are for reference purposes only and are not intended to affect the meaning or interpretation of this Agreement.

          10.3 Notices. Any notice or other communication required or permitted to be given hereunder will be in writing and will be mailed by prepaid registered or certified mail, timely deposited with an overnight courier such as Federal Express, or delivered against receipt (including by facsimile transmission), as follows:

               (a) In the case of Seller, to:

Rockwood Specialties Group, Inc.
100 Overlook Center
Princeton, NJ 08540
Telecopy: 609-514-8722
Attn: General Counsel

with a copy to:

Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
Telecopy: 212-422-4726
Attn: James Modlin, Esq.

               (b) In the case of Buyer, to:

OM Group, Inc.
127 Public Square
1500 Key Tower
Cleveland, Ohio 44114
Telecopy: 216-263-7757
Attn: General Counsel

with a copy to:

Jones Day
901 Lakeside Avenue
Cleveland, Ohio 44114
Telecopy: 216-579-0212
Attn: Lyle G. Ganske, Esq.
and James P. Dougherty, Esq.

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or to such other address as the party may have furnished in writing in accordance with the provisions of this Section. Any notice or other communication shall be deemed to have been given, made and received upon receipt; provided, that any notice or communication that is received other than during regular business hours of the recipient shall be deemed to have been given at the opening of business on the next Business Day of the recipient. A party may change the address to which notices are to be addressed by giving the other party notice in the manner herein set forth.

          10.4 Assignment. This Agreement and all provisions hereof will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that neither this Agreement nor any right, interest, or obligation hereunder may be assigned by any party hereto without the prior written consent of the other party, except that Buyer may assign any right hereunder, in whole or in part, to any wholly-owned subsidiary of Buyer that agrees (without limitation or release of Buyer’s liabilities hereunder) to be bound by and responsible for Buyer’s liabilities hereunder; and provided, further that no party hereto or successor or assignee has the ability to subrogate any other Person to any right or obligation under this Agreement. Any purported assignment or delegation in violation of this Agreement shall be null and void ab initio.

          10.5 Entire Agreement. This Agreement (including the Disclosure Letter and any Schedule or Exhibit hereto or thereto), the Confidentiality Agreement and the Ancillary Documents contain the entire agreement and understanding of the parties with respect to the transactions contemplated hereby and supersede all prior written or oral commitments, arrangements or understandings with respect hereto (other than the Confidentiality Agreement, which will terminate at the Closing but survive any termination hereof).

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          10.6 Amendment; Waiver. This Agreement may only be amended or modified in writing signed by the party against whom enforcement of any such amendment or modification is sought. No breach of any covenant, agreement, representation or warranty made herein shall be deemed waived unless expressly waived in writing by the party who might assert such breach. The waiver by any party hereto of a breach of any term or provision of this Agreement will not be construed as a waiver of any subsequent breach.

          10.7 Counterparts. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement and each of which will be deemed an original.

          10.8 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.

               (a) This Agreement shall be governed by the laws of the State of New York, without regard to any conflicts of law rules or principles that would result in the application of the laws of another jurisdiction.

               (b) Each party hereto, hereby consents to, and confers exclusive jurisdiction upon, the courts of the State of New York and the Federal courts of the United States of America located in the County of New York in the State of New York, and appropriate appellate courts therefrom, over any action, suit or proceeding arising out of or relating to this Agreement. Each party hereto hereby waives, and agrees not to assert, as a defense in any such action, suit or proceeding that it is not subject to such jurisdiction or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that this Agreement may not be enforced in or by said courts or that its Assets are exempt or immune from execution, that such action, suit or proceeding is brought in an inconvenient forum, or that the venue of such action, suit or proceeding is improper. Seller and Buyer covenant not to initiate any such suit,

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action or proceeding in any other jurisdiction. Service of process in any such action, suit or proceeding may be served on any party anywhere in the world, whether within or without the State of New York, as provided in Section 10.3 herein.

               (c) Each party hereby waives to the fullest extent permitted by applicable Law, any right it may have to a trial by jury in respect of any proceeding directly or indirectly arising out of, under or in connection with this Agreement, any Ancillary Document or any transaction contemplated hereby or thereby. Each party (i) 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 the foregoing waiver and (ii) acknowledges that it and the other parties hereto have been induced to enter into this Agreement and the Ancillary Documents, as applicable, by, among other things, the mutual waivers and certifications in this paragraph.

          10.9 Interpretation; Absence of Presumption.

               (a) For the purposes of this Agreement, (i) words in the singular shall be held to include the plural and vice versa, (ii) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules and Exhibits hereto and the Disclosure Letter) and not to any particular provision of this Agreement, and Article, Section, Exhibit and Schedule references are to the Articles, Sections, Exhibits, and Schedules to this Agreement or the Disclosure Letter unless otherwise specified, (iii) except where the context otherwise requires, references to a “party” or “parties” shall mean Buyer or Seller, or all of them as the context requires, (iv) the word “including” and words of similar import when used in this Agreement shall mean

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“including, without limitation,” unless the context otherwise requires or unless otherwise specified and (v) the word “or” shall not be exclusive.

               (b) With regard to each and every term and condition of this Agreement and any and all agreements and instruments subject to the terms hereof, the parties understand and agree that the same have or has been mutually negotiated, prepared and drafted, and if at any time the parties hereto desire or are required to interpret or construe any such term or condition or any agreement or instrument subject hereto, no consideration will be given to the issue of which party actually prepared, drafted or requested any term or condition of this Agreement or any agreement or instrument subject hereto.

          10.10 Third Person Beneficiaries. This Agreement is not intended to confer upon any other Person any rights or remedies hereunder. Each of Buyer and Seller may assert the rights of Buyer Indemnitees and Seller Indemnitees, respectively, pursuant to Article VIII hereof.

          10.11 Representations and Warranties; Schedules. Neither the specification of any dollar amount in the representations and warranties set forth in Article II nor the indemnification provisions of Article VIII nor the inclusion of any items in any Schedule of the Disclosure Letter will be deemed to constitute an admission by Seller or Buyer, or otherwise imply or create any presumption, that any such amounts or the items so included are material for the purposes of this Agreement, or that any such item meets any or all of the criteria set forth in this Agreement for inclusion in such Schedule to the Disclosure Letter or any other Schedule to the Disclosure Letter. Disclosure of any fact or item in any Schedule of the Disclosure Letter shall, should the existence of such fact or item be relevant to any other Schedule of the Disclosure Letter, be deemed to be disclosed with respect to that other Schedule to the extent the

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relevance of such disclosure to such other Schedule is reasonably apparent. Any capitalized terms used in the Disclosure Letter or any Schedule hereto or thereto but not otherwise defined therein shall be defined as set forth in this Agreement.

