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13. COMMITMENTS AND CONTINGENCIES

LEGAL MATTERS

Asbestos Litigation

ÌýÌýÌýÌýÌýÌýÌýÌýWe have been named as a "premises defendant" in a number of asbestos exposure cases, typically claims by nonemployees of exposure to asbestos while at a facility. These complaints generally do not provide specific information about the amount of damages being sought, the time period in which the alleged injuries occurred or the alleged exposures giving rise to the asserted liability. This information, which would be central to any estimate of probable loss, generally must be obtained through legal discovery.

ÌýÌýÌýÌýÌýÌýÌýÌýWhere a claimant's alleged exposure occurred prior to our ownership of the relevant "premises," the prior owners generally have contractually agreed to retain liability for, and to indemnify us against, asbestos exposure claims. This indemnification is not subject to any time or dollar amount limitations. Upon service of a complaint in one of these cases, we tender it to the prior owner. The prior owner accepts responsibility for the conduct of the defense of the cases and payment of any amounts due to the claimants. In our twenty-year experience with tendering these cases, we have not made any payment with respect to any tendered asbestos cases. We believe that the prior owners have the intention and ability to continue to honor their indemnity obligations, although we cannot assure you that they will continue to do so or that we will not be liable for these cases if they do not.

ÌýÌýÌýÌýÌýÌýÌýÌýThe following table presents for the periods indicated certain information about cases for which service has been received that we have tendered to the indemnifying party, all of which have been accepted by the indemnifying party.

ÌýÌýÌýÌýÌýÌýÌýÌýWe have never made any payments with respect to these cases. As of MarchÌý31, 2014, we had an accrued liability of approximately $10Ìýmillion relating to these cases and a corresponding receivable of approximately $10Ìýmillion relating to our indemnity protection with respect to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability associated with these cases would not be material to our financial condition, results of operations or liquidity; accordingly, we are not able to estimate the amount or range of loss in excess of our accruals. Additional asbestos exposure claims may be made against us in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses associated with such claims, we have made no accruals with respect to unasserted asbestos exposure claims as of MarchÌý31, 2014.

ÌýÌýÌýÌýÌýÌýÌýÌýCertain cases in which we are a premises defendant are not subject to indemnification by prior owners or operators. However, we may be entitled to insurance or other recoveries in some of these cases. The following table presents for the periods indicated certain information about these cases. Cases include all cases for which service has been received by us. Certain prior cases that were filed in error against us have been dismissed.

ÌýÌýÌýÌýÌýÌýÌýÌýWe paid gross settlement costs for asbestos exposure cases that are not subject to indemnification of nil during each of the three months ended MarchÌý31, 2014 and 2013. As of MarchÌý31, 2014, we had an accrual of $425,000 relating to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability associated with these cases would not be material to our financial condition, results of operations or liquidity; accordingly, we are not able to estimate the amount or range of loss in excess of our accruals. Additional asbestos exposure claims may be made against us in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses associated with such claims, we have made no accruals with respect to unasserted asbestos exposure claims as of MarchÌý31, 2014.

Antitrust Matters

ÌýÌýÌýÌýÌýÌýÌýÌýWe have been named as a defendant in consolidated class action civil antitrust suits filed on FebruaryÌý9 and 12, 2010 in the U.S. District Court for the District of Maryland alleging that we and our co-defendants and other asserted co-conspirators conspired to fix prices of titanium dioxide sold in the U.S. between at least MarchÌý1, 2002 and the present. The other defendants named in this matter are DuPont, Kronos and Cristal (formerly Millennium). On AugustÌý28, 2012, the court certified a class consisting of all U.S. customers who purchased titanium dioxide directly from the defendants (the "Direct Purchasers") since FebruaryÌý1, 2003. We and all other defendants settled the Direct Purchasers litigation and the court approved the settlement on DecemberÌý13, 2013. We have paid the settlement in an amount immaterial to our condensed consolidated financial statements (unaudited).

ÌýÌýÌýÌýÌýÌýÌýÌýOn NovemberÌý22, 2013, we were named as a defendant in a civil antitrust suit filed in the U.S. District Court for the District of Minnesota brought by a Direct Purchaser who opted out of the Direct Purchasers class litigation (the "Opt Out Litigation"). On AprilÌý21, 2014, the court severed the claims against us from the other defendants and ordered our case transferred to the U.S. District Court for the Southern District of Texas. It is possible that additional claims will be filed by other Direct Purchasers who opted out of the class litigation.

