10-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 10-K

______________________

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2005

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the transition period from to

Commission file number: 1-13888

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GRAFTECH INTERNATIONAL LTD.

(Exact name of registrant as specified in its charter)

Delaware	06-1385548
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

______________________

12900 Snow Road
Parma, Ohio	44130
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (216) 676-2000

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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 $.01 per share Preferred Share Purchase Rights	New York Stock Exchange 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 No

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 No

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 No

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 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. Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer Accelerated Filer Non-Accelerated Filer

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

The aggregate market value of our outstanding common stock held by non-affiliates, computed by reference to the closing price of our common stock on June 30, 2005, was approximately $361 million. On January 31, 2006, 97,879,203 shares of our common stock were outstanding.

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DOCUMENTS INCORPORATED BY REFERENCE

The information required under Part III is incorporated by reference from the GrafTech International Ltd. Proxy Statement for the Annual Meeting of Stockholders to be held on May 24, 2006, which will be filed on or about April 11, 2006.

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Table of Contents

PART  I	4
Preliminary Notes	4
Item 1.  Business	8
Introduction	8
Our Segments	10
Synthetic Graphite Segment	10
Other Segment	14
Business Strategies	18
Production Planning	21
Manufacturing	22
Distribution	25
Sales and Customer Service	25
Technology	27
Competition	29
Environmental Matters	31
Insurance	33
Employees	33
Item  1A.  Risk Factors	33
Risks Relating to Us	34
Risks Relating to Our Securities and Pledges of Our Assets	43
Forward Looking Statements	53
Item  1B.  Unresolved Staff Comments	55
Item  2.  Properties	56
Item  3.  Legal Proceedings	57
Item  4.  Submission of Matters to a Vote of Security Holders	57
PART  II	58
Item  5.  Market for Registrant's Common Equity and Related Stockholder Matters	58
Market Information	58
Dividend Policies and Restrictions	58
Fourth Quarter Unregistered Stock Issuance	59

Item  6.  Selected Financial Data	60
Item  7.  Management's Discussion and Analysis of Financial Condition and                           Results of Operations	64
General	64
Global Economic Conditions and Outlook	64
Financing Transactions	67
Antitrust Litigation Against Us	67
Other Proceedings Against Us	68
Product Warranties	68
Realizability of Net Deferred Tax Assets and Valuation Allowances	68
Customer Base	69
Results of Operations	69
Effects of Inflation	80
Currency Translation and Transactions	81
Effects of Changes in Currency Exchange Rates	81
Liquidity and Capital Resources	83
Costs Relating to Protection of the Environment	90
Critical Accounting Policies	90
Recent Accounting Pronouncements	92
Description of Our Financing Structure	93
Item   7A.  Quantitative and Qualitative Disclosures About Market Risk	93
Item   8.  Financial Statements and Supplementary Data	97
Management’s Report on Internal Control Over Financial Reporting	98
Report of Independent Registered Public Accounting Firm	99
CONSOLIDATED BALANCE SHEETS	102
CONSOLIDATED STATEMENTS OF OPERATIONS	103
CONSOLIDATED STATEMENTS OF CASH FLOWS	104
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)	105
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT	106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	107
(1)  Discussion of Business and Structure	107
(2)  Summary of Significant Accounting Policies	107
(3)  New Accounting Standards	115

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(4)  Segment Reporting	118
(5)  Long-Term Debt and Liquidity	120
(6)  Financial Instruments	125
(7)  Interest Expense	128
(8)  Other (Income) Expense, Net	129
(9)  Supplementary Balance Sheet Detail	130
(10)  Leases and Other Long Term Obligations	131
(11)  Benefit Plans	132
(12)  Restructuring and Impairment Charges	139
(13)  Management Compensation and Incentive Plans	142
(14)  Contingencies	145
(15)  Income Taxes	146
(16)  Earnings Per Share	150
(17)  Stockholder Rights Plan	150
(18)  Financial Information About the Issuer, the Guarantors and the                                    Subsidiaries Whose Securities Secure the Senior Notes, the                                    Debentures and Related Guarantees	151
(19)  Discontinued Operations	161
(20)  Subsequent Events	162
Item  9.  Changes in and Disagreements with Accountants on Accounting                          and Financial Disclosure	163
Item  9A.  Controls and Procedures	163
Item  9B.  Other Information	164
PART  III	165
Items 10 to 14 (inclusive)	165
Executive Officers and Directors	165
Executive Officers	165
Directors	166
NYSE Certification	168
PART  IV	168
Item 15.  Exhibits and Financial Statement Schedules	168
EXHIBIT INDEX	177

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PART I

Preliminary Notes

Important Terms. We use the following terms to identify various matters. These terms help to simplify the presentation of information in this Report.

“AET” refers to Advanced Energy Technology Inc. only. AET is our 97.5% owned subsidiary engaged in the development, manufacture and sale of natural graphite products. Prior to January 1, 2003, AET was named Graftech Inc.

“Carbone Savoie” refers to Carbone Savoie S.A.S. and its subsidiaries. Carbone Savoie is our 70% owned subsidiary engaged in the development, manufacture and sale of cathodes.

“Common stock” means GTI common stock, par value $.01 per share.

“Credit Agreement” refers to the credit agreement providing for our senior secured credit facilities, as amended or amended and restated at the relevant time. “Revolving Facility” refers to the revolving credit facility provided under the Credit Agreement, at the relevant time. Prior to January 22, 2004, the Credit Agreement provided for a tranche B term loan facility (the “Tranche B Loans” and, together with the Revolving Facility, the “Senior Facilities”), which was repaid and terminated on that date. On February 8, 2005, the Credit Agreement was amended and restated to, among other things, extend the maturity of the Revolving Facility, eliminate references to the Tranche B Loans and add provisions to permit establishment of additional credit facilities thereunder.

“Debt Securities” means our 10.25% senior notes due 2012 (the “Senior Notes”) and our 1 5/8% convertible senior debentures due 2024 (the “Debentures”) .The Senior Notes were issued under an Indenture dated February 15, 2002 (as supplemented, the “Senior Note Indenture”). The Debentures were issued under an Indenture dated January 22, 2004 (as supplemented, the “Debenture Indenture”).

“GrafTech Finance” refers to GrafTech Finance Inc. only. GrafTech Finance is a direct wholly-owned, special purpose finance subsidiary of GTI and the borrower under the Revolving Facility. GrafTech Finance is the issuer of the Senior Notes and a guarantor of the Debentures.

“GrafTech Global” refers to GrafTech Global Enterprises Inc. only. GrafTech Global is a direct wholly-owned subsidiary of GTI and the direct or indirect holding company for all of our operating subsidiaries. GrafTech Global is a guarantor of the Senior Notes, the Debentures and the Revolving Facility.

“GTI” refers to GrafTech International Ltd. only. GTI is our public parent company and the issuer of the Debentures and our publicly traded common stock and the related preferred share purchase rights registered under the Exchange Act and listed on the NYSE. GTI is a guarantor of the Senior Notes and the Revolving Facility.

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“Subsidiaries” refers to those companies that, at the relevant time, are or were majority owned or wholly-owned directly or indirectly by GTI or its predecessors to the extent that those predecessors’ activities related to the graphite and carbon business. All of GTI’s subsidiaries have been wholly-owned (with de minimis exceptions in the case of certain foreign subsidiaries) since January 1, 2000 or earlier, except for:

• Carbone Savoie, which has been and is 70% owned; and

• AET, which was 100% owned until it became 97.5% owned in June 2001.

“UCAR Carbon” refers to UCAR Carbon Company Inc. only. UCAR Carbon is our wholly-owned subsidiary through which we conduct most of our U.S. operations. UCAR Carbon is a guarantor of the Senior Notes, the Debentures and the Revolving Facility.

“We,” “us” or “our” refers to GTI and its subsidiaries collectively or, if the context so requires, GTI, GrafTech Global or GrafTech Finance, individually.

Presentation of Financial, Market and Legal Data. We present our financial information on a consolidated basis. As a result, the financial information for Carbone Savoie and AET is consolidated on each line of the Consolidated Financial Statements and the equity of the other owners in those subsidiaries is reflected on the lines entitled “minority stockholders’ equity in consolidated entities” and “minority stockholders’ share of income.” We use the equity method to account for 50% or less owned interests.

References to cost in the context of our low cost advantages and strategies do not include the impact of special charges, expenses or credits, such as those related to investigations, lawsuits, claims, restructurings or impairments, or the impact of changes in accounting principles.

Unless otherwise noted, when we refer to “dollars”, we mean U.S. dollars. Unless otherwise noted, all dollars are presented in thousands.

References to spot prices for graphite electrodes mean prices under individual purchase orders (not part of an annual or other extended purchase arrangement) for near term delivery for standard size graphite electrodes used in large electric arc steel melting furnaces (sometimes called “melters” or “melter applications”) as distinct from, for example, a ladle furnace or a furnace producing non-ferrous metals.

Neither any statement made in this Report nor any charge taken by us relating to any legal proceedings constitutes an admission as to any wrongdoing.

Unless otherwise noted, market and market share data in this Report are our own estimates. Market data relating to the steel, aluminum, electronics, semiconductor, thermal management, transportation, petrochemical and other metals industries, our general expectations concerning such industries and our market position and market share within such industries, both domestically and internationally, are derived from trade publications relating to those industries and other industry sources as well as assumptions made by us, based on such data and our knowledge of such industries. Market data relating to the fuel cell power generation industry,

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our general expectations concerning such industry and our market position and market share within such industry, both domestically and internationally, are derived from publications by securities analysts relating to Ballard Power Systems Inc., other industry sources and public filings, press releases and other public documents of Ballard Power Systems as well as assumptions made by us, based on such data and our knowledge of the industry. Market and market share data relating to the graphite and carbon industry as well as cost information relating to our competitors, our general expectations concerning such industry and our market position and market share within such industry, both domestically and internationally, are derived from the sources described above and public filings, press releases and other public documents of our competitors as well as assumptions made by us, based on such data and our knowledge of such industry. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Risk Factors-Risks Relating to Us” and “Risk Factors - Forward Looking Statements” in this Report. We cannot guarantee the accuracy or completeness of this market and market share data and have not independently verified it. None of the sources mentioned above has consented to the disclosure or use of data in this Report.

Unless otherwise noted, references to “market shares” are based on sales volumes for the relevant year and references to “natural graphite products” do not include mined natural graphite flake. References to graphite electrode market share exclude the demand for domestic non-melter graphite electrode applications in China.

Unless otherwise noted, references to “capacity utilization rates” for the graphite electrode industry refer to actual or effective annual manufacturing capacity as opposed to theoretical or rated annual manufacturing capacity and references to maximum or virtually maximum operating levels or utilization rates mean capacity utilization rates in excess of 95%. In determining capacity utilization rates, we use the available capacity estimated as of the end of the relevant year, and we exclude the domestic graphite electrode manufacturing capacity and demand for non-melter applications in China.

Unless otherwise noted, references to productivity mean annual graphite electrode production volume (in metric tons) per graphite electrode employee or fixed cost per unit of output.

Unless otherwise noted, references to constraint utilization rates for GTI’s synthetic graphite and natural graphite facilities refer to actual annual hours of operation divided by actual annual hours available for operation. We believe that constraint time and constraint utilization are meaningful measures of our operating capability. We strive to maximize revenue per constraint hour to maximize our profitability.

Unless otherwise noted, references to throughput refer to the amount of cash generated per day at the defined constraint.

The GRAFTECH logo, GRAFCELL®, eGRAF®, GRAFOIL® and SpreaderShield™ are our trademarks and trade names used in this report. This Report also contains trademarks and trade names belonging to other parties.

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We make available, free of charge, on or through our web site, copies of our proxy statements, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. We maintain our website at http://www.graftech.com. The information contained on our web site is not part of this Report.

We have a code of ethics (which we call our Code of Conduct and Ethics) that applies to our principal executive officer, principal financial officer, principal accounting officers and controller, and persons performing similar functions, as well as our other employees, and which is intended to comply, at a minimum, with the listing standards of the NYSE as well as the Sarbanes-Oxley Act of 2002 and the SEC rules adopted thereunder. A copy of our Code of Conduct and Ethics is available on our web site at http://www.graftech.com/GrafTech/About+Our+Company/Corporate+Policies/Code+of+Conduct_Ethics.htm

We also have corporate governance guidelines (which we call the Charter of the Board of Directors) which is available on our website at http://www.graftech.com/GrafTech/About+Our+Company/Corporate+Governance/Corporate+Governance+Guidelines.htm as required by the NYSE. You may request a copy of the Charter of the Board of Directors, at no cost, by oral or written request to: GrafTech International Ltd., 12900 Snow Road, Parma, Ohio, 44130, Attention: Michael A. Carr, Manager of Investor Relations, Telephone (216) 676-2525.

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Item 1. Business

(Unless otherwise noted, all dollars are presented in thousands)

Introduction

Our vision is to enable customer leadership, better and faster than our competition, through the creation, innovation and manufacture of graphite and carbon material science-based solutions. We have over 100 years of experience in the research and development of graphite and carbon-based solutions and our intellectual property portfolio is extensive. Our business was founded in 1886 by the National Carbon Company.

We are one of the world’s largest manufacturers of the broadest range of high quality graphite electrodes, products essential to the production of electric arc furnace (“EAF”) steel and various other ferrous and nonferrous metals.We are the largest manufacturer of high quality natural graphite products enabling thermal management solutions for the electronics industry and fuel cell solutions for the transportation and power generation industries. We are one of the world’s largest manufacturers and providers of other synthetic graphite and carbon products, as well as related technical services, including cathodes for the aluminum industry and other advanced graphite and carbon materials for the semiconductor, transportation, petrochemical and other metals markets. We service customers in about 80 countries, including industry leaders such as Arcelor S.A., Bao Steel, Gerdau S.A. and Mittal Steel in steel, Alcoa and Alcan in aluminum, Dell, Samsung and Sony in electronics, MEMC Electronic Materials in semiconductors and Ballard Power Systems in fuel cells.

We currently manufacture our products in 13 state-of-the-art manufacturing facilities strategically located on four continents and have more diverse locations than the facilities of any of our competitors. We believe our unique global manufacturing network cannot be replicated by any of our competitors due to the capital investment, technology and process know-how required to do so. We believe our network has the largest manufacturing capacity, has one of the lowest manufacturing cost structures of all of our major competitors and delivers the highest-level quality products. We currently have the operating capability, depending on product demand and mix, to manufacture approximately 230,000 metric tons of graphite electrodes annually from our existing assets. We believe that our unique global manufacturing network provides us with significant competitive advantages in product quality, proximity to customers, timely and reliable product delivery, and product costs. Given our global network, we are well positioned to serve the growing number of consolidated, global, multi-plant steel and aluminum customers as well as certain smaller, regional customers and segments.

We operate the premier research, development and testing facilities in the graphite and carbon industry, and we believe we are the industry leader in graphite and carbon material science and high temperature processing know-how. We believe our technological capabilities for developing products with superior thermal, electrical and physical characteristics provide us with a competitive advantage. These capabilities have enabled us to accelerate development and commercialization of our technologies to exploit markets with high growth potential, including products for electronic thermal management and fuel cell applications.

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Products and Reportable Segments. We have six major product categories: graphite electrodes, cathodes, carbon electrodes, carbon refractories, advanced graphite materials and natural graphite, the results of which are reported in the following segments: synthetic graphite, which consists of graphite electrodes, cathodes and advanced graphite materials and related services; and other, which consists of natural graphite, carbon electrodes and refractories and related services. The information required by Item 1 with respect to financial information regarding our reportable segments and geographic areasis set forth under “Segment Reporting” in Note 4to the Consolidated Financial Statementsand is incorporated herein by reference.

Synthetic Graphite. Our synthetic graphite segment manufactures and delivers high quality graphite electrodes, cathodes and advanced graphite materials as well as related services. Electrodes and cathodes are key components of the conductive power systems used to produce steel, aluminum and other non-ferrous metals. Advanced graphite materials include primary and specialty products for transportation, semiconductor and other markets.

We are one of the world’s largest manufacturers of the broadest range of high quality graphite electrodes. Approximately 70% of our graphite electrodes sold are consumed in the EAF steel melting process, the steel making technology used by all “mini-mills,” typically at a rate of one graphite electrode every eight to ten operating hours. We believe that mini-mills constitute the higher long-term growth sector of the steel industry and that there is currently no commercially viable substitute for graphite electrodes in EAF steel making. Therefore, graphite electrodes are essential to EAF steel production. The remaining 30% of our graphite electrodes sold are primarily used in various other ferrous and non-ferrous melting applications, including steel formulation (that is, ladle furnace operations for both EAF and blast oxygen furnace steel production), titanium dioxide production and chemical processing.

Cathodes are used in aluminum smelting furnaces, and demand for cathodes is driven by construction of new smelters and relines and upgrades of existing smelters. We believe there is currently no viable substitute for cathodes in aluminum smelting. We operate our cathode business through a 70% owned venture with Pechiney, the world’s recognized leader in aluminum smelting technology. In late 2003, Pechiney was acquired by Alcan, one of the world’s largest aluminum producers.

Other. We invented natural graphite products, consisting of advanced flexible graphite and flexible graphite. Advanced flexible graphite solutions include highly engineered thermal interface products, heat spreaders and heat sinks for electronic device applications. We are the largest manufacturer of high quality natural graphite solutions for the electronics industry. We are also the leading manufacturer of highly engineered natural graphite-based flow field plates and gas diffusion layers and other advanced flexible graphite solutions for proton exchange membrane (“PEM”) fuel cells and fuel cell systems for use in the power generation and transportation markets. Flexible graphite products include gasket and sealing material for high temperature and corrosive environments in automotive, petrochemical and other applications. We are one of the world’s largest manufacturers of natural graphite products for these uses and applications.

Carbon electrodes are used in the production of ferro-alloys and silicon metal, a raw material primarily used as an alloying agent in the manufacture of aluminum, and for production

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of chemical products in the chemical industry. Refractories are used primarily as blast furnace and submerged arc furnace hearth walls and bottoms.

Our Segments

Carbon is one of the fundamental elements and is capable of forming an enormous variety of compounds. As a result of these characteristics, carbon is one of the most widely used elements in manufacturing processes of all kinds. Graphite is the crystalline form of carbon. Graphite can be processed to be resistant to corrosive materials, withstand high temperatures and act as either a conductor of, or an insulator from, heat and electricity. Graphite is both manmade (called “synthetic graphite”) and occurs naturally (called “natural graphite”). Synthetic graphite is made primarily from petroleum coke, a by-product of petroleum refining. Natural graphite is a mined mineral that is processed to increase its purity.

Synthetic Graphite Segment

Our synthetic graphite segment, which had net sales of $640,128 in 2003, $752,436 in 2004 and $784,148 in 2005, manufactures and delivers high quality graphite electrodes, cathodes and advanced graphite materials as well as customer technical services. Graphite electrodes accounted for about 74% of the net sales of this segment in 2005. Cathodes are manufactured by our subsidiary, Carbone Savoie, and accounted for about 14% of the net sales of this segment in 2005.

We estimate that, in 2005, the worldwide market for graphite electrodes, cathodes and advanced graphite materials was over $3 billion. Customers for these products are located in all major geographic markets.

Graphite Electrodes.

Use of graphite electrodes in electric arc furnaces. There are two primary technologies for steel making:

• basic oxygen furnace steel production (sometimes called “integrated steel production”); and

• electric arc furnace steel production (the technology used by all “mini-mills”).

Graphite electrodes are consumed primarily in electric arc furnace steel production, the steel making technology used by all “mini-mills,” typically at a rate of one graphite electrode every eight to ten operating hours. Electric arc furnace steel makers are called “mini-mills” because of their historically smaller capacity as compared to basic oxygen furnace steel makers and because they historically served more localized markets. We believe that mini-mills constitute the higher long term growth sector of the steel industry. Graphite electrodes are also consumed in the refining of steel in ladle furnaces and in other smelting processes such as production of titanium dioxide.

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Electrodes act as conductors of electricity in the furnace, generating sufficient heat to melt scrap metal, iron ore or other raw materials used to produce steel or other metals. The electrodes are consumed in the course of that production.

Electric arc furnaces that produce steel typically range in size from those that produce about 25 metric tons of steel per production cycle to those that produce about 150 metric tons per production cycle. Electric arc furnaces operate using either alternating electric current (A/C) or direct electric current (D/C). The vast majority of electric arc furnaces use alternating current. Each of these furnaces typically uses nine electrodes (in three columns of three electrodes each) at one time. The other electric arc furnaces, which use direct current, typically use one column of three electrodes. The size of the electrodes varies depending on the size of the furnace, the size of the furnace’s electric transformer and the planned productivity of the furnace. In a typical furnace using alternating current and operating at a typical number of production cycles per day, one of the nine electrodes is fully consumed (requiring the addition of a new electrode), on average, every eight to ten operating hours. The actual rate of consumption and addition of electrodes for a particular furnace depends primarily on the efficiency and productivity of the furnace. Therefore, demand for graphite electrodes is directly related to the amount and efficiency of electric arc furnace steel production.

Electric arc furnace steel production requires significant heat (as high as 5,000 degrees Fahrenheit, which we believe is the hottest operating temperature in any industrial or commercial manufacturing process worldwide) to melt the raw materials in the furnace, primarily scrap metal. Heat is generated as electricity (as much as 150,000 amps) passes through the electrodes and creates an electric arc between the electrodes and the raw materials.