          10.12 Severability. If any one or more of the provisions of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Agreement will not be affected thereby, and Seller and Buyer will use their reasonable efforts to substitute one or more valid, legal and enforceable provisions which insofar as practicable implement the purposes and intent hereof. To the extent permitted by applicable Law, each party waives any provision of applicable Law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect.

[Remainder of page intentionally left blank]

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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

ROCKWOOD SPECIALTIES GROUP, INC.
By:
	Name:
	Title:
OM GROUP, INC.
By:
	Name:
	Title:

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EXHIBIT A

Certain Definitions

          “Additives Business” shall mean the business of producing, marketing, developing and selling specialty rheology modifiers and additives.

          “Administrative Assets” shall mean Assets utilized by Seller and its Affiliates (other than the Transferred Companies) in providing administrative, information technology, accounting, book and record keeping, tax, financial, insurance, legal, human resources and other like services (including services of the foregoing nature to be provided pursuant to the Transition Services Agreement) to the Transferred Companies.

          “Affiliate” shall mean, with respect to a Person, another Person, directly or indirectly, through one or more intermediaries, controlled by, under common control with or which controls, the Person specified at such time. For purposes of this definition, “control” shall mean the possession of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by Contract or otherwise. For purposes of this Agreement and the Ancillary Documents, no Person shall be deemed to control Rockwood Holdings, Inc.

          “Agreed Form” shall mean a document in a form approved and for purposes of identification initialed by or on behalf of each party and customary for the type of transaction to which such document relates.

          “Agreement” shall mean this Stock Purchase Agreement.

          “Allocation Schedule” shall have the meaning specified in Section 9.1(k).

          “Ancillary Documents” shall mean the Transition Services Agreement, the Local Share Transfer Agreements (if any), the Share transfer instruments described in Sections

1.4(a)(i), 1.4(a)(ii) and 1.4(a)(v) and 1.4(a)(vi) and the certificates described in Sections 1.4(a)(x), 1.4(a)(xii), 1.4(a)(xiii), 1.4(a)(xiv), 1.4(a)(x)(v), 1.4(a)(x)(vi), 1.4(a)(x)(vii), 1.4(c)(iv) and 1.4(c)(v).

          “Antitrust Laws” shall mean any Laws governing competition, monopolies, restrictive trade practices or competition-related merger notifications in any jurisdiction.

          “Approval” shall mean any franchise, license, certificate of compliance, authorization, consent, order, permit, planning permission, approval or other action of, or any filing, registration or qualification with, any Governmental Authority.

          “Assets” shall mean all properties (including real property), assets, privileges, rights, interests and claims, personal, tangible and intangible, of every type and description.

          “Balance Sheet” shall have the meaning specified in Section 2.4.

          “Basket Amount” shall have the meaning specified in Section 8.4(d).

          “Benefit Plans” shall mean (i) each U.S. Benefit Plan, (ii) each UK Benefit Plan, (iii) any other written material employee benefit plan, including any deferred compensation, pension, retirement, savings, profit sharing, incentive, bonus, health, life insurance, cafeteria, flexible spending, dependent care, fringe benefit, vacation pay, holiday pay, disability, sick pay, workers compensation, unemployment, severance pay, employee loan or educational assistance plan and (iv) any indemnification, severance or change-in-control agreement, in each case, which covers any current or former employees of the Business.

          “Business” shall mean the Restricted Business, as conducted by Seller and its Affiliates.

          “Business Assets” shall mean all Assets of the Transferred Companies that are used or held for use in connection with the Business.

          “Business Day” shall mean a day other than Saturday or Sunday or other day on which banks in New York City are required to or may be closed.

          “Business Employees” shall have the meaning specified in Section 2.11(b).

          “Buyer” shall have the meaning specified in the Preamble, and shall be deemed to include such Affiliates of Buyer that enter into Local Share Transfer Agreements.

          “Buyer Indemnitees” shall have the meaning specified in Section 8.2.

          “Caledonian” shall mean Caledonian Applied Technology Limited, a limited company organized under the laws of England and Wales.

          “Chemetall Business” shall mean the business of producing, marketing, developing and selling surface treatment technologies, processes and products for use in the cleaning, surface texturing and conditioning of substrates.

          “Closing” shall have the meaning specified in Section 1.3.

          “Closing Date” shall have the meaning specified in Section 1.3.

          “Closing Working Capital” shall mean, with respect to the Business, (i) the value of (x) accounts receivable (net of reserves), plus (y) inventories, plus (z) prepaid expenses, minus (ii) the value of (x) accounts payable (including in respect of capital projects), plus (y) accrued expenses (other than the severance costs for terminations occurring following the Closing or obligations for Taxes other than payroll Taxes), in each case determined as of the Closing Date (and after giving effect to the provisions hereof that have the effect of releasing the Transferred Companies from liabilities upon the Closing) in accordance with GAAP applied using the same principles, practices, methodologies and policies used in the preparation of the Balance Sheet. In determining Closing Working Capital, foreign currencies shall be converted into U.S. dollars at the exchange rates in effect on the Closing Date.

          “COBRA” shall have the meaning specified in Section 9.2(g).

          “Code” shall mean the Internal Revenue Code of 1986, as amended.

          “Companies” shall have the meaning specified in the Recitals.

          “Company Benefit Plans” shall have the meaning specified in Section 9.2(b).

          “Company Permit” shall have the meaning specified in Section 2.8(c).

          “Company Transaction Expenses” shall mean all out-of-pocket fees, costs and expenses (including all legal, accounting, broker, finder or investment banker fees) incurred by Seller or the Transferred Companies or their Affiliates or the Business in connection with this Agreement and the transactions contemplated by this Agreement to be consummated at or prior to the Closing.

          “Compugraphics” shall mean Compugraphics International Limited, one of the UK Transferred Companies.

          “Compugraphics Plan” shall have the meaning specified in Section 2.12(j).

          “Confidentiality Agreement” shall have the meaning specified in Section 4.1(b).

          “Confidential Information” shall have the meaning specified in Section 4.23.

          “Continuing Employee” shall have the meaning specified in Section 9.2(a).