ÌýÌýÌýÌýÌýÌýÌýÌýWe have also been named as a defendant in a class action civil antitrust suit filed on MarchÌý15, 2013 in the U.S. District Court for the Northern District of California by the purchasers of products made from titanium dioxide (the "Indirect Purchasers") making essentially the same allegations as the Direct Purchasers. The Opt-Out Litigation and Indirect Purchasers plaintiffs seek to recover injunctive relief, treble damages or the maximum damages allowed by state law, costs of suit and attorneys' fees. We are not aware of any illegal conduct by us or any of our employees. Nevertheless, we have incurred costs relating to these claims and could incur additional costs in amounts which in the aggregate could be material to us. Because of the overall complexity of these cases, we are unable to reasonably estimate any possible loss or range of loss associated with these claims and we have made no accruals with respect to these claims.

Product Delivery Claim

ÌýÌýÌýÌýÌýÌýÌýÌýWe have been notified by a customer of potential claims related to our allegedly delivering a different product than it had ordered. Our customer claims that it was unaware that the different product had been delivered until after it had been used to manufacture materials which were subsequently sold. Originally, the customer stated that it had been notified of claims of up to an aggregate of â‚�153Ìýmillion (approximately $211Ìýmillion) relating to this matter and believed that we may be responsible for all or a portion of these potential claims. Our customer has since resolved some of these claims and the aggregate amount of the current claims is now approximately â‚�113Ìýmillion (approximately $156Ìýmillion). Based on the facts currently available to us, we believe that we are insured for any liability we may ultimately have in excess of $10Ìýmillion. However, no assurance can be given regarding our ultimate liability or costs. We believe our range of possible loss in this matter is between â‚�0 and â‚�113Ìýmillion, and we have made no accrual with respect to this matter.

Indemnification Matter

ÌýÌýÌýÌýÌýÌýÌýÌýOn JulyÌý3, 2012, Deutsche Bank SecuritiesÌýInc. and Credit Suisse Securities (USA)ÌýLLC, or the banks, demanded that we indemnify them for claims brought by certain MatlinPatterson entities that were formerly our shareholders, the plaintiffs, in litigation filed JuneÌý19, 2012 in the 9thÌýDistrict Court in Montgomery County, Texas. The banks assert that they are entitled to indemnification pursuant to the Agreement of Compromise and Settlement between the banks and our Company, dated JuneÌý22, 2009, wherein the banks and our Company settled claims that we brought relating to the failed merger with Hexion. The plaintiffs claim that the banks knowingly made materially false representations about the nature of the financing for the acquisition of our Company by Hexion and that they suffered substantial losses to their 19Ìýmillion shares of our common stock as a result of the banks' misrepresentations. The plaintiffs are asserting statutory fraud, common law fraud and aiding and abetting statutory fraud and are seeking actual damages, exemplary damages, costs and attorney's fees, pre-judgment and post- judgment interest. We denied the banks' indemnification demand. On DecemberÌý21, 2012, the court dismissed the plaintiffs' claims. The plaintiffs have appealed to the Ninth Court of Appeals at Beaumont, Texas.

Other Proceedings

ÌýÌýÌýÌýÌýÌýÌýÌýWe are a party to various other proceedings instituted by private plaintiffs, governmental authorities and others arising under provisions of applicable laws, including various environmental, products liability and other laws. Except as otherwise disclosed in this report, we do not believe that the outcome of any of these matters will have a material effect on our financial condition, results of operations or liquidity.

18. COMMITMENTS AND CONTINGENCIES

PURCHASE COMMITMENTS

ÌýÌýÌýÌýÌýÌýÌýÌýWe have various purchase commitments extending through 2029 for materials, supplies and services entered into in the ordinary course of business. Included in the purchase commitments table below are contracts which require minimum volume purchases that extend beyond one year or are renewable annually and have been renewed for 2014. Certain contracts allow for changes in minimum required purchase volumes in the event of a temporary or permanent shutdown of a facility. To the extent the contract requires a minimum notice period, such notice period has been included in the table below. The contractual purchase prices for substantially all of these contracts are variable based upon market prices, subject to annual negotiations. We have estimated our contractual obligations by using the terms of our current pricing for each contract. We also have a limited number of contracts which require a minimum payment even if no volume is purchased. We believe that all of our purchase obligations will be utilized in our normal operations. For the years ended DecemberÌý31, 2013, 2012 and 2011, we made minimum payments of $7Ìýmillion, nil and nil, respectively, under such take or pay contracts without taking the product.