Graphite electrodes are currently the only products available that have the high levels of electrical conductivity and the capability of sustaining the high levels of heat generated in an electric arc furnace producing steel. Therefore, graphite electrodes are essential to the production of steel in electric arc furnaces. We believe there is currently no commercially viable substitute for graphite electrodes in electric arc furnace steel making. We estimate that, on average, the cost of graphite electrodes represents about 3% to 4% of the cost of producing steel in a typical electric arc furnace.

Electric arc furnace steel production for the last five years has grown at an estimated average annual growth rate of about 3%. We believe that EAF steel production will continue to grow at an average annual long term growth rate of about 3% to 4%. We estimate that there are currently approximately 2,000 electric arc steel production furnaces operating worldwide. Electric arc furnace steel production grew from approximately 90 million metric tons in 1970 to approximately 325 million metric tons in 2005, representing approximately a third of the world’s steel production. We estimate that steel makers worldwide added 11 million metric tons of new EAF capacity in 2005, not all of which was fully operational in 2005. We are aware of about 37 million metric tons of announced new electric arc furnace steel production capacity that is scheduled to be added in the 2006 through 2008 time period, approximately 11% of which is replacement capacity. Additionally, not all of such capacity is expected to be fully operational during this time period.

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An electric arc furnace used for steel production provides significant operational flexibility. It can be shut down and restarted relatively quickly compared to a basic oxygen furnace in response to changing market dynamics. As a result, electric arc furnace steel producers are better able to adjust production to respond to changes in demand and prices for steel on a regional and global basis.

Relationship Between Graphite Electrode Demand and EAF Steel Production. The improved efficiency of electric arc furnaces has resulted in a decrease in the average rate of consumption of graphite electrodes per metric ton of steel produced in electric arc furnaces (called “specific consumption”). We estimate that specific consumption declined from about 4.3 kilograms of graphite electrodes per metric ton of steel produced in 1990 to about 2.2 kilograms per metric ton in 2005. We believe that the rate of decline of specific consumption over the long term has become lower. We believe that the decline in specific consumption will continue at a more gradual pace, on average, as the costs (relative to the benefits) increase for EAF steel makers to achieve further efficiencies in specific consumption. We further believe that the rate of decline in the future will be impacted by the addition of new EAF steel making capacity. To the extent that this new capacity replaces old capacity, it has the accelerated effect of reducing industry wide specific consumption due to the efficiency of new electric arc furnaces relative to the old. However, to the extent that this new capacity increases industry wide EAF steel production capacity and that capacity is utilized, it creates additional demand for graphite electrodes.

Increases in EAF steel production, offset by declines in specific consumption, resulted in corresponding changes in demand for graphite electrodes. Graphite electrode demand is expected to grow over the long term at an estimated average annual growth rate of about 1% to 2%, based on the anticipated growth of EAF steel production, partially offset by the decline in specific consumption described above. We believe that the graphite electrode industry manufacturing capacity utilization rate worldwide was about 96% in 2003, about 96% in 2004 and 95% in 2005.

Production Capacity. We believe that the worldwide total graphite electrode manufacturing capacity, excluding capacity used to make electrodes for domestic non-melter applications in China, is approximately 1.1 million metric tons. There are two global, and approximately seven other notable regional or local producers, who have approximately 815,000 metric tons of this capacity. The remaining capacity is maintained by over twenty other local or regional manufacturers.

We believe that there is over 1 million metric tons of demand that corresponds with this capacity, representing a utilization rate of over 90%. The global demand can be further delineated between melter and non-melter segments. We believe that the melter segment represents approximately 70% of the total electrode demand. There are process technology and raw material constraints related to converting non-melter capacity into melter capacity, however melter capacity can be utilized for non-melter production. All of our production capacity is capable of producing melter-segment electrodes, with the flexibility to produce non-melter segment electrodes as needed.

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As a result of repositioning our global manufacturing network and other actions, as well as our proprietary process and technological improvements, we now have the capability, depending on product demand and mix, to manufacture approximately 230,000 metric tons of graphite electrodes annually from our existing assets. We believe that our Monterrey, Mexico facility is the largest graphite electrode manufacturing facility in the world.

Graphite Electrode Market Share. We estimate that about 56% of the EAF steel makers worldwide (other than in China, for which reliable information is not generally available) and about 77% of the EAF steel makers in the U.S. and the markets where we have manufacturing facilities, purchased all or a portion of their graphite electrodes from us in 2005. We further estimate that we supplied about 35% of all graphite electrodes purchased in the U.S. and the markets where we have manufacturing facilities, and about 20% worldwide (including China), in each case in 2005. We estimate that the worldwide market for graphite electrodes was about $2.5 billion in 2005 (including China).

We estimate that, in 2005, graphite electrode sales in the U.S. accounted for about 15%of the total net sales of our synthetic graphite segment and that we sold graphite electrodes in about 70 countries, with no other country accounting for more than 9% of the total net sales of our synthetic graphite segment.

Cathodes. The cathode market includes cathodes, sidewalls and ramming paste sold to the aluminum industry for installation of new and relining of existing furnaces used to smelt aluminum (called “pots”). Cathode blocks are used as a floor lining for, and act as conductors of electricity in, the pots. Cathodes are made from either carbon (anthracite and semi-graphitic) or graphite. Cathodes are currently the only products available that have the high levels of electrical conductivity and the capability of surviving the highly corrosive high temperature environment in an aluminum smelting pot. We believe that there are currently no commercially viable substitutes for cathodes in aluminum smelting pots. As cathodes are used in the construction of pots, demand for them is directly related to both the number of new aluminum smelting pots being built and the frequency with which existing pots are upgraded and relined. In a typical aluminum smelting pot operating at a typical rate and efficiency of production, the cathodes must be replaced every 5 to 8 years.

We operate our cathode business through a 70% owned venture with Pechiney, the world’s recognized leader in aluminum smelting technology. In late 2003, Pechiney was acquired by Alcan, one of the world’s largest aluminum producers. Alcan uses Pechiney technology in its own smelting operations (including all Pechiney operations) and licenses Pechiney technology to other aluminum producers. We believe that we are positioned as one of the highest quality producers of graphite cathodes, the preferred technology for deployment in new aluminum smelting pots due to their ability to provide substantial improvements in process efficiency. We are benefiting from Alcan/Pechiney’s smelting technology and our graphite technology and expertise in high temperature industrial applications to develop further improvements in graphite cathodes. We believe that our technological advances in graphite cathodes provide substantial improvement in process efficiency for our aluminum customers, extending the life of the cathode block by about 20%. Our cathodes are sold to Alcan/Pechiney for use in their own plants under supply contracts that remain in effect through 2006 and are marketed to Alcan/Pechiney’s licensees as well as to other aluminum producers.

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We believe that worldwide demand for aluminum will continue to grow over the long term at an average annual rate of about 3%, primarily because of greater use of aluminum by the transportation industry and higher growth in demand in China. We also believe that, over the long term, new aluminum smelting furnaces will need to be built to meet the growth in demand.

The worldwide demand for all cathode grades in 2005 was about 260,000 metric tons. Carbon cathodes represented approximately two-thirds of the market, with graphite cathodes representing the balance. We believe that, over the long term, demand for graphite cathodes will increase relative to carbon cathodes as new smelting pots are built.

We believe that the cathode industry manufacturing capacity utilization rate worldwide was about 82% in 2005 (excluding for carbon cathodes, information relating to Russia and China, for which reliable information is generally not available). We believe that, currently, there is an excess supply of carbon cathodes, on a worldwide basis, resulting from a delay in relines of existing pots (as existing pots are operating longer to meet the strong aluminum demand) and an increase in the potlife of certain smelters due to technology improvements.

There are six notable producers of cathodes in the world. We believe that we are the largest manufacturer of cathodes in the world, offering the broadest range of products to the aluminum industry. We estimate that the worldwide market for cathodes was about $530 million in 2005 and that we sold about 16% of all cathodes sold in the world in 2005.

Advanced Graphite Materials. Advanced graphite materials include isomolded, molded and extruded products in a variety of shapes and grades, weighing from a few kilograms to ten metric tons, for diverse applications. These materials include primary products (such as bulk graphite blocks (called “billets”) that are sold to customers for further processing or finishing for end users) and specialty products (such as pressure casting molds for steel railroad car wheels).

Our isomolded products are used in applications including continuous casting and hot press manufacturing processes and resistance heating elements. Our molded products are used in applications including high temperature furnaces and crucibles, chemical processing equipment and centrifugal casting equipment. Our extruded products are used in applications including fused refractories, diamond drill bits and semiconductor components as well as in applications in aluminum refining. In addition, certain of our materials, when combined with advanced flexible graphite, provide superior heat management solutions for insulation packages, induction furnaces, high temperature vacuum furnaces and direct solidification furnaces and other industrial thermal management applications. We estimate the worldwide market for advanced graphite materials was about $550 million in 2005.

Other Segment

Natural Graphite. We manufacture advanced flexible graphite solutions and flexible graphite products from natural graphite. We also provide cost effective engineering and other technical services and license our proprietary technology to meet customer needs in markets where we do not anticipate engaging in manufacturing ourselves. Our natural graphite solutions are developed and manufactured by our subsidiary, AET. We currently sell our solutions primarily to the electronics, fuel cell power generation and sealing markets.

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Advanced flexible graphite solutions include highly engineered eGRAF® thermal interface material, heat spreaders, including those sold under our SpreaderShield™ brand name, and heat sinks for electronic device applications. We also manufacture highly engineered GRAFCELL® flow field plates, gas diffusion layers and other advanced flexible graphite solutions for PEM fuel cells and fuel cell systems for use in the power generation and transportation markets. Flexible graphite products include gasket and sealing material for high temperature and corrosive environments in automotive, petrochemical and other applications. We are one of the world’s largest manufacturers of natural graphite products for all of these uses and applications.

The versatility of our proprietary processes and equipment enables us to modify natural graphite products to meet a variety of customer needs. We work with our customers to develop technologically advanced solutions, utilizing our industry-leading technology and manufacturing strengths and capabilities.

Electronic Thermal Management Solutions. Thermal management solutions are uniquely designed to dissipate heat generated by electronic devices. Electronics manufacturers are currently experiencing constraints in the development of ever more advanced compact devices because of limitations on the ability of current thermal management products and technologies to dissipate the higher levels of heat generated. We have developed and are continuing to develop and introduce highly engineered advanced flexible graphite solutions that improve thermal management in electronic devices. We expect demand for our products to grow as industry trends continue toward smaller, more powerful electronic devices which generate more heat and require more advanced thermal solutions.

Advanced flexible graphite solutions include highly engineered thermal interface materials, heat spreaders and heat sinks for current and next generation electronic device applications, including computers, servers, flat panel display devices, digital video devices, cell phones and other communications, industrial, military, office and automotive equipment. Thermal interface products reside between a chip set or other heat generating unit in a device and the remaining components in the heat dissipation system in the device. Heat sinks are finned units (similar to radiators) that dissipate heat via air movement into the surrounding environment. Heat spreaders are engineered plates or tubes that move or spread heat from hot spots, such as a processing chip, to other locations in the device for dissipation into the environment.

We expect that the superior ability of our products to manage heat will allow our customers and others to redesign electronic devices to improve performance through heat management while reducing cost, size and weight. Our unique solutions offer many advantages over competitive products, such as copper or aluminum. These advantages include:

• excellent ability to conduct heat;

• mechanical and thermal stability;

• lightweight, compressible and conformable nature;

• cost competitiveness; and

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• ease of handling.

Our product lines include eGRAF® heat spreaders, including those sold under our SpreaderShield™ brand name, heat sinks and other thermal management products and eGRAF® Hi-Therm™ thermal interface materials. We can provide both custom and off-the-shelf products and sophisticated solutions for cooling complex electronic devices.

During 2002, we began commercializing our line of eGRAF® thermal management products. Since then, we have obtained orders for eGRAF® products from industry leading electronic companies such as Agilent, Cisco, Hitachi, Dell, Samsung, Sony, Panasonic, and Nokia.

We estimate that the market for our current electronic thermal management products is about $350 million and expect it to grow at an annual rate in excess of 15% over the next three years. Sales of these products grew from about $2,476 in 2003 to $11,611 in 2004 and $18,738 in 2005.

We believe that the thermal management component market for computers, servers, flat panel display devices, digital video devices, cell phones and other communications, industrial, military, office and automotive equipment was about $3 billion in 2002.

Fuel Cell Products. We are the leading manufacturer of natural graphite products for PEM fuel cells and fuel cell systems. We manufacture highly engineered flow field plates, gas diffusion layers and other advanced flexible graphite solutions for PEM fuel cells and fuel cell systems. PEM fuel cells have the potential to generate power for:

• transportation applications, such as automobiles, buses and other vehicles;

• stationary applications, such as residences, commercial buildings and industrial operations; and

• portable applications, such as machinery, equipment and electronic devices.

Fuel cells provide environmentally friendly electrical power generation by combining hydrogen (which can be obtained from a variety of sources such as methanol, natural gas and other fuels) with oxygen (from air, not necessarily pure) to produce electricity through an electrochemical process without combustion. The only material by-products from this process are water and heat. We believe that PEM fuel cells have emerged as the leading fuel cell technology because they offer higher power density, lower weight and lower costs relative to alternative fuel cell technologies. We expect significant growth from this opportunity over the next ten years.

We have been working with Ballard Power Systems since 1992 on developing natural graphite products for use in its PEM fuel cells. GRAFCELL® advanced flexible graphite solutions are a strategic material for the Mark 902, Ballard Power Systems’ most advanced PEM fuel cell platform to date.

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In June 2001, we entered into an exclusive development and collaboration agreement and an exclusive long term supply agreement with Ballard Power Systems, which significantly expanded the scope and term of prior agreements. In addition, Ballard Power Systems became a strategic investor in AET, investing $5 million in shares of Ballard Power Systems’ common stock for a 2.5% equity ownership interest, to support the development and commercialization of natural graphite products for PEM fuel cells. As an investor in AET, Ballard Power Systems has rights of first refusal with respect to certain equity ownership transactions, tag along and drag along rights, and preemptive and other rights to acquire additional equity ownership under certain limited circumstances.

The scope of the current exclusive development and collaboration agreement includes natural graphite products, including flow field plates and gas diffusion layers, for use in PEM fuel cells and fuel cell systems for transportation, stationary and portable applications. The initial term of this agreement extends through 2011. Under the supply agreement, we are the exclusive manufacturer and supplier of natural graphite products for Ballard Power Systems’ fuel cells and fuel cell systems, other than those natural graphite products which Ballard Power Systems elects in the future to manufacture for itself. The initial term of this agreement, which contains customary terms and conditions (including certain license and royalty provisions), extends through 2016. We have the right to manufacture and sell, after agreed upon release dates, natural graphite for use in PEM fuel cells to other fuel cell producers.

In 2004, we were awarded a grant from the State of Ohio for $602 for further development of our gas diffusion layer for fuel cells.

We believe that the significant market opportunities for fuel cell vehicles will be supported by governmental programs. In January 2002, the Bush administration launched a new program called FreedomCAR aimed at spurring the growth of hydrogen fuel cells for cars and trucks. In January 2003, the Bush administration launched FreedomFUEL, focusing on technologies and infrastructure needed to produce, distribute and store hydrogen for fuel cells. About $1.7 billion of funding is proposed under these programs. The European Union and Japan have each announced similar initiatives, and the U.S. and the European Union have agreed to cooperate to overcome barriers to fuel cell commercialization.

We estimate that the market for our fuel cell products in 2012 will exceed $500 million.

Sealing products. Flexible graphite is lightweight, conformable, temperature-resistant and inert to most chemicals. Due to these characteristics, it is an excellent gasket and sealing material that to date has been used primarily in high temperature and corrosive environments in the automotive and petrochemical industries. For example, automotive applications for our flexible graphite products include head gaskets and exhaust gaskets as well as engine and exhaust heat shields. We market our flexible graphite products used in the sealing industry under the GRAFOIL® name.

Carbon Electrodes. Carbon electrodes are used in the production of ferro-alloys and silicon metal, a raw material primarily used as an alloying agent in the manufacture of aluminum, and for production of chemical products in the chemical industry. Carbon electrodes are also used in the production of thermal phosphorous. Carbon electrodes are used and

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consumed in a manner similar to that of graphite electrodes, although at lower temperatures and with different consumption rates. We believe that demand for carbon electrodes fluctuates based primarily on changes in production of silicon metal. We also believe that the silicon metal industry is directly impacted by changes in global and regional economic conditions. We estimate that demand for carbon electrodes was about 81,000 metric tons in 2003, about 88,000 metric tons in 2004, and about 87,000 in 2005.

We estimate that we sold about 28% of the carbon electrodes sold in the world in 2005. We estimate that the worldwide market for carbon electrodes was about $128 million in 2005.

Our carbon electrode product line is facing significant production cost increases and pricing pressure. Given the recent performance of, and outlook for, this product line, we have been exploring strategic alternatives for this product line. In the first quarter of 2006, we announced that we expect to completely exit these operations over the next 12 months. Our carbon electrode net sales in 2005 were $36,407. We have produced carbon electrodes in Columbia, Tennessee for almost 70 years. The decision is expected to result in the termination of about 150 employees between June 2006 and March 2007.

Refractories. Refractories are made in a multitude of standard and custom shapes and sizes. Smaller refractories are sometimes called refractory bricks and larger ones are sometimes called refractory blocks. Graphite is added to some carbon refractories (called semi-graphiticrefractories) to adjust performance characteristics. Carbon and semi-graphitic refractory bricks are used primarily as chemical industry tank and reactor linings and blast furnace and submerged arc furnace hearth walls. These refractory bricks have excellent resistance to corrosion and abrasion. Our carbon refractory brick is one of the established standards for blast furnaces in North America and submerged arc furnaces in South Africa. Our semi-graphitic refractory brick is used where higher conductivity is required or when additional abrasion resistance is desired.

We also manufacture graphite refractory blocks which are used primarily for their high thermal conductivity and the ease with which they can be machined to large or complex shapes. Common applications in blast furnace and submerged arc furnaces are cooling courses in the hearth bottoms for heat distribution and removal, backup linings in hearth walls for improved heat transfer and safety, and lintels over copper cooling plates where a single brick cannot span the cooling plate.

Carbon refractory blocks are used primarily as blast furnace and submerged arc furnace hearth bottoms, for which they are machined to shape and assembled in a variety of designs. We also provide special shapes (such as sidewall blocks, tap blocks, tuyere surrounds and runner liners) for blast furnaces, submerged arc furnaces and cupola furnaces.

We estimate that we sold about 32% of the carbon refractories sold in 2005 for blast and submerged arc furnaces. We estimate that this market for carbon refractories was about $100 million in 2005.

Business Strategies

Our goal is to increase our throughput by maximizing the amount and speed of cash generated from the defined constraint of our assets every day. We believe that, by maximizing the amount and speed of these cash flows, we will deliver enhanced financial performance and return on shareholder value. We have transformed our operations, building sustainable competitive advantages to enable us to compete successfully in our major product lines

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regardless of changes in economic conditions, to realize enhanced performance as economic conditions improve and to exploit growth opportunities from our intellectual property portfolio. Our business strategies are designed to expand upon our competitive advantages by:

Leveraging Our Unique Global Manufacturing Network. We have repositioned our global manufacturing network by shutting down higher cost facilities and redeploying that capacity to our lower cost, strategically located facilities. We have also adopted a constraint-management philosophy that systematically seeks to drive higher utilization rates (constraint utilization) and more productivity from our existing assets. We believe that our unique global manufacturing network provides us with significant competitive advantages in product quality, product costs, proximity to customers, timely and reliable delivery, and operational flexibility to adjust product mix to meet the diverse needs of a wide range of market segments and customers. Currently, we have the operating capability, depending on product demand and mix, to manufacture approximately 230,000 metric tons of graphite electrodes annually from our existing assets.

We continue to leverage our network to seek to achieve significant increases in throughput generated from our existing assets, through productivity improvements, capital expenditures, and other efficiency initiatives. We believe we can further exploit our network by focusing our superior technical and customer service capabilities on:

• the increasing number of large global customers created by the continuing consolidation trend within the steel and aluminum industries, to whom we believe we are better positioned than any of our competitors to offer products that meet their volume, product quality, product mix, delivery reliability and service needs at competitive prices; and

• customers in targeted market segments where we have competitive advantages to meet identified customer needs due to the locations of our facilities, the range and quality of our products, the utilization of our capacity, the value of our customer technical service, our low cost supplier advantage and other factors.

We believe that, in many cases, the increasing number of large global steel and aluminum customers created by consolidation trends are more creditworthy than other customers and that we are able to better manage our exposure to trade credit risk as we increase the percentage of our total net sales sold to these customers.

We believe that our graphite electrode business has one of the top market shares in the world and that our cathode business has the number one market share in the world. In 2005, our worldwide market share was:

• about 20% in graphite electrodes; and

• about 16% in cathodes.

We sell graphite electrodes and cathodes in every major geographic market. Sales of these products outside the U.S. accounted for about 65% of net sales in 2004 and 66% in 2005.

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No single customer or group of affiliated customers accounted for more than 5% of our total net sales in 2003, 2004 or 2005.