          “Continuing U.S. Employees” shall have the meaning specified in Section 9.2(g).

          “Consent” shall mean any consent or approval of, or notice, declaration, report or statement filed with or submitted to, any Person (other than an Approval).

          “Contract” means any contract, agreement, lease, license, indenture, note, bond, commitment, instrument, or other legally binding arrangement, whether written or oral.

          “Control” shall mean, as to any Person, the power to elect a majority of the governing body and direct or cause the direction of the management and policies of such Person,

whether through the ownership of voting securities, by contract or otherwise. The term “Controlled” shall have a correlative meaning.

          “Disclosure Letter” shall mean the Disclosure Letter, dated the date of this Agreement, delivered by Seller to Buyer contemporaneously with the delivery of this Agreement.

          “DOJ” shall have the meaning specified in Section 4.5.

          “Effluent Treatment Plant” shall have the meaning specified in Section 4.11(b)(i).

          “Environment” means soil, surface water, groundwater, land, sediments, surface or subsurface strata, ambient air or indoor air.

          “Environmental Condition” means any condition of the Environment with respect to the Real Property that violates any Environmental Requirements, or even though not violative of any Environmental Requirements nevertheless results in any Liability or obligation to take response action under any Environmental Requirement.

          “Environmental Requirements” shall mean all Laws or Orders concerning the protection of the Environment from contamination or pollution or impact upon human health from contamination or pollution, in each case as are in effect on the Closing Date or, with respect to past operations of the Transferred Companies, as were in effect at the time of such operations.

          “ERISA” shall have the meaning specified in Section 2.12(a).

          “Estimated Closing Statement” shall have the meaning specified in Section 1.5(a).

          “Estimated Purchase Price” shall have the meaning specified in Section 1.5(b).

          “FIA” shall have the meaning specified in Section 1.4(a)(v).

          “Final Allocation Schedule” shall have the meaning specified in Section 9.1(k).

          “Final Closing Statement” shall have the meaning specified in Section 1.5(c).

          “Financial Statements” shall have the meaning specified in Section 2.4.

          “FTC” shall have the meaning specified in Section 4.5.

          “GAAP” shall mean generally accepted accounting principles in the United States as in effect on the date of this Agreement.

          “Governmental Authority” shall mean any national, federal, state, provincial, county or municipal government, domestic or foreign, any agency, board, bureau, commission, court, department or other instrumentality of any such government, and shall include for the avoidance of doubt, any authority responsible for enforcing and/or monitoring compliance with any Antitrust Laws, including those with jurisdiction to review the transactions contemplated hereby.

          “Guaranty Agreement” shall have the meaning specified in Section 4.12.

          “HSR Act” shall have the meaning specified in Section 2.3(b).

          “Hazardous Substance” means any pollutant, toxic substance, including asbestos and asbestos-containing materials, hazardous waste, hazardous material, hazardous substance, contaminant, petroleum or petroleum-containing materials, radiation and radioactive materials, leaded paints, toxic mold and other harmful biological agents, and polychlorinated biphenyls as defined in, the subject of, or that could give rise to liability under any Environmental Requirements.

          “Income Taxes” shall mean any Taxes in the nature of revenue, income or franchise Taxes.

          “Income Tax Return” shall mean any Tax Return relating to Income Taxes.

          “Indebtedness” of any Person means, without duplication, (i) all obligations of such Person (A) for the principal of, interest on, and premium (if any) and breakage costs (if any)

in respect of money borrowed (whether borrowed from an Affiliate of such Person or a Person that is not an Affiliate) or (B) evidenced by notes, debentures, bonds or other similar instruments (other than performance and similar bonds) for the payment of which such Person is responsible or liable; (ii) all obligations of such Person issued or assumed as the deferred purchase price of property (other than accounts payable), all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement, including all obligations of such Person for the payment of money relating to leases that are required to be classified as capitalized lease obligations in accordance with GAAP; (iii) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction; (iv) all obligations of such Person under interest rate or currency swap transactions (valued at the termination value thereof); (v) all obligations of the type referred to in clauses (i) through (iv) of other Persons for the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise, including guarantees of such obligations; and (vi) all obligations of the type referred to in clauses (i) through (iv) of other Persons secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien on any Asset of such Person (whether or not such obligation is assumed by such Person).

          “Indemnified Party” shall mean Buyer Indemnitees or Seller Indemnitees, as the case may be, seeking indemnification pursuant to Article VIII.

          “Indemnifying Party” shall have the meaning specified in Section 8.4(c).

          “Industrial Action” shall have the meaning specified in Section 2.11(a).

          “Intellectual Property” shall have the meaning specified in Section 2.15(a).

          “IRS” shall mean the United States Internal Revenue Service.

          “Knowledge of Seller” shall mean the actual knowledge as of the date of this Agreement of Michael Piacentino, Michael Miles, Moenes Elias, Reg Stephenson, Richard Seager and Andrè Hawryliw.

          “Law” means any foreign, federal, state or local law, statute, code, ordinance, enactment, rule or regulation of any Governmental Authority, including Antitrust Laws and the U.S. Foreign Corrupt Practices Act and comparable statutes in non-U.S. jurisdictions.

          “Leased Property” shall mean the real property leased, licensed or otherwise used by a Transferred Company pursuant to the Leases.

          “Leases” shall have the meaning specified in Section 2.9(b).

          “Legacy Site Environmental Matter” shall mean any Liability or requirement arising under any Environmental Requirement as in effect at any time associated with or attributable to any real property owned, operated, used or leased by a Transferred Company or any predecessor in interest thereto prior to the Closing (but no longer owned, operated, used or leased by a Transferred Company at the Closing).

          “Liability” means any direct or indirect liability, obligation, guaranty, claim, loss, damage, deficiency, cost or expense, whether relating to payment, performance or otherwise, known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not required to be reflected or reserved against on the financial statements of the obligor under GAAP.

          “Lien” means any mortgage, lien (statutory or other), pledge, assignment, deed of trust, hypothecation, charge, option, right of first refusal, preemptive right, security interest, or

other like encumbrance, or any interest or title of any vendor, lessor, lender or other secured party under any conditional sale, capital lease, trust receipt or other title retention agreement.

          “Local Share Transfer Agreement” shall have the meaning specified in Section 1.4(d).

          “Losses” shall mean losses, liabilities, claims, damages, costs and reasonable expenses of defense (including reasonable attorney and investigatory fees and expenses).