ÌýÌýÌýÌýÌýÌýÌýÌýTotal purchase commitments as of DecemberÌý31, 2013 are as follows (dollars in millions):

OPERATING LEASES

ÌýÌýÌýÌýÌýÌýÌýÌýWe lease certain railcars, aircraft, equipment and facilities under long-term lease agreements. The total expense recorded under operating lease agreements in our consolidated statements of operations is approximately $80Ìýmillion, $79Ìýmillion and $83Ìýmillion for 2013, 2012 and 2011, respectively, net of sublease rentals of approximately $4Ìýmillion for each of 2013, 2012 and 2011.

ÌýÌýÌýÌýÌýÌýÌýÌýFuture minimum lease payments under operating leases as of DecemberÌý31, 2013 are as follows (dollars in millions):

ÌýÌýÌýÌýÌýÌýÌýÌýFuture minimum lease payments have not been reduced by minimum sublease rentals of $19Ìýmillion due in the future under noncancelable subleases.

LEGAL MATTERS

Asbestos Litigation

ÌýÌýÌýÌýÌýÌýÌýÌýWe have been named as a "premises defendant" in a number of asbestos exposure cases, typically claims by nonemployees of exposure to asbestos while at a facility. These complaints generally do not provide specific information about the amount of damages being sought, the time period in which the alleged injuries occurred or the alleged exposures giving rise to the asserted liability. This information, which would be central to any estimate of probable loss, generally must be obtained through legal discovery.

ÌýÌýÌýÌýÌýÌýÌýÌýWhere a claimant's alleged exposure occurred prior to our ownership of the relevant "premises," the prior owners generally have contractually agreed to retain liability for, and to indemnify us against, asbestos exposure claims. This indemnification is not subject to any time or dollar amount limitations. Upon service of a complaint in one of these cases, we tender it to the prior owner. The prior owner accepts responsibility for the conduct of the defense of the cases and payment of any amounts due to the claimants. In our nineteen- year experience with tendering these cases, we have not made any payment with respect to any tendered asbestos cases. We believe that the prior owners have the intention and ability to continue to honor their indemnity obligations, although we cannot assure you that they will continue to do so or that we will not be liable for these cases if they do not.

ÌýÌýÌýÌýÌýÌýÌýÌýThe following table presents for the periods indicated certain information about cases for which service has been received that we have tendered to the indemnifying party, all of which have been accepted by the indemnifying party.

ÌýÌýÌýÌýÌýÌýÌýÌýWe have never made any payments with respect to these cases. As of DecemberÌý31, 2013, we had an accrued liability of approximately $10Ìýmillion relating to these cases and a corresponding receivable of approximately $10Ìýmillion relating to our indemnity protection with respect to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability associated with these cases would not be material to our financial condition, results of operations or liquidity; accordingly, we are not able to estimate the amount or range of loss in excess of our accruals. Additional asbestos exposure claims may be made against us in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses associated with such claims, we have made no accruals with respect to unasserted asbestos exposure claims as of DecemberÌý31, 2013.

ÌýÌýÌýÌýÌýÌýÌýÌýCertain cases in which we are a premises defendant are not subject to indemnification by prior owners or operators. However, we may be entitled to insurance or other recoveries in some of these cases. The following table presents for the periods indicated certain information about these cases. Cases include all cases for which service has been received by us. Certain prior cases that were filed in error against us have been dismissed.

ÌýÌýÌýÌýÌýÌýÌýÌýWe paid gross settlement costs for asbestos exposure cases that are not subject to indemnification of $45,000, $559,000 and $584,000 during the years ended DecemberÌý31, 2013, 2012 and 2011, respectively. As of DecemberÌý31, 2013, we had an accrual of $356,000 relating to these cases. We cannot assure you that our liability will not exceed our accruals or that our liability associated with these cases would not be material to our financial condition, results of operations or liquidity; accordingly, we are not able to estimate the amount or range of loss in excess of our accruals. Additional asbestos exposure claims may be made against us in the future, and such claims could be material. However, because we are not able to estimate the amount or range of losses associated with such claims, we have made no accruals with respect to unasserted asbestos exposure claims as of DecemberÌý31, 2013.