We believe that we operate the most technologically sophisticated advanced natural graphite production line in the world and we are the manufacturer best positioned to supply natural graphite products to the electronic thermal management and fuel cell markets. We are the world’s largest manufacturer of natural graphite for these markets and one of the largest manufacturers for automotive and petrochemical applications.

Driving Global Productivity and Efficiency Initiatives. During 2005, we identified various productivity enhancement opportunities. Major actions, identified in 2005 and planned for 2006, include:

• streamlining and centralizing our organizational structure and reducing our salaried and administrative workforce;

• rationalizing certain product and production capabilities, including synthetic graphite facilities in Brazil, France, Italy, the United States and Russia; and

• reassessing alternatives for under-performing production assets.

We are committed to continuously maintaining and improving our low cost manufacturer status in the industry and we are seeking to maximizeproductivity from our existing assets while improving the cost efficiency of the supporting processes.

Accelerating Commercialization of Advantaged Technologies. We believe that our technological capabilities for developing products with superior thermal, electrical and physical characteristics provide us with a significant growth opportunity as well as a competitive advantage. We seek to exploit these capabilities and our intellectual property portfolio to accelerate development and commercialization of these technologies across all of our businesses, to improve existing products, including super-size graphite electrodes and large-diameter pinless electrodes used in the most demanding electric arc steel production furnaces, and to develop and commercialize new products for markets with high growth potential, such as electronic thermal management technologies. For the past three years, we have received R&D Magazine’s prestigious R&D 100 Award, granted to identify the 100 most technologically significant commercialized products each year. We received this award in 2003 and 2004 for our achievements in electronic thermal management products and in 2005 for our large-diameter pinless graphite electrodes.

We believe that we are one of the highest quality producers of graphite cathodes, the preferred technology for new aluminum smelting furnaces. We believe that our advanced graphite cathode technology enables us to increase our market share of graphite cathodes sold upon the commencement of operation of the new, more efficient aluminum smelting furnaces that are being built.

Delivering Exceptional and Consistent Quality. We believe that our products are among the highest quality products available in our industry. Since 1999, we have reduced our annual

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cost for customer graphite electrode quality claims from $2,960 to $1,347. We have been recognized as a preferred or certified supplier by many major steel and aluminum companies and have received numerous technological innovation and other awards by industry groups, customers and others. Using our technological capabilities, we continually seek to improve the consistent overall quality of our products and services, including the performance characteristics of each product, the uniformity of the same product manufactured at different facilities and the expansion of the range of our products. We believe that improvements in overall quality create significant efficiencies and market opportunities for us, provide us the opportunity to increase sales volumes and market share, and create production efficiencies for our customers.

Providing Superior Technical Service. We believe that we are the recognized industry leader in providing value added technical services to customers for our major product lines. We believe that we have the largest customer technical service and related supporting engineering and scientific organizations in our industry, with more than 245 engineers,scientists and specialists around the world. Our employees assist key steel and other metals customers in furnace design, operation and upgrade to reduce energy consumption, improve raw material costs and increase output. In addition, our employees assist customers and others who design, develop or produce electronic devices to integrate our advanced flexible graphite solutions into their new devices.

Deleveragingand Building Stockholder Value. We believe that our business strategies support our goal of maximizing the amount and speed of cash generated and should accelerate our ability to enhance our capital structure by further reducing our gross debt obligations. We have, through successful offerings of the Senior Notes and the Debentures and our successful refinancing of the Revolving Facility, enhanced our financial stability and liquidity. Deleveraging remains a priority for us and we may from time to time purchase Senior Notes and Debentures in the open market or in privately negotiated transactions.

In connection with and building on our focus on deleveraging, we continually review our assets, product lines and businesses to seek out opportunities to maximize value, through re-deployment, divestiture or otherwise. We currently plan to sell certain real estate and may at any time sell other assets, product lines or businesses.

Production Planning

We plan and source our graphite electrode and cathode production globally. We have evaluated virtually every aspect of our global supply chain, and we have redesigned and implemented changes to our global manufacturing, marketing and sales processes to leverage the strengths of our repositioned manufacturing network. Among other things, we have eliminated manufacturing bottlenecks, improved product and service quality and delivery reliability, expanded our range of products, and improved our global sourcing and product mix for our customers. We continue to implement global productivity and efficiency initiatives, including improvements in performance through realignment and standardization of global supply chain processes.

We deploy synchronous work processes at most of our manufacturing facilities. We have also installed and continue to install and upgrade proprietary process technologies at our

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synthetic graphite manufacturing facilities and use statistical process controls in our manufacturing processes for all products.

We utilize capabilities within our global information systems to seek to optimize our global sourcing for maximum profitability. Our global manufacturing network also helps us to minimize risks associated with dependence on any single economic region.

Manufacturing

Synthetic Graphite. The manufacture of a graphite electrode takes, on average, about two months. Graphite electrodes range in size from three inches to 30 inches in diameter and two feet to nine feet in length and weigh between 20 pounds and 4,800 pounds (2.2 metric tons).

The manufacture of graphite electrodes involves the six main processes described below:

Forming: Calcined petroleum coke is crushed, screened, sized and blended in a heated vessel with coal tar pitch. The resulting plastic mass is extruded through a forming press and cut into cylindrical lengths (called “green” electrodes) before cooling in a water bath.

Baking: The “green” electrodes are baked at about 1,400 degrees Fahrenheit in specially designed furnaces to purify and solidify the pitch and burn off impurities. After cooling, the electrodes are cleaned, inspected and sample-tested.

Impregnation: Baked electrodes are impregnated with a special pitch when higher density, mechanical strength and capability to withstand higher electric currents are required.

Rebaking: The impregnated electrodes are rebaked to solidify the special pitch and burn off impurities, thereby adding strength to the electrodes.

Graphitizing: Using a process that we developed, the rebaked electrodes are heated in longitudinal electric resistance furnaces at about 5,000 degrees Fahrenheit to restructure the carbon to its characteristically crystalline form, graphite. After this process, the electrodes are gradually cooled, cleaned, inspected and sample-tested.

Machining: After graphitizing, the electrodes are machined to comply with international specifications governing outside diameters, overall lengths and joint details. Tapered sockets are machine-threaded at each end of the electrode to permit the joining of electrodes in columns by means of correspondingly double-tapered machine-threaded graphite nipples (called "pins"), except in the case of our pinless graphite electrodes.

Cathodes range in size from 5 feet to 12 feet and weigh between 800 pounds and 3,700 pounds and are manufactured by a comparable process (excluding, in the case of carbon cathodes, impregnation and graphitization). We believe that we manufacture the broadest range

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of sizes in graphite electrodes and cathodes and that the quality of our electrodes and cathodes is competitive with or better than that of comparable products of any other major manufacturer.

We generally warrant to our customers that our electrodes and cathodes will meet our specifications. Electrode and cathode returns and replacements have aggregated less than 1% of net sales in each of the last three years.

Graphite electrodes are manufactured in Brazil, Mexico, South Africa, France, Spain and Russia. Cathodes are manufactured in France and Brazil. We intend to cease producing graphite electrodes in Russia and cathodes in Brazil during 2006.

Advanced graphite materials are manufactured using raw materials, processes and technologies similar to those for graphite electrodes and cathodes. Our facilities have the capability to process a wide range of raw materials, extrude or mold small to very large graphite blocks, impregnate, bake and graphitize the blocks, purify the blocks to reduce the impurities to parts per million levels, and machine the blocks using advanced machining stations to manufacture products finished to high tolerances and unique shapes. Advanced graphite materials are manufactured in the U.S., France and South Africa.

Other. We use a proprietary process to convert mined natural graphite flake into expandable graphite, an intermediate product. During this process, we can manufacture expandable graphite with a number of specific properties. For example, we can change its sensitivity to temperature, modify its particle size and give it long-term stability. We manufacture flexible graphite by further processing expandable graphite. We fabricate finished gasket and sealing products by fabricating flexible graphite into sheet, laminate and tape products. We manufacture advanced flexible graphite by subjecting expandable or flexible graphite to additional proprietary processing. These additional processing steps alter the properties and characteristics of the graphite to make materials with modified electrical, thermal and strength characteristics.

Natural graphite operates two state-of-the-art manufacturing facilities in the U.S. These facilities have the capability to chemically treat natural graphite flake, bake the flake in high temperature furnaces to expand the graphite flake, mechanically form and calender the expanded flake, and form and shape intermediate and finished products. We believe that we operate the world’s most technologically sophisticated advanced natural graphite production line.

Carbon electrodes and refractories are manufactured in the United States. Carbon electrodes (which can be up to 55 inches in diameter) are primarily extruded in a comparable process to graphite electrodes (excluding impregnation and graphitization). Refractories are manufactured using a proprietary “hot press” process.

We intend to cease production of carbon electrodes in 2006. Our facility in Columbia, Tennessee that manufactures carbon electrodes will continue to service advance graphite materials and refractories.

Quality Standards and Maintenance. Most of our global manufacturing facilities are certified and registered to ISO 9001-2000 international quality standards and some are certified

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to QS 9000-1998 standards. Natural graphite has a quality assurance system designed to meet the most stringent requirements of its customers and is ISO TS 16949:2002 certified. Major maintenance at our facilities is conducted on an ongoing basis.

Raw Materials and Suppliers. The primary raw materials for electrodes and cathodes are engineered by-products and residues of the petroleum and coal industries. We use these raw materials because of their high carbon content. The primary raw materials for graphite electrodes and graphite cathodes are calcined petroleum cokes (needle coke for electrodes and regular grade cokes for cathodes), coal tar pitch and petroleum pitch. The primary raw materials for carbon electrodes and carbon cathodes are calcined anthracite coal and coal tar pitch and, in some instances, a petroleum coke-based material. The primary raw material for our natural graphite products is natural graphite flake. We purchase raw materials from a variety of sources and believe that the quality and cost of our raw materials on the whole is competitive with or better than those available to our competitors. Except as discussed below with regard to petroleum needle coke, we believe that adequate supplies of these raw materials are available at market prices.

We have a strategic alliance with ConocoPhillips, the largest producer of petroleum coke, to improve the supply chain for our primary raw material and, since the beginning of 2001, we have purchased a majority of our requirements for petroleum coke, at annually negotiated prices, from multiple plants of ConocoPhillips under an evergreen supply agreement. This evergreen supply agreement contains customary terms and conditions, including price renegotiation, dispute resolution and termination provisions, including, upon a termination, a 3-year supply arrangement with reducing volume commitments.

In 2004, Unocal sold its interest in its needle coke production company in Lemont, Illinois, to its partner, Citgo. Citgo announced that it would convert its facility from producing needle grade coke to fuel grade coke. We believe that Citgo stopped producing needle coke in late 2005. Furthermore, we believe that the loss of this volume could lead to a shortage of premium needle coke. We do not believe that there are any needle coke expansion plans that would cover completely the loss of the coke previously produced in Lemont. In 2005, these events had little to no effect on our ability to procure premium quality needle coke. For 2006, we have secured all of our needle coke requirements at annually fixed prices.

We purchase calcined anthracite coal for our carbon products under a five year supply agreement that expires in June 2006. This agreement contains customary terms and conditions.

We purchase energy from a variety of sources. Electric power used in manufacturing processes is purchased from local suppliers under contracts with pricing based on rate schedules or price indices. Our electric costs can vary significantly depending on these rates and usage. Natural gas used in manufacturing processes is purchased from local suppliers primarily under annual volume contracts with pricing based on various natural gas price indices.

We have in the past entered into, and may in the future enter into, natural gas derivative contracts and short duration fixed rate purchase contracts to effectively fix some or all of our natural gas cost exposure. At December 31, 2005, we had fixed about 23% of

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our worldwide natural gas exposure through 2006 using such contracts. As of February 15, 2006, we had fixed about 32% of our worldwide natural gas exposure through such contracts.

Distribution

We deploy various demand management and inventory management techniques to seek to ensure we can meet our customers’ delivery requirements while still maximizing the utilization of our production capacity. We can experience significant variation in our customers’ delivery requirements as their specific needs vary and change through the year. We generally seek to maintain appropriate inventory levels, taking into account these factors as well as the significant differences in manufacturing cycle times for synthetic graphite products and our customers’ products.

Finished products are generally stored at our manufacturing facilities. Limited quantities of some finished products are also stored at local warehouses around the world to meet customer needs. We ship our finished products to customers primarily by truck and ship, using “just in time” techniques, where practical.

Proximity of manufacturing facilities to customers can provide a competitive advantage in terms of cost of delivery of graphite electrodes. These costs are affected by changes in currency exchange rates, methods of shipment, import duties and whether the manufacturing facilities are located in the same economic trading region as the customer. We believe that our manufacturing facilities are uniquely located around the world to supply graphite electrodes globally and that the locations of our facilities provide us with a significant competitive advantage.

Sales and Customer Service

Our product quality and our unique global manufacturing network, its proximity to regional and local customers and market segments and the related low cost structure allows us to deliver a broad range of product offerings across various market segments. We differentiate and sell the value of our product offerings, depending on the market segment or specific product application, primarily based on product quality and performance, delivery reliability, price, and customer technical service.

We price our offers based on the value that we believe we deliver to our customers. Pricing may vary within any given industry, depending on the market segment within that industry and the value of the offer to a specific customer. We believe that we can achieve premium prices through our value added offerings to customers. In certain segments where the product is less differentiated, we may achieve little or no premium for our offer. We have also begun to modify the terms of our offers, specifically in the area of graphite electrode sales, so that we have a some ability to adjust the price of our customer orders to reflect changes in costs or market conditions. Substantially all of our graphite electrode customers generally seek to negotiate and secure the reliable supply of their anticipated volume requirements on a semi-annual or annual basis, sometimes called the “graphite electrode book building process”. The remainder of our graphite electrode customers purchase their electrodes as needed at then current market prices (i.e., at the spot price). Our cathode customers primarily enter into longer term

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“made to order” supply contracts, although certain customers also purchase their cathodes as needed at then current market prices (i.e., at the spot price).Our carbon electrode customers primarily enter into annual contracts with us for a percentage of their annual requirements at a firm price. We have, in certain instances, entered into long term supply contracts with purchasers of our carbon electrodes, and we may, from time to time in the future, enter into long term supply contracts with purchasers of our other products. Orders taken pursuant to our standard terms and conditions are generally not cancelable by the customer. However, these orders are subject to renegotiation or adjustment to meet changing market conditions. Currently, we do not manage or operate based on a backlog.

We believe that we are the recognized industry leader in providing value added technical services to customers for our major product lines, and that we have the largest customer technical service and related supporting engineering and scientific organizations in our industry, with more than 245 engineers, scientists and specialists around the world.

We deploy these selling methods and our customer technical service to address the specific market needs of all products.

Synthetic Graphite. We sell our graphite electrodes in every major geographic market primarily through our direct sales force, whose members are trained and experienced with our products. Our direct sales force operates from 16 sales offices located around the world. We also sell products through independent sales agents and distributors. The sales and service groups of our synthetic graphite segment include those dedicated to cathodes that are employed by Carbone Savoie.

We have graphite electrode customer technical service personnel based around the world who assist customers to maximize their production and minimize their costs. We employ about 160 engineers and technicians to provide technical service and advice to key steel and other metals customers. These services include furnace design and operation, as well as furnace upgrades to reduce energy consumption, improve raw material costs and increase output. We believe that our synthetic graphite segment has more technical service engineers located in more countries than any of its competitors.

Other. Our natural graphite products are sold through direct field sales employees in the U.S., Europe and Asia and through independent sales agents and distributors. Customer service personnel, supported by development scientists and manufacturing engineers, assist customers in learning about and using our natural graphite products, improving their manufacturing processes and operations, and solving their technical dilemmas. A particular focus is assisting customers and others who design, develop or produce electronic devices to integrate our advantaged flexible graphite solutions into their new devices.

Our carbon electrode and refractory products are sold through their respective direct global sales force, located in all of their major markets, as well as through independent agents and distributors. A U.S. sales office coordinates the activities of an experienced sales staff and these agents and distributors. Our experienced engineering staff provides technical service to customers around the world, including specialized technical assistance to submerged arc and

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other furnace operators with regard to product performance, furnace monitoring and operations analysis. We believe that our customer technical service staff is highly regarded.

Technology

We believe that we are the industry leader in graphite and carbon materials science and high temperature processing know-how and that we operate the premier research, development and testing facilities in our industry. We have over 100 years of experience in the research and development of graphite and carbon technologies. Over the past several years, we have analyzed our intellectual property portfolio to identify new product opportunities in markets with high growth potential for us, redirected research to enhance and exploit our portfolio and accelerated development of products for those markets.

Research and Development. We conduct our research and development both independently and in conjunction with our strategic partners, customers and others. We have two dedicated technology centers, one in Ohio, which focuses on all products, and the other in France, which is used by Carbone Savoie. We also have a pilot plant located in Ohio that has the capability to produce small or trial quantities of new or improved synthetic or natural graphite products. In addition, we have a state-of-the-art testing facility located in Ohio capable of conducting physical and analytical testing for those products. The activities at these centers and facilities are integrated with the efforts of our engineers at our manufacturing facilities who are focused on improving manufacturing processes.

Research and development expenses amounted to $10,410, $8,040 and $9,437 in 2003, 2004 and 2005, respectively.

We believe that our technological and manufacturing strengths and capabilities provide us with a significant growth opportunity as well as a competitive advantage and are important factors in the selection of us by industry leaders and others as a strategic partner. Our technological capabilities include developing products with superior thermal, electrical and physical characteristics that provide a differentiating advantage. We seek to exploit these strengths and capabilities across all of our businesses, to improve existing products and to develop and commercialize new products for markets with high growth potential.

Developments by us include:

• larger and stronger graphite electrodes;

• new chemical additives to enhance raw materials used in the manufacture of graphite electrodes;

• patented advanced pin technology for graphite electrodes;

• patent pending pinless large diameter graphite electrodes;

• cold pastes with reduced environmental impact for use with cathodes;

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• patented processing technology for high performance graphite cathodes which have become the preferred products in the industry;

• products for PEM fuel cells that are enabling fuel cell commercialization; and

• new electronic thermal management technologies.

We have been awarded preferred or certified supplier status by many major steel, aluminum, and automotive supply companies and have received numerous technological innovation and other awards by industry groups, customers and others. For the past three years, we have received R&D Magazine’s prestigious R&D 100 Award, granted to identify the 100 most technologically significant commercialized products each year. We received this award in 2003 and 2004 for our achievements in electronic thermal management products and in 2005 for our large-diameter pinless graphite electrodes.

A significant portion of our research and development is focused on new product development, including advancements in electrode and cathode technology, achievement of the objectives of our strategic alliances with companies that use or specify the use of electronic thermal management technologies and our strategic alliance with Ballard Power Systems for PEM fuel cells.

Technology Licensing and Research, Testing and Other Services. We offer, through licensing contracts, rights to use our intellectual property to other firms developing or manufacturing products. We also provide, through service contracts:

• research and development services;

• extensive product testing services (such as high temperature testing and analysis);

• high temperature heat treating services;

• graphite and carbon process and product technology, consulting and development services; and

• information services to customers, suppliers and universities to assist in their development of new or improved process and product technology.

Among other things, we provide cost-effective services for a broad range of markets and license our proprietary technology for a broad range of applications through our web site. The web site includes technical papers on graphite and carbon science, technical literature and search assistance, and industry news as well as access to our services.

Intellectual Property. We believe that our intellectual property, consisting primarily of patents and proprietary know-how and information, particularly the intellectual property relating to electronic thermal management and fuel cell power generation, provides us with competitive advantages and is important to our growth opportunities. Our intellectual property portfolio is extensive, with about 320 U.S. and foreign patents and over 370 U.S. and foreign pending patent applications, which we believe is more than any of our major competitors. Over 130 of these

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patents were granted during the past four years. Among our competitors, we hold the largest number of patents for flexible graphite as well as the largest number of patents relating to the use of natural graphite for PEM fuel cell applications. In addition, we have obtained exclusive and non-exclusive licenses to various U.S. and foreign patents relating to our technologies. These patents and licenses expire at various times over the next two decades.

We own, and have obtained licenses to, various trade names and trademarks used in our businesses. For example, the trade name and trademark UCAR are owned by Union Carbide Corporation (which has been acquired by Dow Chemical Company) and are licensed to us on a worldwide, exclusive and royalty-free basis until 2015. This particular license automatically renews for successive ten-year periods. It permits non-renewal by Union Carbide commencing after the first ten-year renewal period upon five years’ notice of non-renewal. The trade name and trademark CARBONE SAVOIE are owned by Carbone Savoie and are used in connection with cathodes manufactured by it. The trademark CARBONE SAVOIE is registered in many countries throughout the world.

We rely on patent, trademark, copyright and trade secret laws as well as appropriate agreements to protect our intellectual property. Among other things, we seek to protect our proprietary know-how and information, through the requirement that employees, consultants, strategic partners and others, who have access to such proprietary information and know-how, enter into confidentiality or restricted use agreements.

Competition

Synthetic Graphite. Competition in the graphite electrode, cathode and advanced graphite material businesses is based primarily on product differentiation and quality, delivery reliability, price, and customer service, depending on the market segment or specific product application.

