Madison Thermoset Conference Madison, WI October 23 rd, 2008

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1 Madison Thermoset Conference Madison, WI October 23 rd, 2008

2 Environmental Mandates Impact on OEM s / Products RoHS / WEEE Aspects OEM Recognition of RoHS / WEEE Directives Applications Impacted Path Forward

3 Montreal Protocol (1987) Established requirements for worldwide phase-out of chlorofluorocarbons CFC production ceased in all developed nations in 1996 Amendment to Montreal Protocol in 1992 established phase-out schedule for hydrochlorofluorocarbons (HCFC s) carried out through Title VI of the Clean Air Act HCFC Phase-out Schedule No production or importing of HCFC-141b No production or importing of HCFC-142b & HCFC-22 except for use in refrigeration equipment manufactured before 1/1/ : all new refrigeration equipment produced will contain R-410a Refrigerant & HVAC Equipment Manufacturers Re-design Existing Products and Develop New Products Opportunity to Create Differentiation and Competitive Advantage

4 SEER (Seasonal Energy Efficiency Ratio) DOE through the Energy Policy & Conservation Act establishes minimum efficiency standards 2001 Amendment raised minimum efficiency standards for many consumer products, including central air conditioners from 10 SEER to 13 SEER All residential central air conditioning systems manufactured after 1/23/2006 must meet 13 SEER minimum efficiency Impact on HVAC Product Design / Product Offering OEM s enhanced existing designs or completely re-designed existing products Created new business opportunities for Tier 1 / 2 manufacturers

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6 CAFÉ Standards Diesel Engine Emission Requirements

7 Restriction of Hazardous Substances (RoHS) Enacted in 2003 by European Union (EU) Banned the use of four (4) heavy metals and brominated flame retardants in electrical and electronic equipment Applies to equipment which is dependent on electric current to operate, & equipment for the generation, transfer and measurement of such currents Waste Electrical and Electronic Equipment (WEEE) Applies to electrical and electronic equipment (EEE) with a voltage of up to 1000 volts for alternating current or up to 1500 volts for direct current Compliance with the WEEE Regulations is required if one generates, handles or disposes of waste that falls under one of ten categories of WEEE, including: WEEE Regulations apply to importers, producers, retailers and users of EEE

8 RoHS is often referred to as the lead-free directive, but it restricts the use of the following six substances: Lead Mercury Cadmium Hexavalent chromium (Cr 6+ ) Polybrominated biphenyls (PBB) Polybrominated diphenyl ether (PBDE)

9 EU's RoHS regulations in effect Any electronic product that is shipped into the European Union must be compliant with this directive by design or by exemption Directive does not require a formal certification process, but by shipping product into the EU, a company is self-certifying that: they are fully compliant with the directive they have validated the compliance status of supply-chain partners; and they have the documentation to validate compliance Symphony Consulting Inc.'s (Sunnyvale, CA) Bijan Dastmalchi: "All indications are that RoHS will be strictly enforced and that such enforcement may be based on market intelligence, random selection, products known to contain materials of high concern, and consumer products unlikely to be recycled, among others." "the EU could question any company for any reason at any time

10 Current California law only applies to computers and televisions Legislation is under development to increase the types of products affected AB 2202 is currently moving through the California legislature having recently been passed by the state Assembly and sent to the state Senate AB2202 will expand the definition of covered electronic devices to include all that are covered by the EU directive This measure currently has an implementation date of Jan. 1, 2011

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12 Globalization Consolidation of Procurement Function Government / Regulatory Directives RoHS WEEE

13 In 2006 Siemens incorporated a company wide directive to become entirely RoHS compliant in all products Eaton has voluntarily complied with all standards for the Restriction of Hazardous Substances (RoHS), instated to regulate the use of hazardous materials in electrical manufacturing As of July 1, 2006, all Rockwell Automation products that fall within the scope of the RoHS Directive will be fully compliant. Furthermore, Rockwell Automation's long term goal is to meet the RoHS material restrictions on products, even where compliance is not legally required.

14 Electrical - classified in three basic categories Power Generation Power Distribution Power Controls Large / Small Household Appliances IT and Telecommunications Equipment Consumer Equipment Lighting Equipment Electrical and Electronic Tools Toys, Leisure and Sports Equipment Medical Devices, Monitoring and Control Equipment Automatic Dispensers

15 Global Marketplace Cost prohibitive for a company to create one product for Europe and another product for another market Similar environmental legislation developing in China, Japan, etc. Recycling initiatives like WEEE will eventually become common place in many countries The market for non-compliant products will become narrower and narrower, so companies will have to reform or risk running out of markets for their products

16 If you haven t already done so, now is the time to make all our compounds and molded parts RoHS compliant Legislation is pending in California and 27 other states relative to RoHS compliant materials Global regulations are also pending in Korea, Japan, China and other developing nations Thermoset solutions exist both in BMC and SMC form which deliver critical UL 94-5V compliance without the use of halogenated flame retardants To expand applicability, a material that is not only halogen free but also possesses a UL 746C F1 recognition should be sought

17 Regulatory Environment is a Key Aspect in any Market Dynamic Early Recognition / Proactive Engagement Enables First Mover Opportunity Solid Supply Chain Relationships Provide the Vehicle for Technology Proliferation Alignment with OEM Product Attributes as Related to Regulatory Compliance and Market Level / End User Needs Provides Opportunity for Differentiation Alignment / Differentiation Create Value & Sustainable Margin Potential

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