          “Material Adverse Effect” shall mean any material adverse change in or effect on (A) the business, assets, financial condition, liabilities or results of operations of the Transferred Companies, taken as a whole, or (B) the ability of the Rockwood Sellers to consummate the sale of the Shares and the other transactions, in each case, as contemplated hereby. “Material Adverse Effect” shall disregard each of the following, and any effects thereof or changes relating thereto or resulting therefrom: (i) changes in the general economic, financial markets, regulatory or political conditions, (ii) events or changes to the extent that they generally affect the industry or industries, or market or markets, in which the Business operates, (iii) any natural disaster, outbreak or escalation of hostilities, act or acts of war or terrorism, military actions or other national or international calamity or crisis, (iv) the suspension of trading in securities on any United States or foreign stock exchange, or a disruption in securities settlement, payment or clearance services in the United States or elsewhere, (v) the taking of any action by any Governmental Authority in respect of its monetary or fiscal affairs, (vi) changes in applicable Law (other than the effects of any such changes which adversely affect the Transferred Companies to a materially greater extent than their competitors in the applicable industries in which the Transferred Companies compete), (vii) the consummation of the transactions contemplated hereby or the announcement of this Agreement, (viii) the identity of, or actions or

omissions of, Buyer or its Affiliates, (ix) the failure, in and of itself, to meet or fulfill the 2007 EBITDA target or capital expenditure budget of the Transferred Companies to the extent such failure has been reflected in the Purchase Price as agreed by the parties hereto or (x) changes in GAAP or any formal pronouncements related thereto.

          “Material Agreements” shall have the meaning specified in Section 2.10.

          “Mustardgrange” shall mean Mustardgrange Limited, a limited company organized under the laws of England and Wales.

          “Net After-Tax Basis” shall mean, with respect to the calculation of any indemnification payment owed to any party pursuant to the Agreement, calculation thereof in a manner taking into account any Taxes actually owing by the Indemnified Party or its Affiliates as a result of receipt or accrual of the indemnity payment and any savings in Taxes actually realized by the Indemnified Party or its Affiliates as a result of the indemnified liability. In the event that a Tax liability is actually incurred or a savings in Taxes is actually realized by an Indemnified Party or its Affiliates subsequent to the time that an indemnification payment is required to be paid, such liability or savings shall be taken into account (and payment with respect thereto shall be made by the appropriate party) only as and when such liability is incurred or savings are realized.

          “New Lease” shall have the meaning specified in Section 4.11(i).

          “Non-Income Tax Returns” shall have the meaning specified in Section 9.1(a).

          “Non-US Antitrust Approvals” shall mean any Approval required to be obtained from, or any filings or other notifications required to be made to or with, any non-United States Governmental Authority in connection with the transactions contemplated hereby under Antitrust Laws.

          “Order” means any order, writ, injunction, decree, judgment, award or ruling of a Governmental Authority.

          “Ordinary Course of Business” means the ordinary course of business of the Transferred Companies consistent with past custom and practice.

          “Owned Property” shall have the meaning specified in Section 2.9(a).

          “PBGC” shall have the meaning specified in Section 2.12(b).

          “Permit” shall mean any permit or authorization of the Transferred Companies issued by any Governmental Authority in connection with the Business or any of the other Business Assets.

          “Permitted Liens” shall mean (i) Liens for Taxes, assessments and other governmental charges which are not due and payable and which may thereafter be paid without penalty, (ii) Liens identified in the Disclosure Letter, (iii) Liens arising or resulting from any action taken by Buyer or any of its Affiliates, (iv) with respect to any Business Asset, Liens which do not in any material respect interfere with or restrict the use of such Business Asset in the conduct of the Business, (v) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar Liens arising in the Ordinary Course of Business, (vi) zoning restrictions, easements, licenses or other restrictions on the use of any Owned Property or encumbrances thereon, so long as the same do not, individually or in the aggregate, materially interfere with or impair the use of such Owned Property in the manner normally used and (vii) matters disclosed in the title insurance policies, title commitments, UK property searches and French mortgage certificates attached as Exhibit G (the items referred to in this clause (vii) are referred to herein as (“Title Materials”).

          “Person” means any natural person, corporation, partnership, limited liability company, proprietorship, joint stock company, joint venture, trust, union, association, organization, Governmental Authority or other entity or business organization.

          “Pigments Business” shall mean the business of producing, marketing, developing and selling synthetic iron oxide and other inorganic pigments.

          “Pre-Closing Period” shall have the meaning specified in Section 9.1(a).

          “Proceeding” means any judicial, administrative, investigative or arbitral actions, suits or proceedings by or before any Governmental Authority.

          “Purchase Price” shall have the meaning specified in Section 1.2.

          “Real Property” shall mean the Owned Property and the Leased Property, collectively.

          “Related Persons” shall have the meaning specified in Section 2.13.

          “Released Persons” shall have the meaning specified in Section 8.7(c).

          “Restricted Business” shall mean the business of producing, marketing, developing and selling (i) specialty and proprietary wet chemicals used by manufacturers of bare printed wiring boards, (ii) high purity wet process chemicals used as etchants, cleaning solutions, photoresist strippers, edge bead removers, solvents, developers and copper deposition materials to manufacturers of semiconductors, silicon chips, wafers, liquid crystal displays, photomasks and photo-voltaic cells and modules and providing related analytical, logistical and support services to such manufacturers and (iii) photomasks and reticles to the semiconductor, optoelectronics and microelectronics industries. For the avoidance of doubt, the “Restricted Business” shall not include the Wafer Reclaim Business.

          “Restructurings” shall mean the Singapore Restructuring and UK Restructuring.

          “Retained Cash Balances” shall mean all cash and cash equivalents in accounts of the Transferred Companies (listed in Schedule 2.21 of the Disclosure Letter) at the Closing.

          “Retained Liabilities” shall have the meaning specified in Section 8.2(c).

          “Rockwood Electronic” shall mean Rockwood Electronic Materials Limited, one of the UK Transferred Companies.

          “Rockwood Sellers” shall mean Seller, Rockwood Specialties, Caledonian and Mustardgrange.

          “Rockwood Specialties” shall mean Rockwood Specialties, Inc., a Delaware corporation.

          “Rockwood UK Plan” shall have the meaning specified in Section 2.12(j).

          “Selected Accountants” shall have the meaning specified in Section 1.5(d).

          “Seller” shall have the meaning specified in the Preamble.