Global and regional economic conditions and prior antitrust investigations, lawsuits and claims have had an impact on the graphite electrode industry. We believe that, at a minimum, these impacts include increased price competition and increased debt or cost burdens, or both, for most manufacturers in the industry.

In the most demanding product applications (that is, graphite electrodes that can operate in the largest, most productive and demanding EAF steel mills in the world), we compete primarily on product quality, delivery reliability, price and customer technical service. We believe these are prerequisite capabilities that not all producers of graphite electrodes possess or can demonstrate consistently. In this market segment, we primarily compete with higher quality graphite electrode producers, although certain other lower quality producers can demonstrate adequacy in certain melters.

In other product applications, including ladle furnaces requiring less demanding performance and certain other ferrous and non-ferrous market segments, we compete based on product differentiation, product quality and price. Our product quality, unique global manufacturing network, proximity to regional and local customers and market segments and the

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related lower cost structure allows us to deliver a broad range of product offerings across these various market segments.

We believe that there are no current commercially viable substitutes for graphite electrodes in EAF steel production or for cathodes in aluminum smelting furnaces.

We believe that there are significant barriers to entry into our industry, including the need for extensive product and process know-how and other intellectual property and a high initial capital investment. It also requires high quality raw material sources and a developed energy supply infrastructure. There have been no entrants in the graphite electrode industry for more than 50 years. We are not aware of any “greenfield” construction of new graphite electrode manufacturing facilities and believe that it is unlikely that new “greenfield” graphite electrode manufacturing facilities will be built during the next several years by existing competitors due to, among other things, the relatively high initial capital investment. We believe that one or more of our graphite electrode competitors in India are in the process of incrementally expanding their graphite electrode manufacturing capacity and are also providing technical know-how in connection with the potential manufacture of graphite electrodes in Iran. We believe that we can significantly expand our graphite electrode manufacturing capacity at a cost that is less than 25% of the initial investment for “greenfield” capacity.

There are only five multinational graphite electrode producers, GrafTech, SGL Carbon, Tokai Carbon, Showa Denko Carbon and Graphite India. We are the only manufacturer with production facilities in more than three continents. Other notable electrode producers include HEG (India), SEC (Japan) and NDK (Japan). There are several smaller, local manufacturers in the U.S., China and Russia. There are six notable manufacturers of cathodes in the world. We believe that we and SGL Carbon are the largest manufacturers of cathodes in the world. There are about four significant manufacturers of advanced graphite materials in the world.

Other. Competition in the natural graphite business with respect to existing products is based primarily on quality and price. Competition with respect to services and new products is based primarily on product and service innovation, performance and cost effectiveness as well as customer service, with the relative importance of these factors varying among services, products and customers.

Competitors include companies located around the world that develop and manufacture natural graphite products, including SGL Carbon, and companies that develop, manufacture or provide substitute or alternative materials, products, services or solutions. We are one of the largest manufacturers of natural graphite products in the world.

Our electronic thermal management solutions compete with a wide variety of materials, including copper and other metals, ceramics, conductive rubbers and greases. Our fuel cell products compete with other graphitic products, including fibers, composites and synthetic graphite, and metal products such as stainless steel. Our sealing and gasket products compete with various fiber products such as asbestos, cellulose and synthetic composites as well as stainless steel and other metals. Our fire retardant products compete with compounds containing phosphates, halogens and hydrated aluminas as well as many other materials. Our industrial

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thermal management products compete with a wide variety of materials, including natural and synthetic fibers, other carbon forms and metal products.

Competition in the carbon electrode and refractory businesses is based primarily on product differentiation and quality, delivery reliability, price, and customer service, depending on the market segment or specific product application. We are aware of commercially viable technologies that are competitive with carbon electrodes. There are four significant manufacturers of carbon electrodes in the world.

Environmental Matters

We are subject to a wide variety of federal, state, local and foreign laws and regulations relating to the presence, storage, handling, generation, treatment, emission, release, discharge and disposal of hazardous, toxic and other substances and wastes, which govern our current and former properties, neighboring properties and our current operations. These laws and regulations (and the enforcement thereof) are periodically changed and are becoming increasingly stringent. We have experienced some level of regulatory scrutiny at most of our current and former facilities, and have been required to take corrective or remedial actions and incur related costs in the past, and may experience further regulatory scrutiny, and may be required to take further corrective or remedial actions and incur additional costs, in the future. Although it has not been the case in the past, these costs could have a material adverse effect on us in the future.

The principal U.S. laws and regulations to which we are subject include:

• the Clean Air Act, the Clean Water Act and the Resource Conservation and Recovery Act and similar state and local laws which regulate air emissions, water discharges and hazardous waste generation, treatment, storage, handling, transportation and disposal;

• the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, and the Small Business Liability Relief and Brownfields Revitalization Act of 2002, and similar state laws that provide for the reporting of, responses to and liability for releases of hazardous substances into the environment; and

• the Toxic Substances Control Act and related laws that are designed to track and control chemicals that are produced or imported into the United States and assess the risk to health and to the environment of new products at early developmental stages.

Further, laws adopted or proposed in various states impose or may impose, as the case may be, reporting or remediation requirements if operations cease or property is transferred or sold.

Our manufacturing operations outside the U.S. are subject to the laws and regulations of the countries in which those operations are conducted. These laws and regulations primarily relate to pollution prevention and the control of the impacts of industrial activities on the quality of the air, water and soil. Regulated activities include, among other things: use of hazardous

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substances; packaging, labeling and transportation of products; management and disposal of toxic wastes; discharge of industrial and sanitary wastewater; and process emissions to the air.

We believe that we are currently in material compliance with the federal, state, local and foreign environmental laws and regulations to which we are subject. We have received and continue periodically to receive notices from the U.S. Environmental Protection Agency (the “USEPA”) or state environmental protection agencies, as well as claims from others, alleging that we are a potentially responsible party (a “PRP”) under Superfund and similar state laws for past and future remediation costs at hazardous substance disposal sites. Although Superfund liability is joint and several, in general, final allocation of responsibility at sites where there are multiple PRPs is made based on each PRP’s relative contribution of hazardous substances to the site. Based on information currently available to us, we believe that any potential liability we may have as a PRP will not have a material adverse effect on us.

As a result of amendments to the Clean Air Act enacted in 1990, certain of our facilities have been or will be required to comply with new standards for air emissions that have been or will be adopted by the USEPA and state environmental protection agencies over the next several years pursuant to regulations that have been or will be promulgated, including the USEPA’s anticipated promulgation of maximum achievable control technology standards for the carbon and graphite manufacturing industry. The regulations that have been promulgated to date will necessitate use of additional administrative and engineered controls, and changes in certain manufacturing processes, in order for us to achieve compliance with these regulations. Similar foreign laws and regulations have been or may also be adopted to establish new standards for air emissions, which may also require additional controls on our manufacturing operations outside the U.S. Based on information currently available to us, we believe that compliance with these regulations will not have a material adverse effect on us.

We have sold or closed a number of facilities that had operated solid waste landfills on-site. In most cases where we divested the properties, we have retained ownership of the landfills. When our landfills were or are to be sold, we obtained or seek to obtain financial assurance we believe to be adequate to protect us from any potential future liability associated with these landfills. When we have closed landfills, we believe that we have done so in material compliance with applicable laws and regulations. We continue to monitor these landfills pursuant to applicable laws and regulations. To date, the costs associated with the landfills have not been, and we do not anticipate that future costs will be, material to us.

We establish accruals for environmental liabilities where it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. We adjust accruals as new remediation and other commitments are made and as information becomes available which changes estimates previously made.

Estimates of future costs for compliance with environmental protection laws and regulations, and for environmental liabilities, are necessarily imprecise due to numerous uncertainties, including the impact of new laws and regulations, the availability and application of new and diverse technologies, the extent of insurance coverage, the discovery of contaminated properties, or the identification of new hazardous substance disposal sites at which we may be a PRP and, in the case of sites subject to Superfund and similar state and foreign laws, the ultimate

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allocation of costs among PRPs and the final determination of remedial requirements. Subject to the inherent imprecision in estimating such future costs, but taking into consideration our experience to date regarding environmental matters of a similar nature and facts currently known, we believe that costs and capital expenditures (in each case, before adjustment for inflation) for environmental protection compliance and for remedial response will not increase materially over the next several years.

Insurance

We obtain insurance against civil liabilities relating to personal injuries to third parties, for loss of or damage to property, for business interruptions and for environmental matters, to the extent that it is currently available and provides coverage that we believe is appropriate upon terms and conditions and for premiums that we consider fair and reasonable. We believe that we have insurance providing coverage for claims and in amounts that we believe appropriate as described above. We cannot assure you, however, that we will not incur losses beyond the limits of or outside the coverage of our insurance.

Employees

Since 1998, we have reduced our global workforce by about 1,700 employees, or over 30%. At December 31, 2005, we had 3,851 employees, of which 1,745 were in Europe (including Russia), 903 were in Mexico and Brazil, 364 were in South Africa, 3 were in Canada, 829 were in the U.S. and 7 were in the Asia Pacific region. At December 31, 2005, 2,753 of our employees were hourly employees.

At December 31, 2005, about 69% of our worldwide employees were covered by collective bargaining or similar agreements, which expire at various times in each of the next several years. At December 31, 2005, about 1,355 employees, or 35% of our employees, were covered by agreements which expire, or are subject to renegotiation, at various times through December 31, 2006. We believe that, in general, our relationships with our unions are satisfactory and that we will be able to renew or extend our collective bargaining or similar agreements on reasonable terms as they expire. We cannot assure, however, that renewed or extended agreements will be reached without a work stoppage or strike or will be reached on terms satisfactory to us.

Excluding our subsidiaries prior to the time when we acquired them, we have not had any material work stoppages or strikes during the past decade.

Item 1A.  Risk Factors

(Unless otherwise noted, all dollars are presented in thousands)

An investment in our securities involves a high degree of risk. The risks described below are not the only ones facing us. Additional risks not presently known to us, or that we currently deem immaterial, may also have a material adverse effect on us. If any of the following risks actually occur, our financial condition, results of operations, cash flows or business could be harmed. In that case, the market price of our securities could decline, and you could lose part or all of your investment.

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Risks Relating to Us

We are dependent on the global steel and aluminum industries and also sell products to the transportation, semiconductor, petrochemical and other metals industries. Our results of operations may deteriorate during global and regional economic downturns.

We sell graphite electrodes, which accounted for about 66% of our total net sales in 2005, primarily to the EAF steel production industry. We also sell cathodes, which accounted for about 13% of our total net sales in 2005, to the aluminum industry. Many of our other products are sold primarily to the transportation, semiconductor, petrochemical and other metals industries. These are global basic industries, and they are experiencing various degrees of growth and consolidation. Customers in these industries are located in every major geographic market. As a result, our customers are affected by changes in global and regional economic conditions. This, in turn, affects overall demand and prices for our products sold to these industries. As a result of changes in economic conditions, demand and pricing for our products sold to these industries has fluctuated significantly.

Demand for our products sold to these industries may be adversely affected by improvements in our products as well as in the manufacturing operations of customers, which reduce the rate of consumption or use of our products for a given level of production by our customers. In the case of graphite electrodes, we estimate that specific consumption declined from about 4.3 kilograms of graphite electrodes per metric ton of steel produced in 1990 to about 2.2 kilograms per metric ton in 2005. We believe that the rate of decline of specific consumption over the long term has become lower.

Sales volumes and prices of our products sold to these industries are impacted by the supply/demand balance as well as overall demand and growth of and consolidation within the end markets for our products. In addition to the factors mentioned above, the supply/demand balance is affected by factors such as business cycles, rationalization, increase in capacity and productivity initiatives within our industry and the end markets for our products, some of which factors are affected by decisions by us.

We cannot assure you that the EAF steel production industry will continue to be the higher long term growth sector of the steel industry, that the aluminum industry will continue to experience long term growth or that any of the other industries to which we sell products will continue to strengthen as a result of current economic conditions. Accordingly, we cannot assure you that there will be stability or growth in demand for or prices of graphite electrodes or our other products sold to these industries. An adverse change in global or certain regional economic conditions could adversely affect us in a material way.

The planned growth of our natural graphite sales, which depends primarily on the successful and profitable development, manufacture and sale of thermal management products for electronic devices and products for PEM fuel cells and fuel cell systems, may not be achieved.

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Successful and profitable commercialization of products is subject to various risks, including risks beyond our control such as:

• the possibility that we may not be able to develop viable products or, even if we develop viable products, that our products may not gain commercial acceptance;

• the possibility that, until our products gain broad commercial acceptance, our sales may be concentrated in a limited number of customers;

• the possibility that our commercially accepted products could be subsequently displaced by other products or technologies;

• the possibility that, even if our products are incorporated in new products of our customers, our customers

• new products may not become viable or commercially accepted or may be subsequently displaced;

• the possibility that a mass market for our commercially accepted products, or for our customers’ products which incorporate our products, may not develop;

• restrictions under our agreements with Ballard Power Systems on sales of our fuel cell products to, and collaboration with, others; and

• failure of our customers to purchase our products in the quantities that we expect.

These risks could be impacted by factors such as adoption of new laws and regulations, changes in governmental programs, failure of necessary supporting systems (such as fuel delivery infrastructure for fuel cells) to be developed, and consumer perceptions about costs, benefits and safety.

Our financial condition could suffer if we experience unanticipated costs as a result of antitrust investigations and antitrust and securities class action lawsuits and claims.

Since 1997, we have been subject to antitrust investigations and related lawsuits and claims. Our insurance has not and will not cover any material liabilities that have or may become due in connection with antitrust investigations, lawsuits or claims.

We cannot assure you that remaining liabilities and expenses in connection with antitrust investigations, lawsuits and claims will not materially exceed any reserve related thereto or that the timing of payment thereof will not be sooner than anticipated. If such liabilities or expenses materially exceed any reserve or if the timing of payment thereof is sooner than anticipated, such events could materially adversely affect us.

In March 2006, we were served with a complaint commencing a securities class action lawsuit against us and certain of our officers. Securities class action lawsuits against various companies have resulted in material liabilities and expenses, some or all of which have not been covered by insurance. This lawsuit is in its earliest stages and we do not have any reserve related thereto.

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We are highly leveraged and our substantial debt and other obligations could limit our financial resources and ability to compete and may make us more vulnerable to adverse economic events.

Our high leverage and other obligations could have important consequences, including the following:

• our ability to restructure or refinance our debt or obtain additional debt or equity financing for payment of these obligations, or for working capital, capital expenditures, acquisitions or other general corporate purposes, may be impaired in the future;

• a substantial portion of our cash flow from operations must be dedicated to debt service and payment of other obligations, thereby reducing the funds available to us for other purposes;

• an increase in interest rates could result in an increase in the portion of our cash flow from operations dedicated to debt service or cash collateral requirements, in lieu of other purposes;

• we may have substantially more leverage and other obligations than certain of our competitors, which may place us at a competitive disadvantage; and

• our leverage and other obligations may hinder our ability to adjust rapidly to changing market conditions or other events and make us more vulnerable to insolvency, bankruptcy or other adverse consequences in the event of a downturn in general or certain regional economic conditions or in our business or in the event that these obligations are greater, or the timing of payment is sooner, than expected.

Our cash flow and capital resources may be insufficient to enable us to service our debt and meet our other obligations as they become due.

If our cash flow and capital resources are insufficient to enable us to service our debt and meet these obligations as they become due, we could be forced to: reduce or delay capital expenditures; sell assets or businesses; limit or discontinue, temporarily or permanently, business plans or operations; obtain additional debt or equity financing; or restructure or refinance debt.

We cannot assure you as to the timing of such actions or the amount of proceeds that could be realized from such actions.

We are subject to restrictive covenants under the Revolving Facility and the Senior Notes. These covenants could significantly affect the way in which we conduct our business. Our failure to comply with these covenants could lead to an acceleration of our debt.

The Revolving Facility and the Senior Notes contain a number of covenants that, among other things, restrict our ability to: sell assets; incur, repay or refinance indebtedness; create liens; make investments or acquisitions; engage in mergers or acquisitions; pay dividends; repurchase stock; or make capital expenditures.

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The Revolving Facility also requires us to comply with specified financial covenants, including minimum interest coverage and maximum senior secured leverage ratios. We cannot borrow under the Revolving Facility if the additional borrowings would cause us to breach the financial covenants.

Further, substantially all of our assets are pledged to secure indebtedness as described under “Risks Relating to Our Securities and Pledges of Our Assets.”

Our ability to continue to comply may be affected by events beyond our control. The breach of any of the covenants contained in the Revolving Facility, unless waived, would be a default under the Revolving Facility. This would permit the lenders to terminate their commitments to extend credit under, and accelerate the maturity of, the Revolving Facility. An acceleration of maturity of the Revolving Facility would permit the holders of the Senior Notes and the Debentures to accelerate the maturity of the Senior Notes and the Debentures, respectively. A breach of the covenants under the Senior Notes, unless waived, would be a default under the Senior Notes. This would also permit the holders of the Senior Notes to accelerate the maturity of the Senior Notes. An acceleration of maturity of the Senior Notes would permit the holders of the Debentures to accelerate the maturity of the Debentures and the lenders to accelerate the maturity of the Revolving Facility. A breach of our obligations under the Debentures, unless waived, would be a default under the Debentures. This would also permit the holders of the Debentures to accelerate the maturity of the Debentures. Acceleration of maturity of the Debentures would permit the holders of the Senior Notes to accelerate the maturity of the Senior Notes and the lenders to accelerate the maturity of the Revolving Facility. The acceleration of our debt could have a material adverse effect on our financial condition and liquidity. If we were unable to repay our debt to the lenders and holders or otherwise obtain a waiver from the lenders and holders, we could be forced to take the actions described in the preceding risk factor and the lenders and holders could proceed against the collateral securing the Revolving Facility and the Senior Notes and exercise all other rights available to them. We cannot assure you that we will have sufficient funds to make these accelerated payments or that we will be able to obtain any such waiver on acceptable terms or at all.

We are subject to risks associated with operations in multiple countries.

A substantial majority of our net sales are derived from sales outside the U.S., and a substantial majority of our operations and our total property, plant and equipment and other long-lived assets are located outside the U.S. As a result, we are subject to risks associated with operating in multiple countries, including:

• currency devaluations and fluctuations in currency exchange rates, including impacts of transactions in various currencies, impact on translation of various currencies into dollars for U.S. reporting and financial covenant compliance purposes, and impacts on results of operations due to the fact that costs of our foreign subsidiaries are primarily incurred in local currencies while their products are primarily sold in dollars and euros;

• creation of tax attributes in certain jurisdictions that we may not be able to utilize due to the lack of taxable income in relevant jurisdictions and creation or reversal of

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valuation allowances with respect to the related deferred tax assets due to changes in such circumstances and our estimates of the likely utilization of such assets;

• imposition of or increases in customs duties and other tariffs;

• imposition of or increases in currency exchange controls, including imposition of or increases in limitations on conversion of various currencies into dollars or euros, making of intercompany loans by subsidiaries or remittance of dividends, interest or principal payments or other payments by subsidiaries;

• imposition of or increases in revenue, income or earnings taxes and withholding and other taxes on remittances and other payments by subsidiaries;

• imposition of or increases in investment or trade restrictions and other restrictions or requirements by non-U.S. governments;

• inability to definitively determine or satisfy legal requirements, inability to effectively enforce contract or legal rights and inability to obtain complete financial or other information under local legal, judicial, regulatory, disclosure and other systems; and

• nationalization and other risks which could result from a change in government or other political, social or economic instability.

We cannot assure you that such risks will not have a material adverse effect on us or that we would be able to mitigate such material adverse effects in the future.

In general, our results of operations and financial condition are affected by inflation in each country in which we have a manufacturing facility. We cannot assure you that future increases in our costs will not exceed the rate of inflation or the amounts, if any, by which we may be able to increase prices for our products.

Our ability to grow and compete effectively depends on protecting our intellectual property. Failure to protect our intellectual property could adversely affect us.

We believe that our intellectual property, consisting primarily of patents and proprietary know-how and information, particularly the intellectual property relating to electronic thermal management and fuel cell power generation, is important to our growth. Failure to protect our intellectual property may result in the loss of the exclusive right to use our technologies. We rely on patent, trademark, copyright and trade secret laws and confidentiality and restricted use agreements to protect our intellectual property. Some of our intellectual property is not covered by any patent or patent application or any such agreement.

Patents are subject to complex factual and legal considerations. Accordingly, there can be uncertainty as to the validity, scope and enforceability of any particular patent. Therefore, we cannot assure you that:

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• any of the U.S. or foreign patents now or hereafter owned by us, or that third parties have licensed to us or may in the future license to us, will not be circumvented, challenged or invalidated;

• any of the U.S. or foreign patents that third parties have non-exclusively licensed to us, or may non-exclusively license to us in the future, will not be licensed to others; or

• any of the patents for which we have applied or may in the future apply will be issued at all or with the breadth of claim coverage sought by us.

Moreover, patents, even if valid, only provide protection for a specified limited duration.

We cannot assure you that agreements designed to protect our proprietary know-how and information will not be breached, that we will have adequate remedies for any such breach, or that our strategic alliance partners, consultants, employees or others will not assert rights to intellectual property arising out of our relationships with them.

In addition, effective patent, trademark and trade secret protection may be limited, unavailable or not applied for in the U.S. or in any of the foreign countries in which we operate.