Antitrust Matters

ÌýÌýÌýÌýÌýÌýÌýÌýWe have been named as a defendant in consolidated class action civil antitrust suits filed on FebruaryÌý9 and 12, 2010 in the U.S. District Court for the District of Maryland alleging that we and our co-defendants and other asserted co-conspirators conspired to fix prices of titanium dioxide sold in the U.S. between at least MarchÌý1, 2002 and the present. The other defendants named in this matter are DuPont, Kronos and Cristal (formerly Millennium). On AugustÌý28, 2012, the court certified a class consisting of all U.S. customers who purchased titanium dioxide directly from the Direct Purchasers since FebruaryÌý1, 2003. We and all other defendants settled the Direct Purchasers litigation and the court approved the settlement on DecemberÌý13, 2013. We have paid the settlement in an amount immaterial to our consolidated financial statements.

ÌýÌýÌýÌýÌýÌýÌýÌýOn NovemberÌý22, 2013, we were named as a defendant in a civil antitrust suit filed in the U.S. District Court for the District of Minnesota brought by a Direct Purchaser who opted out of the Direct Purchasers class litigation. It is possible that additional claims will be filed by other Direct Purchasers who opted out of the class litigation.

ÌýÌýÌýÌýÌýÌýÌýÌýWe have also been named as a defendant in a class action civil antitrust suit filed on MarchÌý15, 2013 in the U.S. District Court for the Northern District of California by the Indirect Purchasers making essentially the same allegations as the Direct Purchasers. The Opt-Out Litigation and Indirect Purchasers plaintiffs seek to recover injunctive relief, treble damages or the maximum damages allowed by state law, costs of suit and attorneys' fees. We are not aware of any illegal conduct by us or any of our employees. Nevertheless, we have incurred costs relating to these claims and could incur additional costs in amounts which in the aggregate could be material to us. Because of the overall complexity of these cases, we are unable to reasonably estimate any possible loss or range of loss associated with these claims and we have made no accruals with respect to these claims.

Product Delivery Claim

ÌýÌýÌýÌýÌýÌýÌýÌýWe have been notified by a customer of potential claims related to our allegedly delivering a different product than it had ordered. Our customer claims that it was unaware that the different product had been delivered until after it had been used to manufacture materials which were subsequently sold. Originally, the customer stated that it had been notified of claims of up to an aggregate of â‚�153Ìýmillion (approximately $211Ìýmillion) relating to this matter and believed that we may be responsible for all or a portion of these potential claims. Our customer has since resolved some of these claims and the aggregate amount of the current claims is now approximately â‚�113Ìýmillion (approximately $156Ìýmillion). Based on the facts currently available to us, we believe that we are insured for any liability we may ultimately have in excess of $10Ìýmillion. However, no assurance can be given regarding our ultimate liability or costs. We believe our range of possible loss in this matter is between â‚�0 and â‚�113Ìýmillion, and we have made no accrual with respect to this matter.

Indemnification Matter

ÌýÌýÌýÌýÌýÌýÌýÌýOn JulyÌý3, 2012, Deutsche Bank SecuritiesÌýInc. and Credit Suisse Securities (USA)ÌýLLC, or the banks, demanded that we indemnify them for claims brought by certain MatlinPatterson entities that were formerly our shareholders, the plaintiffs, in litigation filed JuneÌý19, 2012 in the 9thÌýDistrict Court in Montgomery County, Texas. The banks assert that they are entitled to indemnification pursuant to the Agreement of Compromise and Settlement between the banks and our Company, dated JuneÌý22, 2009, wherein the banks and our Company settled claims that we brought relating to the failed merger with Hexion. The plaintiffs claim that the banks knowingly made materially false representations about the nature of the financing for the acquisition of our Company by Hexion and that they suffered substantial losses to their 19Ìýmillion shares of our common stock as a result of the banks' misrepresentations. The plaintiffs are asserting statutory fraud, common law fraud and aiding and abetting statutory fraud and are seeking actual damages, exemplary damages, costs and attorney's fees, pre-judgment and post- judgment interest. We denied the banks' indemnification demand. On DecemberÌý21, 2012, the court dismissed the plaintiffs' claims. The plaintiffs have appealed to the Ninth Court of Appeals at Beaumont, Texas.

Other Proceedings

ÌýÌýÌýÌýÌýÌýÌýÌýWe are a party to various other proceedings instituted by private plaintiffs, governmental authorities and others arising under provisions of applicable laws, including various environmental, products liability and other laws. Except as otherwise disclosed in this report, we do not believe that the outcome of any of these matters will have a material effect on our financial condition, results of operations or liquidity.