          “Seller Indemnitees” shall have the meaning specified in Section 8.3.

          “Seller Marks” shall have the meaning specified in Section 4.6(a).

          “Shares” shall mean, with respect to a Company, the shares of capital stock, the issued shares or other equity interests of such Company set forth on Schedule 2.2 of the Disclosure Letter.

          “Singapore Restructuring” shall mean the transfer of the Pigments Business and Additives Business of the Singapore Transferred Company (and the employees thereof, or the resignation or termination of employment of any such employees who are not willing to transfer their employment) to an Affiliate of Seller, as described in Exhibit G.

          “Singapore Shares” shall mean, with respect to the Singapore Transferred Company, the shares of capital stock or other equity interests of the Singapore Transferred Company set forth on Schedule 2.2 of the Disclosure Letter.

          “Singapore Transferred Company” shall mean Rockwood Specialties (Singapore) Pte Limited.

          “Specified Indemnified Parties” shall have the meaning specified in Section 4.25(i).

          “Straddle Period” shall have the meaning specified in Section 9.1(b).

          “Subsidiary” shall mean, with respect to any Person, another Person of which such Person, directly or indirectly through one or more Subsidiaries, beneficially owns capital stock, share capital or other equity interests having in the aggregate fifty percent (50%) or more of the total combined voting power, without giving effect to any contingent voting rights, in the election of directors (or Persons fulfilling similar functions or duties) of such owned Person.

          “Subsidiary Shares” shall mean, with respect to a Subsidiary of a Company, the shares of capital stock, the issued shares or other equity interests of such Subsidiary set forth on Schedule 2.2 of the Disclosure Letter.

          “Supplies” shall have the meaning specified in Section 4.6(a).

          “Taiwan Nominee Shareholders” shall mean each of Southern Clay Products; Inc.; Rockwood Specialties; Exsil, Inc.; Electrochemicals, Inc.; Cyantek Corporation; and Compugraphics U.S.A., Inc.

          “Taiwan Purchase Price” shall mean the amount of the Purchase Price allocated to the Taiwan Shares at the Closing in accordance with Exhibit C, expressed in New Taiwan Dollars, that is to be indicated in the application for FIA to be filed jointly by Taiwan Shares

Seller and Buyer to the Investment Commission of the Taiwan Ministry of Economic Affairs for approval.

          “Taiwan Securities Transaction Tax” shall mean 0.3% of the Taiwan Purchase Price.

          “Taiwan Shares” shall mean, with respect to the Taiwan Transferred Company, the shares of capital stock or other equity interests of the Taiwan Transferred Company set forth on Schedule 2.2 of the Disclosure Letter.

          “Taiwan Transferred Company” shall mean Rockwood Electrochemicals Asia Limited.

          “Taiwan Shares Seller” shall mean Rockwood Specialties Group, Inc.

          “Tax Authority” shall mean the IRS or any other domestic or foreign governmental entity responsible for the administration of any Taxes.

          “Taxes” shall mean all taxes, charges, fees, levies or other assessments, and all estimated payments thereof, including but not limited to income, excise, license, severance, stamp, occupation, premium, profits, windfall profits, customs duties, capital stock, employment, disability, registration, alternative or add-on minimum, property, sales, use, value added, environmental (including Taxes imposed under Section 59A of the Code), franchise, payroll, transfer, gross receipts, withholding, social security or similar unemployment taxes, and any other tax of any kind whatsoever, imposed by any Governmental Authority, including any interest, penalties and additions to tax relating to such taxes, charges, fees, levies or other assessments.

          “Tax Return” shall mean any return, report, form or other information filed with any Governmental Authority with respect to Taxes, including any attachment or schedule thereto or any amendment thereof.

          “Title Materials” shall have the meaning specified in the definition of Permitted Liens.

          “Third-Party Claim” shall have the meaning specified in Section 8.6(a).

          “Threshold Amount” shall have the meaning specified in Section 8.4(d).

          “Transferred Companies” shall have the meaning specified in Section 2.1.

          “Transition Services Agreement” shall have the meaning specified in Section 1.4(a)(xi).

          “U.C.C.” shall mean the Uniform Commercial Code, as amended, and any successor thereto.

          “UK Benefit Plans” shall have the meaning mentioned in section 2.12(j).

          “UK Companies Act” shall have the meaning in section 1.4(a)(ix).

          “UK Restructuring” shall mean the transactions described in clauses (b) and (c) of Section 4.11.

          “UK Shares” shall mean, with respect to a UK Transferred Company, the issued shares of such UK Transferred Company set forth on Schedule 2.2 of the Disclosure Letter.

          “UK Transferred Companies” shall mean Compugraphics and Rockwood Electronic.

          “Ultra Pure Chemicals Lease” shall mean the lease dated 10 January 2001 between (1) The Second Industrial Partnership Limited (2) Micro Images Technology Limited of

premises known as Units 16/7, 16/8.1, 16/8.2, 16/8.3, 16/9, 16/10 and 16/11 Amber Business Centre, Riddings, Derbyshire.

          “U.S. Business Employees” shall mean those Business Employees employed and/or engaged in the portion of the Business conducted in the United States.

          “U.S. Company Benefit Plans” shall have the meaning specified in Section 2.12(a).

          “U.S. Shares” shall mean, with respect to a U.S. Transferred Company, the shares of capital stock or other equity interests of such U.S. Transferred Company set forth on Schedule 2.2 of the Disclosure Letter.

          “U.S. Transferred Company” shall mean any Transferred Company that has as its place of incorporation or organization a place within the United States of America.

          “Voting Debt” shall have the meaning specified in Section 2.2.

          “Wafer Reclaim Area Lease” shall mean the lease dated 9 August 2000 between (1) The Second Industrial Partnership Limited (2) Micro Image Technology Limited of premises known as Unit 16.12 Amber Business Centre, Riddings, Derbyshire.

          “U.S. Benefit Plan” shall have the meaning specified in Section 2.12(a).

          “Wafer Reclaim Business” shall mean the business of producing, marketing, developing and selling semiconductor wafer refurbishment services, including without limitation the cleaning and restoring of silicon wafer surfaces.

          “Water Treatment Plant” shall have the meaning specified in Section 4.11(b)(ii).