Further, we cannot assure you that the use of our patented technology or proprietary know-how or information does not infringe the intellectual property rights of others.

Intellectual property protection does not protect against technological obsolescence due to developments by others or changes in customer needs.

The protection of our intellectual property rights may be achieved, in part, by prosecuting claims against others whom we believe have misappropriated our technology or have infringed upon our intellectual property rights, as well as by defending against misappropriation or infringement claims brought by others against us. Our involvement in litigation to protect or defend our rights in these areas could result in a significant expense to us, adversely affect the development of sales of the related products, and divert the efforts of our technical and management personnel, regardless of the outcome of such litigation.

If necessary, we may seek licenses to intellectual property of others. However, we can give no assurance to you that we will be able to obtain such licenses or that the terms of any such licenses will be acceptable to us. Our failure to obtain a license from a third party for its intellectual property that is necessary for us to make or sell any of our products could cause us to incur substantial liabilities and to suspend the manufacture or shipment of products or use of processes requiring the use of such intellectual property.

Our current and former manufacturing operations are subject to increasingly stringent health, safety and environmental requirements.

We use and generate hazardous substances in our manufacturing operations. In addition, both the properties on which we currently operate and those on which we have ceased operations are and have been used for industrial purposes. Further, our manufacturing operations involve

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risks of personal injury or death. We are subject to increasingly stringent environmental, health and safety laws and regulations relating to our current and former properties, neighboring properties, and our current operations. These laws and regulations provide for substantial fines and criminal sanctions for violations and sometimes require the installation of costly pollution control or safety equipment or costly changes in operations to limit pollution or decrease the likelihood of injuries. In addition, we may become subject to potential material liabilities for the investigation and cleanup of contaminated properties, for claims alleging personal injury or property damage resulting from exposure to or releases of hazardous substances, or for personal injury as a result of an unsafe workplace. Further, alleged noncompliance with or stricter enforcement of, or changes in interpretations of, existing laws and regulations, adoption of more stringent new laws and regulations, discovery of previously unknown contamination or imposition of new or increased requirements could require us to incur costs or become the basis of new or increased liabilities that could be material.

We are dependent on supplies of raw materials and energy at affordable prices. Our results of operations could deteriorate if that supply is substantially disrupted for an extended period.

We purchase raw materials and energy from a variety of sources. In many cases, we purchase them under short term contracts or on the spot market, in each case at fluctuating prices. We purchase a majority of our requirements for petroleum coke, our principal raw material, from multiple plants of a single supplier under an evergreen supply agreement, containing customary terms and conditions, including price renegotiation, dispute resolution and termination provisions. The availability and price of raw materials and energy may be subject to curtailment or change due to:

• limitations which may be imposed under new legislation or regulation;

• suppliers’ allocations to meet demand of other purchasers during periods of shortage (or, in the case of energy suppliers, extended cold weather);

• interruptions or cessations in production by suppliers; and

• market and other events and conditions.

Petroleum and coal products, including petroleum coke and pitch, our principal raw materials, and energy, particularly natural gas, have been subject to significant price fluctuations.

We have in the past entered into, and may in the future enter into, natural gas derivative contracts and short duration fixed rate purchase contracts to effectively fix some or all of our natural gas cost exposure. At December 31, 2005, we had fixed about 23% of our worldwide natural gas exposure through 2006 using such contracts. As of February 15, 2006, we had fixed about 32% of our worldwide natural gas exposure through such contracts.

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A substantial increase in raw material or energy prices which cannot be mitigated or passed on to customers or a continued interruption in supply, particularly in the supply of petroleum coke or energy, would have a material adverse effect on us.

Our results of operations could deteriorate if our manufacturing operations were substantially disrupted for an extended period.

Our manufacturing operations are subject to disruption due to extreme weather conditions, floods and similar events, major industrial accidents, strikes and lockouts, adoption of new laws or regulations, changes in interpretations of existing laws or regulations or changes in governmental enforcement policies, and other events. We cannot assure you that no such events will occur. If such an event occurs, it could have a material adverse effect on us.

We have significant non-dollar-denominated intercompany loans and have had in the past, and may in the future have, foreign currency financial instruments and interest rate swaps and caps. The related gains and losses have in the past been, and may in the future be, significant.

We have non-dollar-denominated intercompany loans between GrafTech Finance and some of our foreign subsidiaries. At December 31, 2004 and 2005, the aggregate principal amount of these loans was $414,457 and $318,663, respectively. These loans are subject to remeasurement gains and losses due to changes in currency exchange rates. A portion of these loans are deemed to be essentially permanent and, as a result, remeasurement gains and losses on these loans are recorded as a component of accumulated other comprehensive loss in the stockholders’ deficit section of the Consolidated Balance Sheets. The balance of these loans are deemed to be temporary and, as a result, remeasurement gains and losses on these loans are recorded as currency (gains) losses in other expense (income), net, on the Consolidated Statements of Operations. These gains or losses have in the past been and may in the future be substantial. These gains and losses may cause reported results to differ from actual cash operating results, and such difference may be material.

Additionally, we have in the past entered into, and may in the future enter into, interest rate swaps and caps to attempt to manage interest rate expense. We have also in the past entered into, and may in the future enter into, foreign currency financial instruments to attempt to hedge global currency exposures, net, relating to euro-denominated debt and identifiable foreign currency receivables, payables and commitments held by our foreign and domestic subsidiaries. We may purchase or sell these financial instruments, and open and close hedges or other positions, at any time. Changes in currency exchange rates or interest rates have in the past resulted, and may in the future result, in significant gains or losses with respect thereto. These instruments are marked-to-market monthly and gains and losses thereon are recorded in the Consolidated Statement of Operations.

Our results of operations for any quarter are not necessarily indicative of our results of operations for a full year.

Sales of graphite electrodes and other products fluctuate from quarter to quarter due to such factors as changes in economic conditions, changes in competitive conditions, scheduled

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plant shutdowns by customers, national vacation practices, changes in customer production schedules in response to seasonal changes in energy costs, weather conditions, strikes and work stoppages at customer plants and changes in customer order patterns in response to the announcement of price increases or price adjustments. We have experienced, and expect to continue to experience, volatility with respect to demand for and prices of graphite electrodes and other products, both globally and regionally. We have also experienced volatility with respect to prices of raw materials and energy, and we expect to experience volatility in such prices in the future. Accordingly, results of operations for any quarter are not necessarily indicative of the results of operations for a full year.

The graphite and carbon industry is highly competitive. Our market share, net sales or net income could decline due to vigorous price and other competition.

Competition in the graphite and carbon products industry (other than with respect to new products) is based primarily on product differentiation and quality, delivery reliability, price and customer service. Electrodes, in particular, are subject to rigorous price competition. Price increases by us or price reductions by our competitors, decisions by us or our competitors with respect to prices, volumes or profit margins, technological developments, changes in the desirability or necessity of entering into long term supply contracts with customers or other competitive or market factors or strategies could adversely affect our market share, net sales or net income.

Competition with respect to new products is, and is expected to be, based primarily on product innovation, performance and cost effectiveness as well as customer service.

Competition could prevent implementation of price increases, require price reductions or require increased spending on research and development, marketing and sales that could adversely affect us.

To achieve our planned growth and successfully complete our overhead cost reduction and restructuring activities, we may need to attract qualified personnel. Failure to do so could adversely affect us.

We are seeking to achieve growth and cost-savings, and activities related thereto may require us to hire a substantial number of additional qualified personnel and promote or replace with new qualified personnel a substantial number of existing employees whose functions are changed, who elect not to relocate or who resign or are terminated for other reasons. Companies that experience rapid growth or substantial turnover in personnel frequently encounter higher costs and operating inefficiencies (which can adversely impact internal and disclosure control environments so as to result in errors, omissions and delays in financial statements and public reporting that may be material as well as adversely impact execution of business plans and financial performance) until the new personnel are integrated into the organization. If we are unable to hire, promote or replace such employees with qualified personnel and effectively and quickly integrate them into our organization, our growth, business operations or finance, legal and administrative activities would likely be adversely affected.

We may not be able to complete our planned asset sales.

We intend to continue to sell real estate, non-strategic businesses and certain other non-strategic assets. We cannot assure you if or when we will be able to complete these sales or that we will realize proceeds therefrom that meet our current expectations.

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We have significant deferred income tax assets in multiple jurisdictions, and we may not be able to realize any benefits from those assets.

At December 31, 2005, we had $248,022 of gross deferred income tax assets, of which $208,393 required a valuation allowance. In addition we had $69,083 of gross deferred income tax liabilities. Our valuation allowance means that we do not believe that these assets are more likely than not to be realized. Until we determine that it is more likely than not that we will generate sufficient U.S. taxable income to realize our deferred income tax assets, income tax benefits in each current period will be fully reserved. This valuation allowance does not affect our ability and intent to utilize these assets to reduce taxes on future taxable income in the U.S. Future realization of the tax benefit from these tax assets depends on the existence of sufficient future taxable income of the appropriate character within the relevant periods and jurisdictions under the existing tax laws. We cannot assure you of the existence of such sufficient taxable income.

Risks Relating to Our Securities and Pledges of Our Assets

The Senior Notes and the related guarantees have limited security, and the Debentures and the related guarantees have no security. As a result, the Debt Securities are effectively subordinated to the Revolving Facility, which is secured by most of our assets, and to certain other secured debt and obligations. This could result in holders of the Debt Securities receiving less on liquidation than the lenders under the Revolving Facility and certain other creditors. In addition, this could result in holders of the Debentures receiving less on liquidation than the holders of the Senior Notes.

The borrower under the Revolving Facility is GrafTech Finance. The Revolving Facility is guaranteed by all of our domestic subsidiaries (other than AET) and certain of our foreign subsidiaries. Substantially all of the assets of such subsidiaries (except for the unsecured intercompany term note obligations described below) are pledged to secure obligations of GrafTech Finance as borrower under the Revolving Facility, guarantees by such subsidiaries of the Revolving Facility or intercompany loans to such guarantors under the Revolving Facility. Proceeds of borrowings under the Revolving Facility are required to be:

• used by GrafTech Finance for its own purposes; or

• loaned by GrafTech Finance to GTI or certain of our other domestic subsidiaries or to our Swiss subsidiary under intercompany revolving notes that are pledged to secure the Revolving Facility.

In addition, other funds loaned by GrafTech Finance to our Swiss subsidiary are generally required to be loaned under such intercompany revolving notes. Proceeds of loans to our Swiss subsidiary are required to be:

• used by our Swiss subsidiary for its own purposes; or

• loaned by our Swiss subsidiary to our other foreign subsidiaries.

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Any such loans to our other foreign subsidiaries that are not guarantors of the Revolving Facility are guaranteed by most of such other foreign subsidiaries. Such loans and guarantees are secured by a pledge of most of the assets of such other foreign subsidiaries and are pledged by our Swiss subsidiary under the Revolving Facility. As a result, most of our assets are pledged in respect of the Revolving Facility. Further, our obligation to pay the balance of the DOJ antitrust fine is secured by a lien on all of the assets of GTI.

The Senior Notes have been issued by GrafTech Finance, and the Debentures have been issued by GTI. Unsecured intercompany term notes in an aggregate principal amount equal to $506,887 and unsecured guarantees of those unsecured intercompany term notes by certain of our foreign subsidiaries have been pledged by GrafTech Finance to secure the Senior Notes, subject to the limitation that at no time will the combined value of the pledged portion of any foreign subsidiary’s unsecured intercompany term note and unsecured guarantee of unsecured intercompany term notes issued by other foreign subsidiaries exceed 19.99% of the principal amount of the then outstanding Senior Notes. As a result of this limitation, at December 31, 2005, the aggregate principal amount of unsecured intercompany term notes pledged to secure the Senior Notes equaled $323,026 or about 74% of the aggregate principal amount of the then outstanding Senior Notes. The remaining unsecured intercompany term notes held by GrafTech Finance in an aggregate principal amount at December 31, 2005 of $183,861, and any pledged unsecured intercompany term notes that cease to be pledged due to a reduction in the principal amount of the then outstanding Senior Notes due to redemption, repurchase or other events, are not subject to any pledge and are available to satisfy the claims of creditors (including the lenders under the Revolving Facility, the holders of the Senior Notes and, pursuant to the guarantee by GrafTech Finance of the Debentures, the holders of the Debentures) of GrafTech Finance, as their interests may appear. The Senior Notes contain provisions restricting the pledge of those unsecured intercompany term notes to secure any debt or obligation. The foreign subsidiaries who are obligors under any of such unsecured intercompany term notes or the related guarantees are called “unsecured intercompany term note obligors” and their obligations thereunder are called “unsecured intercompany term note obligations.”

The guarantees of the unsecured intercompany term notes by foreign subsidiaries that are pledged to secure the Senior Notes are limited as required to comply with applicable law. Many of these laws effectively limit the amount of the guarantee to the net worth of the foreign subsidiary guarantor or some portion thereof.

Neither the Senior Notes nor the Debentures contain limitations on new secured intercompany term or revolving loans under the Revolving Facility to, or intercompany guarantees of such intercompany loans by, foreign subsidiaries, including foreign subsidiaries that are unsecured intercompany term note obligors.

The Senior Notes are guaranteed by GTI, UCAR Carbon and other U.S. subsidiaries (other than AET) that collectively hold a substantial majority of our U.S. operating assets. The Debentures are guaranteed by GrafTech Finance, UCAR Carbon and other U.S. subsidiaries (other than AET) that collectively hold a substantial majority of our U.S. operating assets. The obligors (including the guarantors) under the Senior Notes and the Debentures are the same. The guarantees of the Senior Notes and the Debentures are unsecured, except the guarantee of the Senior Notes by UCAR Carbon. Each of the obligors (including guarantors) under the Senior

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Notes and the Debentures is also an obligor (including a guarantor) under the Revolving Facility. The guarantee of the Senior Notes by UCAR Carbon is secured by a pledge of all of the shares of capital stock (constituting 97.5% of the outstanding shares of capital stock) of AET held by UCAR Carbon (called the “AET Pledged Stock”). While all of the AET Pledged Stock is pledged to secure the UCAR Carbon guarantee of the Senior Notes, at no time will the value of the pledged portion of the AET Pledged Stock exceed 19.99% of the principal amount of the then outstanding Senior Notes. Moreover, the pledge of the AET Pledged Stock is junior to the pledge of the same shares to secure the UCAR Carbon guarantee of the Revolving Facility.

None of our foreign subsidiaries has guaranteed the Senior Notes or the Debentures.

The lenders and creditors whose debt and obligations are secured will have prior claims on our assets, to the extent of the lesser of the value of the assets securing, or the amount of, the respective debt or obligations. If we become bankrupt or insolvent or are liquidated or if maturity of such debt or obligations is accelerated, the secured lenders and creditors will be entitled to exercise the remedies available to a secured party under applicable law and pursuant to the relevant agreements and instruments, including the ability to foreclose on and sell the assets securing such debt or obligations to satisfy such debt or obligations. If they exercise such remedies, it is possible that our remaining assets could be insufficient to repay in full the debts and obligations to creditors whose debt and obligations are unsecured, including holders of the Debentures and, to the extent that the Senior Notes are not repaid in full upon exercise of the remedies available to holders thereof as secured parties under applicable law and pursuant to the relevant agreement and instruments, the holders of the Senior Notes.

We have a holding company structure. The issuer of the Senior Notes is a special purpose finance company. The issuer of the Debentures is our parent holding company. Accordingly, the Senior Notes and the Debentures are structurally subordinated to certain of our obligations.

The issuer of the Debentures is our parent holding company. It is a holding company with no operations, limited assets (all of which are pledged to secure the Revolving Facility and the DOJ antitrust fine) and substantial debt, liabilities and obligations.

GrafTech Finance, the issuer of the Senior Notes, is a special purpose finance company with limited operations, limited assets (a substantial majority of which are pledged to secure the Revolving Facility and the Senior Notes) and substantial debt.

A majority of our operations is conducted by, and a majority of our cash flow from operations is derived from, our foreign subsidiaries. The foreign subsidiaries that have issued unsecured intercompany term notes that are pledged to secure the Senior Notes are our operating subsidiaries in Mexico, South Africa and Switzerland and our holding company in France. The obligations of the holding company in France in respect of its unsecured intercompany term note are guaranteed, on an unsecured basis, by our operating company in France engaged in the graphite electrode business. The unsecured intercompany term notes are guaranteed, on an unsecured basis, by our operating subsidiaries in Brazil, Canada, Mexico, Spain, Switzerland and the United Kingdom and the holding company in France.

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Our advanced graphite materials operating subsidiary in Italy, our operating subsidiary in Russia and Carbone Savoie, AET and certain immaterial domestic and foreign operating and holding companies are neither guarantors of the Senior Notes or the unsecured intercompany term notes nor guarantors of the Debentures. At December 31, 2005, the aggregate combined book value of their assets was about $209,498. For 2005, their aggregate combined net loss was about $2,331 and their aggregate combined net cash provided by operations was about $25,854.

GrafTech Finance has made and may continue to make secured intercompany revolving loans to our Swiss subsidiary that are pledged under the Revolving Facility. At December 31, 2005, the aggregate principal amount of the intercompany revolving loan to our Swiss subsidiary was $12,758. To the extent that our Swiss subsidiary loans proceeds of such secured intercompany revolving loans to foreign subsidiaries that are not guarantors of the Revolving Facility, these loans will be secured, and guaranteed on a secured basis, by other such foreign subsidiaries and will be pledged under the Revolving Facility. Neither the Senior Notes nor the Debentures contain limitations on existing or new secured intercompany revolving loans pursuant to the Revolving Facility to domestic or foreign subsidiaries that are guarantors of the Senior Notes or unsecured intercompany term note obligors.

GTI relies upon interest and principal payments on intercompany loans, as well as dividends, loans and advances from our subsidiaries, to generate the funds necessary to meet its debt service obligations with respect to the Debentures. GrafTech Finance relies upon interest and principal payments on intercompany loans, as well as loans, advances and contributions from GTI and our other subsidiaries, to generate the funds necessary to meet its debt service obligations with respect to the Revolving Facility and the Senior Notes. GTI and our subsidiaries are separate entities that are legally distinct from each other. Our subsidiaries that are neither guarantors of the Senior Notes nor unsecured intercompany term note obligors have no obligation, contingent or otherwise, to pay debt service on the Senior Notes or to make funds available for such payments. Our subsidiaries that are not guarantors of the Debentures have no obligation, contingent or otherwise, to pay debt service on the Debentures or to make funds available for such payments. The ability of GTI and our subsidiaries to make these payments, loans, advances or contributions is subject to, among other things and to the extent applicable, their earnings and cash flows, their need for funds for business purposes, the covenants of their other debt, guarantees and obligations, and restrictions on dividends, distributions or repatriation of earnings under applicable corporate laws and foreign currency exchange regulations.

The ability of the holders of the Senior Notes or the Debentures to realize upon the assets of any subsidiary that is neither a guarantor of the Senior Notes or the Debentures, respectively, nor, in the case of the Senior Notes only, an unsecured intercompany term note obligor in any liquidation, bankruptcy, insolvency or similar proceedings involving such subsidiary will be subject to the claims of their respective creditors, including their respective trade creditors, holders of their respective debt and their respective preferred stockholders.

As a result, the Senior Notes and the Debentures are structurally subordinated to all existing and future debt and other obligations, including trade payables and obligations to preferred stockholders, of our subsidiaries that are neither guarantors of the Senior Notes or the Debentures, respectively, nor, in the case of the Senior Notes only, unsecured intercompany term note obligors, and the ability of the issuers and guarantors of the Senior Notes and the

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Debentures to receive (and therefore the ability of the holders of the Senior Notes and the Debentures to participate in) the assets of any subsidiary upon liquidation, bankruptcy, insolvency or similar proceedings involving any such subsidiary will be subject to the claims of the holders of such debt and other obligations, including trade creditors and preferred stockholders. In addition, to the extent that the issuers and guarantors of the Senior Notes and the Debentures are creditors of any such subsidiary, whether as trade creditors, creditors under the unsecured intercompany term notes or otherwise, their rights as a creditor could be equitably subordinated to such claims. At December 31, 2005, the debt and liabilities of such subsidiaries totaled $88,465 (including intercompany trade and other miscellaneous liabilities of $54,078).

Except as otherwise specifically stated, the financial information included in this Report is presented on a consolidated basis, including both our domestic and foreign subsidiaries. As a result, such financial information does not completely indicate the assets, liabilities or operations of each source of funds for payment of debt service on the Senior Notes or the Debentures.

The provisions of the unsecured intercompany term note obligations can be changed, and the unsecured intercompany term notes can be prepaid in whole or in part, without the consent of the holders of the Senior Notes under certain circumstances. Prepayment would increase the structural subordination of the Senior Notes. Prepayment or changes in such provisions could reduce or eliminate the ability of holders of the Senior Notes to seek recovery directly from our foreign subsidiaries upon a default under the Senior Notes.