EX-10.8

Exhibit 10.8

CONTRACT FOR THE SALE
OF CoCu Concentrate

N° CTA/507/KCO

Between :

CENTRAL TRADING OF AFRICA Ltd,
12 The Shrubberies, George Lane GB — London E18 1 BD, represented herein by Mr Axel WEND

Hereinafter referred to as CTA

And

OMG KOKKOLA CHEMICALS Oy, a company organized and existing under the laws of the Republic of Finland, represented by Mr. JORAN SOPO;

Hereinafter referred to as KCO

IT IS HEREBY AGREED AS FOLLOWS:

Table of contents:

ARTICLE 1 . DEFINITIONS
ARTICLE 2 : PURPOSE — DURATION and RECONDUCTION
ARTICLE 3 : CHARACTERISTICS & SPECIFICATIONS OF THE PRODUCTS TO BE DELIVERED
ARTICLE 4: PRICE
4.1. Reference and Quotational Period
4.2. Price Calculation
4.3. Penalty— Premium for the Cobalt
4.4. Invoicing
ARTICLE 5 : SAMPLING AND FINAL ANALYSIS
5.1. Weighing — Sampling
5.2. Analysis
ARTICLE 6 : APPOINTMENT
ARTICLE 7 : NOTICES
ARTICLE 8 : QUOTATIONAL PERIOD
ARTICLE 9 : FORCE MAJEURE
ARTICLE 10 : REFERENCE DOCUMENT
ARTICLE 11 : AMENDMENT
ARTICLE 12 : NON WAIVER
ARTICLE 13 : VALIDITY OF CLAUSES AND HEADINGS
ARTICLE 14 : INTERPRETATION
ARTICLE 15 : AMICABLE SETTLEMENT
ARTICLE 16 : JURISDICTION — LANGUAGE

ARTICLE 1 : DEFINITIONS

Wherever used in this contract unless the context otherwise requires:

CIF: means loaded on boat, packing big bags included, African port to Kokkola port Finland, transport and

1

insurance charges to CTA according to Incoterms 2000.

Business Day means a day which is not a Saturday, Sunday or a public holiday in Europe or Africa,
in such a way that is any period end a non Business Day, it will expire the first next Business Day

LMB: means London Metal Bulletin.

LME: means London Metal Exchange.

Dispatched Lot and Dispatched Sub-Lot: shall designate any lot of CoCu Concentrate, sent from the Democratic Republic of Congo (Katanga) for purchase by KCO. The lots will be labelled by CTA by affixing a code and number on each big bag.

Shipping means the quantity of CoCu Concentrate shipped in an African port. On its arrival in Kokkola it should be divided in Received Lots.

Received Lot : means the Cobaltiferous Product received by KCO in Kokkola, containing approximately **. Each Received Lot can be a sub-division of a Shipping.

Month means calendar Month.

Quotational period: shall mean the period taken into consideration for invoicing, as specified into article 4.1. hereafter.

CoCu Concentrate: shall designate the materials defined into article 3 hereafter.

Ton and metric Ton means 2204,62 pounds

WMT means wet metric ton.

DMT means dry metric ton.

USD means lawful currency of the United States of America

ARTICLE 2 : PURPOSE — DURATION and RECONDUCTION

The purpose of this contract is related to the delivery of CoCu Concentrate of ** of Cobalt contained divided into ** Monthly Shipping of ** of Cobalt contained.

This CoCu Concentrate shall be forwarded out of Katanga to be delivered CIF (Incoterms 2000) to Kokkola -Finland

This contract enter into force on October 1^st, 2007.

The parties will meet on or before ** latest for a possible renewal of the quantities for the **

ARTICLE 3: CHARACTERISTICS & SPECIFICATIONS OF THE PRODUCTS TO BE DELIVERED

Taking into account article 2, CTA agrees to sell and deliver and KCO agrees to purchase CoCu Concentrate having the following characteristics assayed on a dry basis:

**

These CoCu Concentrate shall be ex ** exclusively.

ARTICLE 4: PRICE

2

4.1. Reference and Quotation Period

4.1.1 For the Cobalt contained:

**

4.1.2. For the Copper contained:

**

4.2. Price calculation

4.2.1 For the Cobalt contained:

The payable amount for the Cobalt Contained is fixed as follows:

**

4.2.2 For the Copper contained

The amount payable for Copper contained Is determined according to following formula:

**

4.3. Penalty — Premium for the Cobalt

4.3.1 Penalty if the Cobalt contained is **

If Co-contained in a Received Lot is ** there will be a discount of the price defined here above.

The discount is **.

The discount is **.

4.3.2 Premium if the Cobalt contained is **

If Co-contained in Received Lot is ** there will be a premium of the price defined here above.

The premium is **.

The premium is **.

4.4. Invoicing / Payments

4.4.1. Provisional invoice / payment

A first provisional invoice will be issued as on loading African Port. It shall be drawn on the basis of the Producer’s analysis and calculated under the terms of article 4.1. and 4.2, but with reference to the **.

** of the provisional invoice will be payable within ** subjected to the transmission of the following documents:

- a Commercial Invoice,

- the table of loading

- an original set of Bill of Lading

3

4.4.2. Final Invoice

The final invoice shall be issued according to the terms of article 4.1 and 4.2 after final weights, prices and assays as specified in article 5, are known. The final amount shall be payable at sight, after deduction of the amount paid under the provisional invoice.

ARTICLE 5 : SAMPLING AND FINAL ANALYSIS

On the arrival of any Received Lot at Kokkola, it will be proceed as follows at Buyer’s cost:

5.1. Weighing — Sampling

The sampling operation will be carried as on arrival of the Products at the plant of destination by Finnish Cargo Control Ltd. (acting as independent controller) and latest 15 calendar days after arrival at the Port of Kokkola.

Any weighed and sampled lot will constitute a Received Lot with which all the provisions of this article and its continuations that it induces will apply.

For any sampled lot, each party shall receive from Finnish Cargo Control Ltd. two sealed samples set, one for its own analysis and the other one being hold for reserve in case of umpire analysis.

Finnish Cargo Control Ltd. will preserve too one sample set in case of umpire assay.

Each party shall have the right to assist or to be represented during the sampling operation.

Within 15 calendar days from sampling, Finnish Cargo Control Ltd. weighing report with determination of moisture and dry weigh shall be sent to the parties.

Such weights shall be final.

Finnish Cargo Control Ltd. shall include in its weighing and sampling report all the references related to the loading tables.

The samples for CTA will have to arrive to TEA Pty (South Africa) within 15 calendars days after the date of operations of sampling. GFI, agent for CTA, shall be inform of the sending by email.

5.2. Analysis

Assays shall be made independently by KCO and CTA and these results shall be exchanged on a way and date to be mutually agreed upon.

If the difference of assays for Co and Cu is not higher than ** the accepted contained shall be the arithmetic average of these results for the issue of the final invoice.

In the event of a greater difference and if one of the parties so requests, an umpire assay shall be made by an umpire laboratory to be mutually agreed who will be either:

Griffith, Britain
2 Perry Road, Witham
Essex, CM8 3TU
England, Great Britain

Or

Alfred H. Knight International Ltd
Eccleston Grange
Prescot Road
St. Helens

4

Merseyside WA10 3BQ — UK

· Should the umpire assay be the exact arithmetic mean of the exchanged assays then the umpire result shall be final; with such a case the cost of the umpire assay shall be borne equally by both parties.

· Should the umpire assay fall between the results of the two parties or coincide with either, the arithmetical mean of the umpire assay and the assay of the party that is the nearer one to the umpire shall be taken as the agreed assay. The cost of the umpire assay shall be borne by the party whose results of assay deviate the most with the umpire assay ones.

· Should the umpire assay fall outside the exchanged results, the assay of the party which is nearer the umpire shall be taken as agreed assay. The cost of this assay shall be borne by the other party.

Should one of the assay not be available within 45 calendar days after arrival, the parties will contact each other to determine the amount that KCO shall pay in addition to the provisional invoice. CTA will issue and send an additional invoice accordingly.

Should one of the assay not be available within 60 calendar days after arrival, the available assay will attest for the final invoicing.

The assay results, as defined here above will be final, compulsory and binding for each party and for all the purpose of this contract.

Based on the dry tonnage determined by the independent controller and the final assay results applicable to the Received Lot, CTA will issue the final invoice related to the Shipping. The invoice shall be transmitted to KCO via facsimile or electronic mail.

The original of the invoice shall be sent by express courier.

ARTICLE 6: APPOINTMENT

To facilitate the proper monitoring of the performance of this Contract, in particularly its transport and follow-up components, CENTRAL TRADING OF AFRICA Limited has appointed, irrevocably for this purpose, GEORGE FORREST INTERNATIONAL S.A. (GFI) a Belgian Company, Avenue Pasteur 9, 1300 Wavre, Belgium.

This mandate is recognised to be valid and not opposable by KCO.

This appointment shall remain in force until the expiration of this contract.

ARTICLE 7: NOTICES

All communications or notices, shall be delivered in person or sent by pre paid registered post, or by any other way under which the sender preserve a formal evidence of transmission and reception.

For CTA
CTA Ltd
c/o GFI SA
Avenue Pasteur, 9
1300 Wavre — Belgium
Email: wb.gfl@forrestgroup.com
Tel: + 32 10 23 96 80
Fax: + 32 10 23 96 89

For KCO

KCO
OMG Kokkola Chemicals Oy

5

Att : The President
P.O. Box 286
FIN-67101 Kokkola — Finland
Email : joran.sopo@eu.omgi.com
Telephone : +358 6 828 0111
Telecopy : +358 6 828 1009

Any change of adress will be taken into consideration only if it has been notified in wrtitting by a party to the other.

ARTICLE 8: DEFAULT PROCEDURE

Should any party remain under default of performing any of its obligations, or in the event of a default with the undertaken commitments, the injured party shall have the right to serve notice to the defaulting party by registered letter.

The defaulting party shall remedy the problem within a strict period of 15 calendar days as of the service of notice.

The very fact that the defaulting party falls to remedy the default within the 15-day period shall entitle the injured party to introduce the procedure provided in Article 15 infra.

If the default concerns the total or partial non-payment of an invoice drawn up according to this contract, CTA shall be entitled to cancel the contract, without prejudice to its rights for payment and indemnification.

ARTICLE 9: FORCE MAJEURE

All cases of force majeure shall be assessed in accordance with law. A case of force majeure is any act, situation, de facto or de jure, phenomenon or circumstance of an external, unforeseeable and irreversible nature beyond the reasonable control of the party that invokes it.

The party invoking a case of force majeure must notify the other within the ten days of becoming conscious thereof, by providing a detailed memorandum of the constituting facts. Such a case may be invoked only while it runs.

In the event of non-performance, by one of the parties, of its contractual obligations because of a case of force majeure, the period granted for the performance thereof shall be extended by the delay caused by said force majeure.

When the case of force majeure constitutes a definitive obstacle to the performance of this contract, either party may cancel it after consultation.

ARTICLE 10: REFERENCE DOCUMENT

This contract cancels and replaces all documents exchanged previously by and between the parties regarding the same purposes.

ARTICLE 11: AMENDMENT

Any amendment or addition to this contract shall come with effect only if done in writing and duly signed by both parties.

Should an amendment or a change have an effect on any other clause of this contract, the parties shall amend or change said other clauses to avoid any conflict between said clauses and the amendment.

ARTICLE 12: NO WAIVER

6

That fact that at any time whatsoever either party does not request for the performance of any provision of this contract, shall under no circumstances affect the right of that party to request this contract to be performed. The release by either party, at any time, from compliance with a provision of this contract by the other party shall at no time be misconstrued as a release by said party from all subsequent performance of the provision or a release from the performance of any other provision of this contract.

ARTICLE 13: VALIDITY OF THE CLAUSES AND HEADINGS

If a clause of this contract were to become null and void, such voidance shall not affect the other provisions or annexe of said contract. The parties shall endeavor, through negotiations conducted in good faith, to replace any provision of this contract that becomes null and void as well as any other provision thereby affected.

The headings of this contract are considered as references for convenience only and shall not affect or limit the meaning or interpretation of the provisions.

ARTICLE 14: INTERPRETATION

The parties recognize that the rights and obligations resulting out of this contract result from negotiations conducted between themselves in good faith; any possible ambiguity, gap or difficulty of interpretation shall be settled consequently not with regard to the stipulating or beneficiary party, but only with regard to the general and fair balance of the rights and obligations between the parties.

ARTICLE 15: AMICABLE SETTLEMENT

In the event of a dispute between the parties arising out of or related to this contract, the parties shall meet to find an amicable solution, prior to any court action and except in emergency cases. To this end, the parties (or their agents expressly designated for this purpose) shall meet within 15 days as of the date of a written notice served by the first party to take action to the other party, and shall consult and negotiate in good faith, taking their mutual interests into consideration, so as to reach a fair solution to the satisfaction of either parties.