In general, the unsecured intercompany term notes and the unsecured intercompany term note guarantees cannot be changed, and the unsecured intercompany term notes cannot be prepaid or otherwise discharged, without the consent of the holders of the Senior Notes. However, without the consent of the holders of the Senior Notes:

• the interest rate, interest payment dates, currency of payment of principal and interest and currency in which an unsecured intercompany term note is denominated (subject to certain limitations) can be amended;

• provisions of an unsecured intercompany term note obligation can be amended to comply with changes in applicable law, so long as such amendments do not change the enforceability, principal amount, stated maturity, average life, ranking or priority or prepayment provisions of an unsecured intercompany term note or the enforceability of or obligations guaranteed under an unsecured intercompany term note guaranty; and

• an unsecured intercompany term note can be prepaid in whole or in part if the proceeds received by GrafTech Finance from such prepayment are (i) invested in or loaned to a guarantor of the Senior Notes, (ii) loaned to another foreign subsidiary pursuant to an unsecured intercompany note that is pledged to secure the Senior Notes and is, to the extent permitted by applicable law, guaranteed by the unsecured intercompany term note obligors or (iii) applied to an offer to purchase Senior Notes at a purchase price equal to 100% of the principal amount of the Senior Notes, plus accrued and unpaid interest.

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The principal amount (expressed in dollars) of any unsecured intercompany term note that is not denominated in dollars could increase or decrease at any time due to changes in currency exchange rates.

A reduction in the principal amount of one or more unsecured intercompany notes could increase the structural subordination of the Senior Notes, as described in the preceding risk factors, and reduce the ability of holders of the Senior Notes to realize upon the assets of our foreign subsidiaries upon a default under the Senior Notes. A change in the provisions of the unsecured intercompany note obligations could also limit such ability.

In the event of the bankruptcy or insolvency of any of the subsidiary guarantors of the Senior Notes or the unsecured intercompany term note obligors, the guarantee of the Senior Notes by such guarantor or the unsecured intercompany term note and the unsecured intercompany term note guarantee of such obligor could be voided or subordinated. In the event of the bankruptcy or insolvency of any of the subsidiary guarantors of the Debentures, the guarantee of the Debentures by such guarantor could be voided or subordinated.

In the event of the bankruptcy or insolvency of any of the subsidiary guarantors of the Senior Notes or the Debentures or any of the unsecured intercompany term note obligors, its guarantee, unsecured intercompany term note guarantee or unsecured intercompany term note would be subject to review under relevant fraudulent conveyance, fraudulent transfer, equitable subordination and similar statutes and doctrines in a bankruptcy or insolvency proceeding or a lawsuit by or on behalf of creditors of that guarantor or obligor. Under those statutes and doctrines, if a court were to find that the guarantee or note was incurred with the intent of hindering, delaying or defrauding creditors or that the guarantor or obligor received less than a reasonably equivalent value or fair consideration for its guarantee or note and, at the time of its incurrence, the guarantor or obligor:

• was insolvent or rendered insolvent by reason of the incurrence of its guarantee or note; or

• was engaged in a business or transaction for which its remaining unencumbered assets constituted unreasonably small capital to carry on its business; or

• intended to, or believed that it would, incur debts beyond its ability to pay as they matured or became due;

then the court could void or subordinate its guarantee or note.

The measure of insolvency varies depending upon the law of the jurisdiction being applied. Generally, however, a company will be considered insolvent at a particular time if the sum of its debts at that time is greater than the then fair saleable value of its assets or if the fair saleable value of its assets at the time is less than the amount that would be required to pay its probable liability on its existing debts as they become absolute and mature. At the time of incurrence, we believed that each of the guarantors and obligors was:

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• neither insolvent nor rendered insolvent by reason of the incurrence of its guarantee or note;

• in possession of sufficient capital to run its business effectively; and

• incurring debts within its ability to pay as the same mature or become due.

The assumptions and methodologies used by us in reaching these conclusions about solvency may not be adopted by a court, and a court may not concur with these conclusions. If the guarantee of a guarantor or the unsecured intercompany term note guarantee or unsecured intercompany term note of an unsecured intercompany term note obligor is voided or subordinated, holders of the Senior Notes, holders of the Debentures or both would effectively be subordinated to all indebtedness and other liabilities of that guarantor or, in the case of holders of the Senior Notes, all indebtedness and other liabilities of that obligor.

The unsecured intercompany term note obligors are incorporated in jurisdictions other than the U.S. and are subject to the bankruptcy and insolvency laws of such other jurisdictions. We cannot assure you that the bankruptcy and insolvency laws of such jurisdictions will be as favorable to the interests of the holders of the Debt Securities as creditors, as the laws of the U.S.

We may not have the ability to purchase the Senior Notes upon a change of control as requiredby the Senior Notes. We may not have the ability to purchase the Debentures upon a fundamental change or upon specified dates as requiredby the Debentures.

Upon the occurrence of certain change of control events, we will be required to offer to purchase the outstanding Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest. Upon the occurrence of certain fundamental change events, we will be required to offer to purchase the outstanding Debentures at a purchase price equal to 100% of the principal amount, plus accrued and unpaid interest (including liquidated damages). These events are the same under the Senior Notes and the Debentures, except that, in the case of the Debentures, these events also include the failure of the capital stock (or certain equivalents) into which they are convertible to be listed on a U.S. securities exchange or market and no offer to purchase is required to be made if certain trading price or transaction consideration thresholds are met. In addition, on January 15, 2011, January 15, 2014 and January 15, 2019, at the option of a holder of Debentures, such holder may require us to purchase some or all of its Debentures at the same purchase price.

If such an event (including the exercise of such option) were to occur, we cannot assure you that we would have sufficient funds to pay the purchase price, and we expect that we would require third party financing to do so. We cannot assure you that we would be able to obtain this financing on favorable terms or at all. Upon the occurrence of certain of these events, we may be required to repay all borrowings under the Revolving Facility or obtain the consent of the lenders under the Revolving Facility to purchase the Senior Notes and the Debentures. If we do not obtain such consent or repay such borrowings, we may be prohibited from purchasing the Senior Notes and the Debentures. In such case, our failure to purchase tendered Senior Notes or Debentures would constitute a default under the Senior Notes or the Debentures, respectively. If the holders of the Senior Notes or the Debentures were to accelerate the maturity of the Senior

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Notes or the Debentures, respectively, upon such default, the lenders under the Revolving Facility would have the right to terminate their commitment to extend credit under, and to accelerate the maturity of, the Revolving Facility. We cannot assure you that we will have the financial ability to purchase outstanding Senior Notes and Debentures and repay such borrowings upon the occurrence of any such event.

The Senior Notes, the Debentures and the respective related guarantees rank equally with each other and certain of our other debt and liabilities.

The Senior Notes and the related guarantees, and the Debentures and the related guarantees, are general senior obligations of the respective issuers and guarantors. Payments in respect thereof rank equally with each other and with payments in respect of all other present or future senior indebtedness of such issuers and guarantors, respectively, and senior to all present or future subordinated obligations of such issuers and guarantors, respectively. Such payments are effectively subordinated to all present or future secured indebtedness and obligations (including the secured obligations or guarantees in respect of the Revolving Facility and, in the case of GTI as issuer or guarantor, the secured DOJ antitrust fine), to the extent of the value of the assets securing such indebtedness and obligations. We currently have no subordinated indebtedness.

GTI, GrafTech Finance and our other subsidiaries may from time to time incur additional debt, including senior indebtedness and secured indebtedness, as well as other liabilities. Such additional debt may include indebtedness of obligors in respect of the Senior Notes or the Debentures to subsidiaries that are not obligors in respect of the Senior Notes or the Debentures, subject to certain limitations under the Revolving Facility (but not under the Senior Notes or the Debentures). GTI, GrafTech Finance and our other subsidiaries are subject to certain limitations on incurrence of debt under the Revolving Facility and the Senior Notes (but not under the Debentures).

As a result of such ranking, holders of the Senior Notes and the Debentures may receive less upon liquidation, bankruptcy, insolvency or similar proceedings than they would have received if they had a more senior or secured ranking.

The value of the conversion right associated with the Debentures may be substantially lessened or eliminated if we are party to a merger, consolidation or other similar transaction.

If we are party to a merger, consolidation, binding share exchange, sale, transfer or lease of all or substantially all of our assets or similar transaction pursuant to which our common stock is converted into, or into the right to receive, cash, securities or other property, then, at the effective time of the transaction, the right to convert a Debenture into our common stock will be changed into a right to convert into the kind and amount of cash, securities or other property which the holder would have received if the holder had converted its Debenture immediately prior to the transaction. This change could substantially lessen or eliminate the value of the conversion right associated with the Debentures.

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The conditional conversion feature of the Debentures could result in a holder receiving less than the value of the common stock into which a Debenture is convertible.

The Debentures are convertible into our common stock only if specified conditions are met. If these conditions are not met, a holder will not be able to convert its Debentures, and a holder may not be able to receive the value of our common stock into which its Debentures would otherwise be convertible.

A holder of Debentures is not entitled to any rights with respect to our common stock, but will be subject to all changes made with respect to our common stock.

Holders of Debentures are not entitled to any rights with respect to our common stock (including rights to vote, to receive dividends or other distributions and to participate in other transactions), but will be subject to all changes affecting our common stock. A holder will have rights with respect to our common stock only if and when we deliver shares of our common stock to such holder upon conversion of its Debentures and, to a limited extent, by virtue of the conversion rate adjustments applicable to the Debentures. If a holder converts its Debenture near the record date for the determination of stockholders entitled to vote, receive a dividend or distribution or participate in other transactions, it is possible that such record date could pass before such delivery is made.

The Debenture Indenture contains only limited covenants, which may not protect a holder’s investment if we experience significant adverse changes or engage in a highly leveraged transaction.

The Debenture Indenture does not:

• require us to maintain any financial ratios or specified levels of net worth, revenues, income, cash flow or liquidity and, therefore, does not protect holders of the Debentures in the event that we experience significant adverse changes in our financial condition or performance;

• limit our ability to incur additional indebtedness, including indebtedness that is equal in right of payment to the Debentures;

• restrict our ability to pledge our assets;

• restrict our ability to pay dividends or make other payments in respect of our common stock or other securities ranking junior to the Debentures;

• restrict our ability to make investments; or

• restrict our ability to issue new securities.

Such events may, however, result in an adjustment to the conversion rate applicable to the Debentures.

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Adjustments to the conversion rate applicable to the Debentures may result in a taxable distribution to a holder of Debentures.

The conversion rate applicable to the Debentures will be adjusted if we distribute cash with respect to our common stock and in certain other circumstances. Under Section 305(c) of the Internal Revenue Code, an increase in the conversion rate as a result of our distribution of cash to common stockholders generally will result in a deemed distribution to a holder of Debentures. Other adjustments in the conversion rate (or failures to make such adjustments) that have the effect of increasing a holder’s proportionate interest in our assets or earnings may have the same result. Any deemed distribution to a holder will be taxable as a dividend to the extent of our current or accumulated earnings and profits.

Conversion or repurchase of Debentures into or with our common stock will dilute the ownership interests of other stockholders. In addition, to the extent that outstanding options to purchase shares of our common stock are exercised, there will be further dilution.

Our stock price may be volatile due to the nature of our business as well as the nature of the securities markets, which could affect the value of an investment in our common stock, the Debentures or the Senior Notes.

Many factors may cause the market price for our common stock to decline or fluctuate, perhaps substantially, including:

• failure of net sales, results of operations or cash flows from operations to meet the expectations of securities analysts or investors;

• recording of additional restructuring, impairment or other charges or costs;

• downward revisions in revenue, earnings or cash flow estimates of securities analysts;

• downward revisions or announcements that indicate possible downward revisions in the ratings on the Senior Notes or the Debentures;

• speculation in the press or investor perception concerning our industry or our prospects; and

• changes in general capital market conditions.

The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of our common stock.

Companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. We are involved in a securities class action litigation. Such litigation could result in substantial costs and a diversion of management’s attention and resources.

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Forward Looking Statements

This Report contains forward looking statements. In addition, we or our representatives have made or may make forward looking statements on telephone or conference calls, by webcasts or emails, in person, in presentations or written materials, or otherwise. These include statements about such matters as: future production and sales of steel, aluminum, electronic devices, fuel cells and other products that incorporate or that are produced using our products; future prices and sales of and demand for such products; future operational and financial performance of our businesses; strategic plans and business projects; impacts of regional and global economic conditions; interest rate management activities; deleveraging activities; rationalization, restructuring, realignment, strategic alliance, raw material and supply chain, technology development and collaboration, investment, acquisition, venture, operational, tax, financial and capital projects; legal and litigation matters; consulting projects; potential offerings, sales and other actions regarding debt or equity securities of us or our subsidiaries; and future asset sales, costs, working capital, revenues, business opportunities, debt levels, cash flows, cost savings and reductions, margins, earnings and growth. The words “will,” “may,” “plan,” “estimate,” “project,” “believe,” “anticipate,” “expect,” “intend,” “should,” “would,” “could,” “target,” “goal” and similar expressions identify some of these statements.

Actual future events and circumstances (including future results and trends) could differ materially from those set forth in these statements due to various factors. These factors include:

• the possibility that additions to capacity for producing steel in electric arc furnaces may not occur or that increases in graphite electrode manufacturing capacity may occur, which may impact demand for or prices or sales volume of graphite electrodes;

• the possibility that continued global consolidation of the world’s largest steel producers could impact our business or industry;

• the possibility that average graphite electrode revenue per metric ton in the future may be different than current spot prices due to changes in product mix, changes in currency exchange rates, changes in competitive market conditions or other factors;

• the possibility that price increases, adjustments or surcharges may not be realized;

• the possibility that economic or technological developments may adversely affect growth in the use of graphite cathodes in lieu of carbon cathodes in the aluminum smelting process;

• the possibility that additions to aluminum smelting capacity may not occur or that increases in production of cathodes by competitors may occur, which may impact demand for or prices or sales volume of cathodes;

• the possibility of delays in or failure to achieve successful development and commercialization of new or improved electronic thermal management or other products or that they could be subsequently displaced by other products or technologies;

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• the possibility of delays in or failure to achieve widespread commercialization of PEM fuel cells which use our natural graphite-based products or that manufacturers of PEM fuel cells may obtain those products from other sources;

• the possibility of delays in expanding or failure to expand our manufacturing capacity to meet growth in demand for existing, new or improved products, if any;

• the possibility that we may be unable to protect our intellectual property or may infringe the intellectual property rights of others;

• the occurrence of unanticipated events or circumstances relating to antitrust investigations, lawsuits or claims, a securities class action lawsuit or other litigation;

• the possibility that our provision for income taxes and effective income tax rate or cash tax rate may fluctuate significantly due to changes in tax planning, profitability, estimates of future ability to use foreign tax credits, tax laws and other factors;

• the occurrence of unanticipated events or circumstances relating to health, safety or environmental compliance or remediation obligations or liabilities to third parties or relating to labor relations;

• the possibility of changes in interest or currency exchange rates, in competitive conditions, or in inflation;

• the possibility that our high leverage, substantial debt and other obligations could limit our financial resources and ability to compete and may make us more vulnerable to adverse economic events;

• the possibility that our outlook could be significantly impacted by, among other things, changes in interest rates by the U.S. Federal Reserve Board or other central banks, changes in fiscal policies by the U.S. and other governments, developments in the Middle East, the occurrence of further terrorist acts and developments (including increases in security, insurance, data back-up, energy and transportation and other costs, transportation delays and continuing or increased economic uncertainty and weakness) resulting from terrorist acts and the war on terrorism;

• the possibility that interruption in our major raw material, energy or utility supplies due to, among other things, natural disasters, process interruptions, actions by producers, and capacity limitations, may adversely affect our ability to manufacture and supply our products or result in higher costs;

• the possibility of interruptions in production at our facilities due to, among other things, critical equipment failure, which may adversely affect our ability to manufacture and supply our products or result in higher costs;

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• the possibility that we may not complete planned asset sales for amounts or at times anticipated or at all, or that we may not achieve the earnings that we provide as guidance from time to time;

• the possibility that the anticipated benefits from organizational and work process redesign or other system changes, including operating efficiencies, production cost savings and improved operational performance, including leveraging infrastructure for greater productivity and contributing to our continued growth, may be delayed or may not occur;

• the possibility that our disclosure or internal controls may become inadequate because of changes in conditions or that the degree of compliance with our policies and procedures related to those controls may deteriorate or that those controls may not operate effectively and may not prevent or detect misstatements or errors;

• the possibility that delays may occur in the financial statement closing process due to a change in our internal control environment; and

• other risks and uncertainties, including those described elsewhere in this Report or our other SEC filings, as well as future decisions by us.

Occurrence of any of the events or circumstances described above could also have a material adverse effect on our business, financial condition, results of operations, cash flows or the market price of our common stock, the Senior Notes or the Debentures.

No assurance can be given that any future transaction about which forward looking statements may be made will be completed or as to the timing or terms of any such transaction.

All subsequent written and oral forward looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. Except as otherwise required to be disclosed in periodic reports required to be filed by public companies with the SEC pursuant to the SEC’s rules, we have no duty to update these statements.

Item 1B.  Unresolved Staff Comments

None.

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Item 2.  Properties

(Unless otherwise noted, all dollars are presented in thousands)

We currently operate the following facilities, which are owned or leased as indicated.

Location of Facility	Primary Use	Owned or Leased
U.S.
Parma, Ohio	Corporate Headquarters, Technology Center, Testing Facility, Pilot Plant and Advanced Flexible Graphite Manufacturing Facility	Owned
Wilmington, Delaware	Administrative Offices	Leased
Lakewood, Ohio	Flexible Graphite Manufacturing Facility and Sales Office	Owned
Clarksville, Tennessee	Sales Office and Machine Shop	Leased
Columbia, Tennessee	Carbon Electrode Manufacturing Facility and Sales Office	Owned
Lawrenceburg, Tennessee	Refractories Manufacturing Facility	Owned
Clarksburg, West Virginia	Advanced Graphite Materials Manufacturing Facility and Sales Office	Owned
Europe
Calais, France	Graphite Electrode Manufacturing Facility	Owned
Notre Dame, France	Graphite Electrode, Advanced Graphite Materials and Cathode Manufacturing Facility and Sales Office	Owned
Vénissieux, France	Cathode Manufacturing Facility and Technology Center	Owned
Caserta, Italy	Graphite Electrode Machine Shop	Owned
Malonno, Italy	Advanced Graphite Materials Machine Shop and Sales Office	Owned
Saronno, Italy	Sales Office	Leased
Moscow, Russia	Sales Office	Leased
Vyazma, Russia	Graphite Electrode Manufacturing Facility	Owned
Pamplona, Spain	Graphite Electrode Manufacturing Facility and Sales Office	Owned
Etoy, Switzerland	Sales Office and European Headquarters	Owned
Other International
Salvador Bahia, Brazil	Graphite Electrode and Cathode Manufacturing Facility	Owned
Sao Paulo, Brazil	Sales Office	Leased
Beijing, China	Sales Office	Leased
Hong Kong, China	Sales Office	Leased
Singapore	Sales Office	Leased
Monterrey, Mexico	Graphite Electrode Manufacturing Facility and Sales Office	Owned
Meyerton, South Africa	Graphite Electrode Manufacturing Facility and Sales Office	Owned

We believe that our facilities, which are of varying ages and types of construction, are in good condition, are suitable for our operations and generally provide sufficient capacity to meet our requirements for the foreseeable future. We plan to cease operations, in whole or in part, at certain of our facilities as described elsewhere in this Report.

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Item 3.  Legal Proceedings

The information required by Item 3 is set forth under “Contingencies” in Note 14 to the Consolidated Financial Statements and under “Subsequent Events” in Note 20 to the Consolidated Financial Statements and is incorporated herein by reference.

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

None.

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PART II

Item 5.  Market for Registrant’s Common Equity and Related Stockholder Matters

(Unless otherwise noted, all dollars are presented in thousands)

Market Information

Our common stock is listed on the NYSE under the trading symbol “GTI.” The closing sale price of our common stock was $6.22 on December 30, 2005, the last trading day of our last fiscal year. The following table sets forth, for the periods indicated, the high and low closing sales price per share for our common stock as reported by the NYSE.

	High			Low
2004
First Quarter	$	14	.95	$	11	.77
Second Quarter		15	.50		7	.97
Third Quarter		13	.95		9	.35
Fourth Quarter		14	.03		8	.14
2005
First Quarter		9	.35		5	.41
Second Quarter		5	.73		3	.21
Third Quarter		6	.27		4	.24
Fourth Quarter		7	.14		4	.86

At January 31, 2006, there were 94 record holders of common stock. We estimate that there were about 8,613 stockholders represented by nominees.

Our common stock is included in the Russell 2000 Index.

The information required by this Item 5 with respect to GTI’s Stockholder Rights Plan is set forth under “Stockholder Rights Plan” in Note 17 to the Consolidated Financial Statements contained in this Report and is incorporated herein by reference.

Dividend Policies and Restrictions

It is the current policy of GTI’s Board of Directors to retain earnings to finance strategic and other plans and programs, conduct business operations, fund acquisitions, meet obligations and repay debt. Any declaration and payment of cash dividends or repurchases of common stock will be subject to the discretion of GTI’s Board of Directors and will be dependent upon our financial condition, results of operations, cash requirements and future prospects, the limitations contained in the Revolving Facility and the Senior Notes and other factors deemed relevant by GTI’s Board of Directors. We do not anticipate paying cash dividends or repurchasing common stock in the foreseeable future.

GTI is a holding company that derives substantially all of its cash flow from issuances of its securities and cash flows of its subsidiaries. Accordingly, GTI’s ability to pay dividends or repurchase common stock from cash flow from sources other than issuance of its securities is

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dependent upon the cash flows of its subsidiaries and the advance or distribution of those cash flows to GTI.

Under the Revolving Facility, in general, GTI is permitted to pay dividends and repurchase common stock in an aggregate amount (cumulative from February 2005) equal to up to $25 million (or up to $75 million, if certain leverage ratio requirements are satisfied), plus, each year, an aggregate amount equal to 50% of our consolidated net income in the prior year.

Under the Senior Notes, in general, GTI is permitted to pay dividends and repurchase common stock only in an aggregate amount (cumulative from February 2002) equal to $25 million, plus, if certain leverage ratio requirements are satisfied, an amount of up to the sum of 50% of certain consolidated net income (cumulative from April 2002), 100% of net cash proceeds from certain sales of common stock (subsequent to February 1, 2002) and certain investment returns.

The Debentures do not restrict the payment of dividends or repurchase of our common stock, but such payment or repurchase may result in an adjustment to the conversion rate applicable to the Debentures.

Fourth Quarter Unregistered Stock Issuance

On December 12, 2005, we granted 14,000 shares of restricted stock to certain employees under the 2005 Equity Incentive Plan.  The fair market value (as defined thereunder) of such shares on the date of grant was $6.99 per share. These shares vest over a three-year period, with one-third of the shares vesting on August 31, 2006, 2007 and 2008. Each grant was exempt from registration under the Securities Act of 1933 pursuant to the exemption for transactions not involving a public offering afforded by Section 4(2) of such Act.

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Item 6.  Selected Financial Data

(Unless otherwise noted, all dollars are presented in thousands)

The following selected consolidated financial data at and for the years ended December 31 2001, 2002, 2003, 2004 and 2005 have been derived from our audited annual Consolidated Financial Statements, except for the data under “Other Operating Data.” The data set forth below should be read in conjunction with “Part I. Preliminary Notes-Presentation of Financial, Market and Legal Data,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto.

	Year Ended December 31,
	2001			2002			2003			2004			2005
	(Dollars in thousands, except per share data)
Statement of Operations Data:
Net sales	$	634,104		$	595,714		$	712,337		$	847,701		$	886,699
Income (loss) from continuing operations (a)		(89,177	)		(19,313	)		(25,314	)		17,041			(125,180	)
Basic earnings per common share:
Income (loss) from continuing operations	$	(1.79	)	$	(0.35	)		(0.38	)	$	0.18		$	(1.28	)
Income from discontinued operations		0.04			0.02			0.02			—			—
Net income (loss)	$	(1.75	)	$	(0.33	)	$	(0.36	)	$	0.18		$	(1.28	)
Weighted average common shares outstanding
(in thousands)		49,720			55,942			67,981			96,548			97,689
Diluted earnings per common share:
Income (loss) from continuing operations	$	(1.79	)	$	(0.35	)	$	(0.38	)	$	0.17		$	(1.28	)
Income from discontinued operations		0.04			0.02			0.02			—			—
Net income (loss)	$	(1.75	)	$	(0.33	)		(0.36	)		0.17			(1.28	)
Weighted average common shares outstanding
(in thousands)		49,720			55,942			67,981			98,149			97,689
Balance sheet data (at period end):
Total assets	$	781,968		$	847,659		$	966,389		$	1,067,818		$	886,820
Other long-term obligations (b)		231,494			249,622			204,214			149,462			107,704
Total long-term debt		631,201			722,449			533,934			671,446			703,743
Other financial data:
Net cash provided by (used in) operating      activities from continuing operations	$	13,967		$	(61,102	)	$	(26,528	)	$	(132,266	)	$	7,989
Net cash used in investing activities		(38,242	)		(49,539	)		(22,113	)		(56,310	)		(60,381	)
Net cash provided by financing activities		14,599			78,525			69,133			176,606			36,184

______________________

(a) For 2001, includes a restructuring charge of $11,466, pertaining primarily to the corporate realignment of our businesses, the relocation of our corporate headquarters, the shutdown of graphite electrode manufacturing operations in Clarksville and Columbia, Tennessee, the mothballing of graphite electrode manufacturing operations in Caserta,

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Italy and the shutdown of coal calcining operations in Niagara Falls, New York. For 2001, includes an impairment charge of $80,389, primarily related to the shutdowns in Tennessee and New York, the corporate realignment of our subsidiaries, the mothballing in Italy and an impairment loss related to available-for-sale securities.

For 2002, includes a restructuring charge of $5,800, pertaining primarily to the mothballing of graphite electrode manufacturing operations in Caserta, Italy. For 2002, includes an impairment charge of $16,982, primarily related to impairment losses on long-lived carbon electrode assets in Columbia, Tennessee, on available-for-sale securities, and on our investment in our venture with Jilin Carbon Ltd. in China.

For 2003, includes a restructuring charge of $19,765, pertaining primarily to the closure and settlement of our U.S. non-qualified defined benefit plan for the participating salaried workforce, with the remaining due to further organizational changes. For 2003, includes an impairment charge of $6,991, primarily related to the closure of the majority of the graphite electrode manufacturing operations in Caserta, Italy and a net write-off of the remaining book value of assets of our former graphite electrode manufacturing operations in Clarksville, Tennessee.

For 2004, includes a restructuring benefit of $548, pertaining primarily to a net benefit associated with the closure of our graphite electrode manufacturing operations in Caserta, Italy, offset by severance programs and related benefits associated with the closure of our advanced graphite machining operations in Sheffield, United Kingdom and changes in estimates related to U.S. voluntary and selective severance programs.

For 2005, includes a restructuring charge of $9,729, pertaining primarily to a $6,100 charge associated with the rationalization of our synthetic graphite facilities, including those in Brazil, France, and Russia, a $3,194 charge associated with the closure of our graphite electrodes manufacturing operations at Caserta, Italy, a $523 charge primarily associated with the relocation of our corporate headquarters from Wilmington, Delaware to Parma, Ohio, an $804 charge associated with the phase out of our graphite electrode machining operations in Clarksville, Tennessee and a $430 charge associated with the closure of our advanced graphite machining operations in Sheffield, United Kingdom, offset by a $1,322 benefit associated with a change in estimate pertaining to the closure of certain graphite electrode manufacturing operations.

For 2005, includes a $2,904 charge related to the impairment of our long-lived carbon electrode fixed assets in Columbia, Tennessee. The future estimated undiscounted cash flows expected to result from the use of these assets were below their respective carrying amounts. As a result, an impairment loss was measured as the difference between the assets’ carrying amount and fair value, which was based on current estimates of market price.

For 2005, provision for income taxes was a charge of $165,813 primarily due to a charge resulting from a net change in the total valuation allowance for 2005 of $153,079. During the 2005 year end financial accounting closing process, we determined that the timing of when we will generate sufficient U.S. taxable income to realize our U.S. deferred tax assets became less certain; therefore, we recorded valuation allowances, primarily against our net federal deferred tax assets in the U.S. of $149,734. We recorded similar valuation allowances in certain other

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jurisdictions in both the second and fourth quarters of 2005, which resulted in charges totaling $3,345.

(b) Represents liabilities and expenses in connection with antitrust investigations and related lawsuits and claims, pension and post-retirement benefits and related costs, employee severance liabilities and miscellaneous other long-term obligations.

The following quarterly selected consolidated financial data have been derived from the Consolidated Financial Statements for the periods indicated, which have not been audited. The selected quarterly consolidated financial data set forth below should be read in conjunction with “Part I. Preliminary Notes–Presentation of Financial, Market and Legal Data,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto.

	First Quarter			Second Quarter		Third Quarter			Fourth Quarter
	(Dollars in thousands, except per share data)
2004
Net sales	$	196,564		$	213,158	$	206,089		$	231,890
Net income (loss) (a)		(39	)		17,618		(9,402	)		8,865
Basic earnings per common share:
Net income (loss) per share		-			0.18		(0.10	)		0.09
Diluted earnings per common share:
Net income (loss) per share		-			0.16		(0.10	)		0.09

2005
Net sales	$	211,096	$	220,146	$	208,195	$	247,263
Net income (loss) (b)		1,505		5,690		15,589		(147,964	)
Basic earnings per common share:
Net income (loss) per share		0.02		0.06		0.16		(1.51	)
Diluted earnings per common share:
Net income (loss) per share		0.02		0.06		0.15		(1.51	)

________________

(a) The 2004 first quarter includes a $1,005 restructuring charge, primarily associated with changes in estimates for the U.S. voluntary and selective severance program.

The 2004 second quarter includes a $2,875 restructuring charge, primarily associated with the completion of severance agreements for approximately two-thirds of the employees terminated in connection with closure of our graphite electrode manufacturing operations in Caserta, Italy.

The 2004 third quarter includes a net restructuring benefit of $2,603, primarily due to a $3,484 reduction in restructuring cost estimates associated with the closure of our graphite electrode manufacturing operations in Caserta, Italy, partially offset by a $881 charge relating primarily to severance programs and related benefits associated with the closure of our advanced graphite machining operations in Sheffield, United Kingdom.

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The 2004 fourth quarter includes a net restructuring benefit of $1,825, primarily associated with changes in estimates related to U.S. voluntary and selective severance programs and the closure of our graphite electrode manufacturing operations in Caserta, Italy.

(b) The 2005 first quarter includes a $363 restructuring charge, primarily pertaining to the closure of our advanced graphite machining operations in Sheffield, United Kingdom.

The 2005 second quarter and 2005 third quarter include nominal restructuring charges or benefits.

The 2005 fourth quarter includes a restructuring charge of $9,335, pertaining primarily to a $6,100 charge associated with the rationalization of our synthetic graphite facilities, including those in Brazil, France, and Russia, a $3,327 charge associated with the closure of our graphite electrode manufacturing operations at Caserta, Italy, a $604 charge primarily associated with the relocation of our corporate headquarters from Wilmington, Delaware to Parma, Ohio, and a $626 charge associated with the phase out of our graphite electrode machining operations in Clarksville, Tennessee, offset by a $1,322 benefit associated with a change in estimate pertaining to the closure of certain graphite electrode manufacturing operations.

The 2005 fourth quarter also includes a $2,904 charge related to the impairment of our long-lived carbon electrode fixed assets in Columbia, Tennessee. The future estimated undiscounted cash flows expected to result from the use of these assets were below their respective carrying amounts. As a result, an impairment loss was measured as the difference between the assets’ carrying amount and fair value, which was based on current estimates of market price.

The 2005 fourth quarter provision for income taxes was a charge of $157,337 primarily due to a charge resulting from a net change in the total valuation allowance for 2005 of $153,079. During the 2005 year end financial accounting closing process, we determined that the timing of when we will generate sufficient U.S. taxable income to realize our U.S. deferred tax assets became less certain; therefore, we recorded a valuation allowance, primarily against our net federal deferred tax assets in the U.S., of $149,734. We recorded similar valuation allowances in certain other jurisdictions in the fourth quarter of 2005.

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

(Unless otherwise noted, all dollars are presented in thousands)

General

We have six major product categories: graphite electrodes, cathodes, carbon electrodes, carbon refractories, advanced graphite materials and natural graphite, the results of which are reported in the following segments:

• Synthetic graphite, which primarily serves the steel, aluminum, transportation and semiconductor industries and includes graphite electrodes, cathodes and advanced graphite materials and related services. We have a strategic alliance in the cathode business with Alcan/Pechiney, one of the world’s largest aluminum producers, which is a 30% owner of our cathode subsidiary, Carbone Savoie.

• Other, which includes carbon electrodes, refractories and natural graphite. Our natural graphite activities, which are conducted by AET, primarily serve the electronics, automotive, petrochemical and power generation industries and include advanced flexible graphite and flexible graphite solutions and related services. We have a strategic alliance in the natural graphite business with Ballard Power Systems, the world’s recognized leader in PEM fuel cells. Ballard Power Systems became a strategic investor in AET in June 2001, by investing $5 million in shares of Ballard Power Systems common stock for a 2.5% equity ownership interest in AET. Our other carbon product activities serve the silicon metal, steel and ferro-alloy industries.

Reference is made to the information under “Part I” for background information on our businesses, industry and related matters.

Global Economic Conditions and Outlook

We are impacted in varying degrees, both positively and negatively, as global, regional or country conditions fluctuate.

2003. Over the three years prior to the 2003 first half, we faced extremely challenging business and industry conditions. Adverse global and regional economic conditions negatively impacted many of the end markets for our products. Many of the customers in these markets reduced production levels, became less creditworthy, filed for bankruptcy protection or were acquired as part of consolidation trends within their industries. In addition, for most of this period, industry-wide capacity for most of our products exceeded demand. Such factors reduced demand and prices for products sold by us.

Global and certain regional economic conditions began to strengthen in the 2003 second half. Steel production increased globally and was particularly strong in China. We estimate that worldwide steel production was about 965 million metric tons in 2003. We estimate that EAF steel production increased to about 305 million metric tons in 2003.

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We believe that the graphite electrode industry manufacturing capacity utilization rate was about 93% in 2002 and 96% in 2003. We operated our graphite electrode manufacturing capacity at very high levels in 2003. The strengthening in the steel industry in 2003 and the tightening of the graphite electrode supply/demand balance lead to an increase in average graphite electrode prices in 2003 as compared to 2002.

Demand for cathodes in 2003 (excluding China) decreased from 2002 because of reduced construction of new aluminum smelters. We operated our cathode manufacturing capacity at relatively high operating levels in 2003. Demand for carbon refractories was strong in 2003 as a result of our increased penetration of various markets, including Europe and China, and increased blast furnace construction and refurbishment. Weak economic conditions resulted in relatively low demand and weak pricing in 2003 for most of our other products.

2004. Global and regional economic conditions continued to strengthen throughout 2004 and steel demand and production remained strong. We estimate that worldwide steel production was about 1.05 billion metric tons in 2004, about 9% higher than in 2003. We estimate that electric arc furnace steel production increased 6% in 2004 to 324 million metric tons.

Worldwide graphite electrode demand increased to approximately 1 million metric tons driven by increased steel production and, in particular, EAF steel production. Graphite electrode supply remained tight for graphite electrodes used in EAF melter applications. Graphite electrode prices for the EAF melter segment increased over the course of 2004.

We believe that the graphite electrode industry manufacturing capacity utilization rate was about 96% in 2004.We operated our graphite electrode manufacturing capacity at virtually maximum operating levels throughout 2004.

We estimate that worldwide aluminum production was about 29.8 million metric tons in 2004, about 7% higher than in 2003. Demand for cathodes increased slightly in 2004 as compared to 2003, primarily due to the construction of new aluminum smelting furnaces, offset by delays in relines of existing furnaces as a result of longer pot life from technology improvements. Consolidation of aluminum companies, including Alcan’s acquisition of Pechiney, also delayed the start of known new smelter projects. We believe that, in 2004, there was an excess supply of cathodes, on a worldwide basis.

Demand for carbon refractories strengthened consistent with growth in integrated steel production in 2004 and related increases in blast furnace lining refurbishments and, to a lesser extent, new blast furnace construction. Demand for carbon electrodes strengthened consistent with increases in production of silicon metal.

Demand for our advanced graphite materials strengthened in 2004 as compared to 2003, consistent with increased production by the customers we serve in the semiconductor, electronics, energy and transportation industries.

Throughout 2004, we experienced upward pressure on most of our raw material costs, including freight, energy and petroleum-based raw materials. These cost increases impacted almost all of our product lines. We believe these cost increases were experienced industry-wide.

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Demand for thermal management solutions in smaller, more powerful electronic devices continued to grow rapidly in 2004. Our ETM solutions are enabling some of the most advanced, thinnest and lightest products being sold today. These devices include, among others, plasma display panels, liquid crystal displays, ultra-lightweight laptops and cell phones. Sales of our ETM products grew significantly to $11,585 in 2004 as compared to $2,393 in 2003.

2005. Graphite electrode demand is primarily linked with the global production of steel in electric arc furnaces and, to a lesser extent, with the total production of steel and certain other metals. This production is linked to global and regional economic conditions. Overall, global and regional economic conditions remained relatively stable in 2005. We estimate that worldwide steel production was about 1.13 billion metric tons in 2005, about an 8% increase as compared to 2004. China’s steel production, however, grew almost 25% in 2005 and represented the single largest contributor to the growth in global steel demand. Although approximately 88% of Chinese steel production is blast oxygen furnace steel production, China is also the growth leader for new EAF steel production. Overall, EAF steel production capacity continued to grow, primarily driven by new EAF furnaces in China, and to a lesser extent, in Russia, the Middle East and North America. This contributed to a more favorable global pricing environment in 2005.

Notwithstanding the growth in worldwide steel production, the steel industry in most of our major markets operated at lower operating rates in 2005. We believe that these lower operating rates resulted in a reduction of steel inventories in the U.S. and, to a lesser extent, in other regions of the world.

Our venture with Alcan/Pechiney, which is a 30% owner of our cathode business and which purchases cathodes from us under requirements contracts that remain in effect through 2006, continues to position us as the leading supplier of cathodes to the aluminum industry.

Our refractories business is linked primarily to construction and refurbishment of blast furnaces in the integrated segment of the global steel industry and, to a lesser extent, submerged arc furnaces in the ferroalloy industry. We have benefited from the growth of steel production in China through 2005, and have expanded our global sales to large markets such as India and Russia as well as several smaller markets.

Excluding China, carbon electrode demand in 2005 was essentially the same as in 2004. In 2005, certain silicon metal producers (who are the primary carbon electrode consumers) announced plans to idle capacity. We expect growth in China to continue to replace idle capacity elsewhere, leaving overall demand relatively flat in the near future. Carbon electrode average selling prices in 2005 remained at 2004 levels.

Demand for our advanced graphite materials increased in 2005 as compared to 2004. The increases were mainly in the energy related markets, including solar, silicon and oil and gas exploration, and defense and transportation industries. We operated our advanced graphite materials capacity at very high levels in 2005.

Demand for thermal management solutions in smaller, thinner, more powerful electronic devices continued to grow rapidly in 2005. Our ETM solutions are enabling some of the most advanced, thinnest and lightest products being sold today. These devices include, among others, flat panel displays, plasma and liquid crystal display (LCD), ultra-lightweight laptops, cell phones, and LED lighting applications. The flat panel display market is expected to grow from 27 million units (15% of the TV market) to 75 million units (40%) by 2008. Sales of our ETM products grew significantly, to about $19 million in 2005 as compared to about $12 million in 2004.

Throughout 2005, we continued to experience upward pressure on most of our raw material costs, including freight, energy and petroleum based materials. These cost increases impacted almost all of our product lines.

Outlook.  Global and regional economic conditions are expected to remain relatively stable in 2006, with global EAF steel production growth of approximately 3%. We estimate that worldwide total steel production will increase to about 1.17 billion metric tons in 2006, about 4% higher than in 2005.

Worldwide graphite electrode demand is also expected to remain stable in 2006. We expect demand growth of approximately 2%, driven primarily by new EAF product capacity and higher EAF operating rates.

We expect net sales of graphite electrodes to increase approximately 15% in 2006. We expect graphite electrode sales volume to be approximately 210,000 to 215,000 metric tons, depending on market conditions. We expect upward pressure on most of our raw material costs, including freight, energy and petroleum-based raw materials. These cost increases will impact almost all of our product lines. We believe our graphite electrode production costs will increase approximately 10% to 12% in 2006 as compared to 2005.

We estimate that worldwide production of aluminum will increase in 2006 by about 2% – 3% over 2005. We expect demand for cathodes in 2006 to increase as compared to 2005, primarily due to the construction of new aluminum smelting furnaces and increased demand for relining, or expansion, of existing smelters. We believe that, in 2006, there will be an excess supply of cathodes, on a worldwide basis.

In 2006, we believe that the overall demand for advanced graphite materials will remain at a high level, resulting from continued strength in the energy markets and defense and transportation industries.

In 2006, we expect continued strong demand for our carbon refractories. The integrated steel industry is expected to remain strong through 2006, with growth continuing in China, India, and Brazil. A number of large expansion projects are known to be in the planning, engineering, and early construction phases. In addition, the Chinese government has announced its intention to close all small, inefficient blast furnaces, which we believe will require significant replacement capacity in the coming years.

For 2006, we expect net sales of ETM products of about $30 million. We continue to see the need for efficient thermal management in electronic devices as a major challenge for manufacturers. The move toward increased functionality and convergence is creating the need for larger amounts of memory in devices, larger color displays in portable devices, wireless and increased speed of data transmission, all resulting in significant thermal management issues. As a result, our ETM materials and solutions address these challenges and at the same time enable device manufacturers to capitalize on these growing trends in a more cost efficient manner.

Our outlook could be significantly impacted by, among other things, factors described under “Item 1A – Risk Factors” and “Item 1A – Forward Looking Statements” in this Report.

Financing Transactions

During 2004, we repurchased Senior Notes for cash or in exchange for shares of our common stock. See Note 5 to the Consolidated Financial Statement for more detailed information.

On January 22, 2004, we completed an offering of $225,000 aggregate principal amount of Debentures at a price of 100% of principal amount. The net proceeds from the offering were approximately $218,812. We used the net proceeds to repay the remaining $21,398 of term loans outstanding under the Senior Facilities, to make provisional payments of $74,064 against the fine (the “EU antitrust fine”) that was assessed against us in 2001 by the Directorate General IV of the European Communities (the “EU Competition Authority”), and to fund general corporate purposes, including replacement of financing previously provided by factoring of accounts receivable and strategic acquisitions that are complementary to our businesses. The balance was invested in short-term, investment quality, interest-bearing securities or deposits.