Should the parties fail to a solution within a period of 30 days starting as of the date of notification, the courts upon the initiative of the first party to take action shall settle the dispute, complaint or problem.

Other than in cases of emergency, the foregoing reconciliation procedure shall be carried out beforehand, such that any court proceedings must be put in abeyance if the reconciliation procedure has not been carried out.

ARTICLE 16: COMPETENT COURTS — LANGUAGE

Any dispute of any kind between the parties not amicably settled shall be submitted to the courts of Brussels.

Belgian law only shall apply, but with no regard to those related to conflict of jurisdiction and to CISG.

In consequence whereof, the parties signed this contract drafted in French and in English, in triplicate, two originals for CTA and one for KCO, by their authorized representatives. The English version will be binding.

October 4^th 2007.

/s/	/s/ Jöran Sopo
CTA	KCO

7

Appendix 1 — to the contract CTA/507/KCO

**

** Confidential treatment has been requested with respect to certain information contained within this document. Confidential portions are omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.

8

EX-12

Exhibit 12

Computation of Ratio of Earnings to Fixed Charges
(all amounts except ratios are shown in millions)

	Year Ended December 31,
	2006		2005			2004		2003
Income (loss) from continuing operations before income taxes and minority interest	$	60.5	$	(17.8	)	$	62.2	$	(97.3	)
Less: Equity in earnings of 50%-or-less owned companies		—		—			—		—
Add: Fixed charges net of capitalized interest		40.1		42.5			41.0		36.8
Add: Amortization expense of previously capitalized interest		1.2		1.2			1.2		1.2
Total earnings		101.8		25.9			104.4		(59.3	)
Fixed charges		40.1		42.5			41.0		36.8
Ratio of earnings to fixed charges(b)		2.5		0.6			2.5		96.1	(a)
(a) — Earnings were inadequate to cover fixed charges by $96.1 million and $162.8 million in 2003 and 2002, respectively.
(b) — The ratio of earnings to fixed charges is not applicable for 2007 as a result of the redemption of the Notes on March 7, 2007.

EX-21

Exhibit 21

NAME OF SUBSIDIARY	JURISDICTION OF ORGANIZATION
OM Holdings, Inc.	Delaware
OMG Americas, Inc.	Ohio
OMG Asia-Pacific Co., Ltd.	Taiwan
OMG Belleville, Limited	Canada
OMG Europe GmbH	Germany
OMG Fidelity, Inc.	Delaware
OMG Finland Oy	Finland
OMG Harjavalta Chemicals Holding BV	Netherlands
OMG Japan, Inc.	Japan
OMG Jett, Inc.	Ohio
OMG Kokkola Chemicals Oy	Finland
OMG Chemicals Pte, Ltd.	Singapore
OMG Thailand Co., Ltd.	Thailand
OMG Vasset, S.A.	France
Harko CV	Netherlands
Groupement Pour Le Traitement Du teril De Lubumbashi (55%)	Jersey
Societe De Traitement du Terril De Lubumbashi (49%)	Democratic Republic of Congo
OMG U.K. Limited	United Kingdom
OMG Fidelity SDN.BHD	Malaysia
OMG Kokkola Chemicals Holding (Two) BV	Netherlands
Omg Electronic Chemicals Pte. Ltd	Singapore
OMG (Suzhou) Electronic Chemicals Co., Inc.	China
Compugraphics USA, Inc.	California
Electrochemicals Inc.	Minnesota
Cyantek Corporation	California
Key Professional Services Ltd.	Gibralter
Slag Processing Company of Lubumbashi (49%)	Democratic Republic of Congo
Borchers GmbH	Germany
Borchers France SAS	France
Rockwood Electronic Materials Limited	United Kingdom
Rockwood Electronic Chemicals (Suzhou) Co. Ltd.	China
Compugraphics International Limited	United Kingdom
Rockwood Electronic Materials France SAS	France
Rockwood Specialties (Singapore) Pte Limited	Singapore
Rockwood Electrochemicals Asia Limited	Taiwan

EX-23

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 26, 2008, 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, 2007:

Registration
Statement	Description	Filing Date
333-07531	OM Group, Inc. Non-Employee Directors’	July 3, 1996
	Equity Compensation Plan—Form S-8
	Registration Statement—250,000 Shares
333-47230	OM Group, Inc. 1998 Long-Term Incentive	October 3, 2000
	Compensation Plan—Form S-8 Registration
	Statement—2,000,000 Shares
333-65852	OM Group, Inc. 1998 Long-Term Incentive	July 25, 2001
	Compensation Plan—Form S-8 Registration
	Statement—2,000,000 Shares
333-141033	OM Group, Inc. 2002 Stock Incentive Plan	March 2, 2007
	and Inducement Stock Option Grant to
	Joseph M. Scaminace—Form S-8
	Registration Statement—1,488,934 Shares
333-145238	OM Group, Inc. 2007 Incentive Compensation	August 8, 2007
	Plan—Form S-8 Registration Statement —3,000,000 Shares

 
Cleveland, Ohio
February 26, 2008

EX-24

Exhibit 24

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, 2007, 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 17th day of January, 2008.

/s/ Richard W. Blackburn 

Richard W. Blackburn

Exhibit 24

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, 2007, 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 17th day of January, 2008.

/s/ David L. Pugh 

David L. Pugh

Exhibit 24

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, 2007, 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 4th day of February, 2008.

/s/ Gordon A. Ulsh 

Gordon A. Ulsh

Exhibit 24

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, 2007, 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 ___day of February, 2008.

/s/ Steven J. Demetriou 

Steven J. Demetriou

Exhibit 24

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, 2007, 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 21st day of January, 2008.

/s/ Katharine L. Plourde 

Katharine L. Plourde

Exhibit 24

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, 2007, 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, 2008.

/s/ William J. Reidy 

William J. Reidy

EX-31.1

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 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 28, 2008

/s/ Joseph M. Scaminace Joseph M. Scaminace

Chairman of the Board and

Chief Executive Office

EX-31.2

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 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 28, 2008

/s/ Kenneth Haber Kenneth Haber

Chief Financial Officer

EX-32

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, 2007 (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 28, 2008

/s/ Joseph M. Scaminace Joseph M. Scaminace

Chairman of the Board and

Chief Executive Officer

/s/ Kenneth Haber Kenneth Haber

Chief Financial Officer