On February 8, 2005, we completed a substantial amendment and restatement of the Credit Agreement to effect a refinancing of the Revolving Facility. We believe the refinancing has enhanced our stability and liquidity. The Revolving Facility now provides for loans and letters of credit in a maximum amount outstanding at any time of up to $215 million and matures in July 2010. As a result of the refinancing, we have no material debt scheduled to mature prior to July 2010.

Antitrust Litigation Against Us

In 1997, the DOJ and the EU Competition Authority commenced investigations into alleged violations of the antitrust laws in connection with the sale of graphite electrodes. The antitrust authorities in Canada, Japan and Korea subsequently began similar investigations. The EU Competition Authority also commenced an investigation into alleged antitrust violations in connection with the sale of specialty graphite. These antitrust investigations have been resolved. Several of the investigations resulted in the imposition of fines against us. These fines, or payments in accordance with a payment schedule in the case of the DOJ antitrust fine, have been timely paid.

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We have settled virtually all of the civil antitrust lawsuits (including class action lawsuits) previously pending against us, certain civil antitrust lawsuits threatened against us and certain possible civil antitrust claims against us arising out of alleged antitrust violations occurring prior to the date of the relevant settlement in connection with the sale of graphite electrodes, carbon electrodes and bulk graphite products. All settlement payments due have been timely paid. There remain, however, certain pending claims as well as pending lawsuits in the U.S. relating to the sale of graphite electrodes sold to foreign customers. It is also possible that additional antitrust lawsuits and claims could be asserted against us in the U.S. or other jurisdictions. We are currently not reserved for such matters.

Other Proceedings Against Us

On March 1, 2006, the Company was served with a complaint commencing a securities class action in the United States District Court for the District of Delaware. The complaint alleges that GTI and certain of our executive officers violated federal securities law by making false statements or failing to disclose adverse facts about us in, or in relation to, a press release issued by us on November 3, 2005. Our analysis and investigation relating to this lawsuit is in its earliest stages, and, as a result, we are not able to assess the likelihood of loss, if any, or the amount thereof. We have not yet filed a response to the complaint. We intend to vigorously defend against this lawsuit.

We are involved in various other investigations, lawsuits, claims and other legal proceedings incidental to the conduct of our business. While it is not possible to determine the ultimate disposition of each of them, we do not believe that their ultimate disposition will have a material adverse effect on our financial position, results of operations or cash flows.

Product Warranties

We generally sell products with a limited warranty. We accrue for known warranty claims if a loss is probable and can be reasonably estimated. Claims accrued but not yet paid amounted to $646 at December 31, 2004 and $610 at December 31, 2005. The following table presents the activity in this accrual for 2005:

Balance at December 31, 2004	$	646
Product warranty charges		2,402
Payments and settlements		(2,438	)
Balance at December 31, 2005	$	610

Realizability of Net Deferred Tax Assets and Valuation Allowances

At December 31, 2005, we had $248,022 of gross deferred income tax assets, of which $208,393 required a valuation allowance. In addition, we had $69,083 of gross deferred income

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tax liabilities. Deferred income tax assets and liabilities are classified on a net current and net non-current basis for each tax jurisdiction.

              The net change in gross deferred income tax assets for 2005 was an increase of $37,962, of which $27,447 was recorded in the fourth quarter with a full valuation allowance. The net change in the total valuation allowance for 2005 was a increase of $185,204. During the 2005 year end financial accounting closing process, we determined that the timing of when we will generate sufficient U.S. taxable income to realize our U.S. deferred tax assets became less certain. Accordingly, during the fourth quarter of 2005, we recorded a valuation allowance of $149,734 against deferred tax assets in the U.S. and $1,722 in certain non-U.S. jurisdictions, which resulted in a total net charge of $151,456. Until we determine that it is more likely than not that we will generate sufficient U.S. taxable income to realize our deferred income tax assets, income tax benefits in each current period will be full reserved. This adjustment does not affect our ability and intent to utilize the deferred income tax assets as we generate sufficient future profitability in the U.S.

We are executing current strategies, and developing future strategies, to improve sales, reduce costs and improve our capital structure in order to improve U.S. taxable income to a level sufficient to fully realize these benefits in future years. The current U.S. tax attributes, if utilized, will allow us to significantly reduce our cash tax obligations in the U.S. We currently expect our overall 2006 book tax rate to be 37% to 40% and our overall 2006 cash tax rate to be 32% to 35%.

Customer Base

We are a global company and serve all major geographic markets. Sales of our products to customers outside the U.S. accounted for about 76% of our net sales in 2003, 76% of our net sales in 2004 and 70% of our net sales in 2005. In 2005, four of our ten largest customers were based in Europe, three were in the U.S. and one was in each of Brazil, Canada, and Korea.

In 2005, three of our ten largest customers were purchasers of non-graphite electrode products. No single customer or group of affiliated customers accounted for more than 5% of our net sales in 2005.

Results of Operations

Financial information discussed below omits our non-strategic composite tooling business that was sold in June 2003 and has been accounted for as discontinued operations. The results of our discontinued operations were not material to our consolidated results of operations.

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2004 Compared to 2003.

Consolidated. Net sales of $847,701 in 2004 represented a $135,364, or 19%, increase from net sales of $712,337 in 2003 primarily due to higher net sales of graphite electrodes, which increased $90,721, primarily due to higher sales volume and higher average graphite electrode sales revenue per metric ton. Higher sales volumes of carbon refractory products resulted in an increase of $14,057 while higher electronic thermal management sales resulted in an increase of $9,192. The remaining $21,394 increase in net sales occurred almost equally within advanced graphite materials and cathodes.

Cost of sales of $638,186 in 2004 represented a $93,990, or 17%, increase from cost of sales of $544,196 in 2003. Cost of sales increased $56,869 due to higher sales volumes and the impact of a less favorable product sales mix, $25,497 due to the net unfavorable impacts of currency exchange rate changes, $16,003 due to higher operating costs and $4,964 primarily due to increased electronic thermal management sales, partially offset by $9,343 of improvements of productivity throughout our manufacturing network.

Gross profit of $209,515 in 2004 represented a $41,374, or 25%, increase from gross profit of $168,141 in 2003. Gross margin increased to 24.7% of net sales in 2004 from 23.6% of net sales in 2003. See below for further details regarding such changes.

Selling, administrative and other expenses increased $3,823 from $85,546 in 2003 to $89,369 in 2004. The increase was due to investments to improve global business processes, primarily new global information systems and Sarbanes-Oxley compliance efforts. These changes in business processes resulted in higher costs of $5,000. In addition, we incurred higher selling expenses of $3,000 in 2004 as a result of higher net sales. The net unfavorable impact of changes in currency exchange rates increased costs by $2,000. These higher costs were partially offset by $8,000 of lower employee benefit costs consisting primarily of lower variable compensation expenses and, to a lesser extent, lower post retirement expense. Other costs which increased selling, administrative and other expenses were individually insignificant.

Research and development expenses decreased $2,370 from $10,410 in 2003 to $8,040 in 2004. The decrease was primarily due to both higher benefits from external funding proceeds from grants awarded to us in 2004 by the State of Ohio to support fuel cell development programs and lower net costs due to our 2003 voluntary severance programs and workforce attrition. These personnel reductions are net of increases in research and development resources dedicated to electronic thermal management development activities.

Other (income) expense, net, was expense of $21,189 in 2004 as compared to income of $12,060 in 2003. The net increase in expense of $33,249 was primarily due to the following:

• losses due to changes in currency exchange rates, primarily associated with Euro-denominated intercompany loans, increasing $33,622 for 2004 as compared to 2003;

• losses attributable to a reduction of Senior Notes outstanding (due to debt for equity exchanges and repurchases), increasing $8,166 for 2004 as compared to 2003;

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• expenses pertaining to legal, environmental and other related costs increasing $5,840 for 2004 as compared to 2003; offset by

• losses on foreign currency exchange rate contract, decreasing $6,244 for 2004 as compared to 2003;

• charges for employee benefit curtailment and other costs, decreasing $3,686 for 2004 as compared to 2003; and

• other costs, net, decreasing $4,449 in 2004 as compared to 2003.

In 2003, we recorded a net restructuring charge of $19,765, consisting of an $11,266 charge associated with the closure and settlement with certain of our U.S pension plans, with the remaining primarily due to further organizational changes.

In 2004, we recorded a net restructuring benefit of $548, comprised primarily of the following:

• a $2,473 net benefit associated with the closure of our graphite electrode manufacturing operations in Caserta, Italy (consisting of a reduction in cost estimate, partially offset by the completion of further severance agreements for employees terminated in connection with the closure), offset by

• a $1,329 charge relating primarily to severance programs and related benefits associated with the closure of our advanced graphite machining operations in Sheffield, United Kingdom; and

• a $596 charge associated primarily with changes in estimates related to U.S. voluntary and selective severance programs.

The restructuring accrual is included in other accrued liabilities and other long-term obligations on the Consolidated Balance Sheets. The following table summarizes activity relating to the accrual:

	Severance and Related Costs			Plant Shutdown and Related Costs			Total
	(Dollars in thousands)
Balance at January 1, 2003	$	2,441		$	11,543		$	13,984
Restructuring charges		19,044			721			19,765
Payments and settlements,     including non-cash items of $721		(2,763	)		(3,650	)		(6,413	)
Effect of change in currency exchange rates		531			796			1,327
Balance at December 31, 2003	$	19,253		$	9,410		$	28,663
Restructuring charges		4,321			985			5,306
Change in estimates		—			(5,854	)		(5,854	)

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	Severance and Related Costs			Plant Shutdown and Related Costs			Total
Payments and settlements,     including non-cash items of $2,814		(18,367	)		(1,300	)		(19,667	)
Effect of change in currency exchange rates		340			64			404
Balance at December 31, 2004	$	5,547		$	3,305		$	8,852

In 2003, we recorded impairment charges of $6,991. Such charges consisted of $5,370 pertaining primarily to write-off of the remaining fixed assets in connection with the closure of our graphite electrode manufacturing operation in Caserta, Italy and $1,621 pertaining primarily to the net write-off of the remaining book value of assets of our former graphite electrode manufacturing operations in Clarksville, Tennessee.

We recorded a $32,073 charge in 2003 relating to the EU antitrust fine.

We recorded a $1,262 charge for additional potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims in the 2004 first quarter. This charge was offset by a gain due to the refund of €10 million ($12,163 based on currency exchange rates then in effect) that we received from the EU Competition Authority as a result of the reduction of the EU antitrust fine to €42 million, plus accrued interest of a €7.7 million (which was calculated at a rate of 8.04% per annum), an aggregate of about $59 million at currency exchange rates in effect at the time the decision on our appeal thereof was issued.

The following table presents an analysis of interest expense:

	For the Year Ended December 31,
	2003			2004
	(Dollars in thousands)
Interest incurred on debt	$	62,351		$	49,808
Interest rate swap benefit		(13,022	)		(10,092	)
Amortization of fair value adjustments for terminated hedge     instruments		(2,222	)		(2,468	)
Accelerated amortization of fair value adjustments for terminated
hedge instruments due to reduction of Senior Notes		(5,734	)		(4,746	)
Amortization of debt issuance costs		3,148			4,834
Interest on DOJ antitrust fine, including imputed interest		955			710
Amortization of premium on Senior Notes		(687	)		(243	)
Amortization of discount on Debentures		–			867
Interest incurred on other items		352			508
Interest expense	$	45,141		$	39,178

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Average total debt outstanding was $675,553 in 2004 as compared to $696,723 in 2003. The average annual interest rate was 5.5% in 2004 as compared to 7.1% in 2003. These average annual rates include the benefits of our interest rate swaps, but exclude imputed interest on the DOJ antitrust fine, the amortization of the effective discount on the debentures, the amortization of the net proceeds from the sale of swaps and the acceleration of the amortization of gains realized from the sale of interest rate swaps due to the early extinguishment of debt from our exchange of common stock for, and repurchases of, Senior Notes outstanding.

We recorded interest income in 2004 of $1,161 primarily attributable to interest earned on cash proceeds from the issuance and sale of the Debentures.

Provision for income taxes was a charge of $46,310 in 2004 as compared to a charge of $4,695 in 2003. The effective income tax rate was 72% in 2004. The higher effective income tax rate was primarily due to the implementation of a standard tax election known as “Check-the-Box” (the “2004 special tax election”) that accelerated $215,177 of taxable income in the U.S. that resulted in the utilization of approximately $26,219 in deferred tax assets, of which approximately $19,969 were existing foreign tax credits. This resulted in tax expense that was $26,219 higher in 2004 than if we had not made this election. The effective rate in 2004 was also impacted by a benefit from the EU Competition Authority refund, which was non-taxable in the U.S., and by nondeductible expenses associated with certain restructuring charges. The effective income tax rate was not meaningful in 2003 because we incurred income tax expense of $4,695, even though we recognized a loss from continuing operations of $19,374, primarily due to tax expense of $8,362 associated with nondeductible antitrust related charges and an additional $4,989 from adjustments increasing the deferred tax asset valuation allowance. The effective income tax rate was 36% in 2004 and 40% in 2003, in each case excluding the impact of restructuring charges, antitrust charges or benefits, and the tax expense resulting from the 2004 special tax election.

During 2003, we recorded a $561 gain from the sale of our non-strategic composite tooling business. The discontinued business recorded a net income from operations of $476 in 2003.

As a result of the matters described above, net income was $17,041 in 2004 as compared to net loss of $24,277 in 2003.

Synthetic Graphite. Net sales of $752,436 in 2004 represented a $112,308, or 18%, increase from net sales of $640,128 in 2003, primarily due to higher sales volume of graphite electrodes and higher average graphite electrode sales revenue per metric ton.

Volume of graphite electrodes sold was 222,000 metric tons in 2004 as compared to 200,500 metric tons in 2003. The higher volume of graphite electrodes sold represented an increase of $50,668 in net sales. Average sales revenue per metric ton of graphite electrodes in 2004 was $2,515 per metric ton as compared to $2,344 per metric ton in 2003. The higher

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average sales revenue per metric ton represented an increase of $48,033 in net sales, approximately one-third of which was due to the positive impact of net changes in currency exchange rates. Such increases were partially offset by a decrease in net sales of $7,981 due primarily to changes in product and geographical mix.

The remaining $21,843 increase in net sales in the synthetic graphite segment occurred almost equally within advanced graphite materials and cathodes. Advanced graphite materials sales increased primarily due to the strengthening in the semiconductor, electronics, energy and transportation markets. Higher volumes of products sold increased net sales by $4,910 while improved pricing increased net sales by $1,497. Remaining increases were due to net favorable impacts of currency exchange rate changes. Cathode net sales increased primarily due to $9,191 net favorable impacts of currency exchange rate changes and $6,992 due to a favorable change in product mix, offset by negative pricing impacts.

Cost of sales of $565,583 in 2004 represented a $76,453, or 16%, increase from cost of sales of $489,130 in 2003. Cost of sales increased $44,861 due to higher sales volumes and the impact of a less favorable product sales mix, $25,497 due to the net unfavorable impacts of currency exchange rate changes and $15,830 due to higher operating costs, partially offset by $9,343 of improvements in productivity throughout our manufacturing network and $393 of improvements in other costs.

As a result, gross profit in 2004 was $186,854, 24% or $35,856 higher than in 2003. Gross margin was 24.8% of net sales in 2004, while gross margin was 23.6% of net sales in 2003.

Other. Net sales of $95,265 in 2004 represented a $23,056, or 32%, increase from net sales of $72,209 in 2003. Refractory product sales increased $14,057 primarily due to higher sales volumes. Remaining increases of $8,999 were due primarily to higher electronic thermal management sales, offset by decreases in sales of other products.

Cost of sales of $72,604 in 2004 represented a $17,538, or 32%, increase from cost of sales of $55,066 in 2003. Increases of $13,065 were primarily due to higher sales volumes of carbon refractory products and upward pressure on energy and raw material costs in both refractories and carbon electrodes. Remaining increases were primarily due to increased electronic thermal management sales.

As a result, gross profit in 2004 was $22,661, 32% or $5,518 higher than in 2003. Gross margin was 24.7% of net sales in 2004, while gross margin was 23.7% of net sales in 2003.

2005 Compared to 2004.

Consolidated. Net sales of $886,699 in 2005 represented a $38,998, or 5%, increase from net sales of $847,701 in 2004. Net sales of graphite electrodes increased $14,162 primarily due to higher average graphite electrode sales revenue per metric ton, offset by lower sales volumes and a less favorable product sales mix. Advanced graphite materials net sales increased $9,326 due primarily to higher sales volumes and improved pricing. Net sales of cathodes increased $8,224 due to higher sales volumes along with a more favorable product sales mix,

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offset by negative pricing impacts. Net sales of natural graphite increased $4,556 primarily due to an increase in ETM net sales, partially offset by decreases in sales of other natural graphite products. Remaining increases in net sales were primarily due to an increase in net sales of carbon electrodes, primarily driven by increased volumes.

Cost of sales of $654,342 in 2005 represented a $16,156, or 3%, increase from cost of sales of $638,186 in 2004.Cost of sales increased $33,679 due to higher operating costs, $2,992 due to a less favorable product sales mix, $7,265 due to the net unfavorable impacts of currency exchange rates and $2,716 due to other costs, partially offset by a decrease of $30,496 due to lower sales volumes.

Gross profit of $232,357 in 2005 represented a $22,842, or 11%, increase from gross profit of $209,515 in 2004. Gross margin increased to 26.2% of net sales in 2005 from 24.7% of net sales in 2004. See below for further details regarding such changes.

Selling, administrative and other expenses increased $11,070, or 12%, from $89,369 in 2004 to $100,439 in 2005.The increase was primarily due to higher selling expenses of approximately $2,320 associated with higher net sales, increased employee compensation costs of approximately $4,425 ($1,814 of which was associated with restricted stock grants), an increase in third party professional fees of $1,718 and $2,607 of other costs.

Research and development expenses increased $1,397, or 17%, from $8,040 in 2004 to $9,437 in 2005, with the increase primarily due to increased headcount to support growth in our ETM products and services.

Other (income) expense, net, was expense of $18,020 in 2005 as compared to expense of $21,189 in 2004. The net decrease in expense of $3,169 was primarily due to the following:

• losses of $8,782 attributable to a reduction of Senior Notes outstanding (due to debt for equity exchanges and repurchases) occurred in 2004;

• expenses pertaining to legal, environmental and other related costs decreased $5,696 in 2005 as compared to 2004;

• non-income tax charges decreased $3,395 for 2005 as compared to 2004;

• benefits pertaining to foreign currency exchange rate contracts of $1,674 as gains were recognized in 2005 as compared to losses in 2004;

• a decrease in fair value adjustment losses on interest rate caps of $3,300 for 2005 as compared to 2004; and

• the net decrease in other costs of $3,717; offset by

• losses due to changes in currency exchange rates, primarily associated with Euro-denominated intercompany loans, increasing $23,395 for 2005 as compared to 2004.

In 2004, we recorded a net restructuring charge of $548, comprised primarily of the following:

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• a $2,473 net benefit associated with the closure of our graphite electrode manufacturing operations in Caserta, Italy (consisting of a reduction in cost estimate, partially offset by the completion of further severance agreements for employees terminated in connection with the closure); offset by

• a $1,329 charge relating primarily to severance programs and related benefits associated with the closure of our advanced graphite machining operations in Sheffield, United Kingdom; and

• a $596 charge associated primarily with changes in estimates related to U.S. voluntary and selective severance programs.

In 2005, we recorded a net restructuring charge of $9,729, comprised primarily of the following:

• a $6,100 charge associated with the rationalization of our synthetic graphite facilities, including those in Brazil, France, and Russia;

• a $3,194 charge associated with the closure of our graphite electrode manufacturing operations at Caserta, Italy;

• a $523 charge primarily associated with the relocation of our corporate headquarters from Wilmington, Delaware to Parma, Ohio;

• an $804 charge associated with the phase out of our graphite electrode machining operations in Clarksville, Tennessee, scheduled for completion in the third quarter of 2006, and the closure of our administrative offices in Clarksville, scheduled for completion at the end of the first quarter of 2006; and

• a $430 charge associated with the closure of our advanced graphite machining operations in Sheffield, United Kingdom; offset by

• a $1,322 benefit associated with a change in estimate pertaining to the closure of certain graphite electrode manufacturing operations.

We expect to record additional charges of approximately $7 million in 2006 and $2 million in 2007 related to such initiatives. Additionally, in the first quarter of 2006, we announced plans to shut down carbon electrode production operations at our Columbia, Tennessee manufacturing facility. This plan is expected to be completed by the end of the first quarter of 2007. We expect to record total charges of approximately $5 million throughout 2006 and 2007 related to such shut down.

As a result of the rationalization of our synthetic graphite facilities, we expect to achieve both operating efficiencies and production cost savings. The restructuring of our graphite electrode facilities is aimed at improving our operating performance, including leveraging our infrastructure for greater productivity and contributing to our continued growth. We anticipate annualized cost savings between $20 million and $22 million, with the full benefit of such savings expected to be realized in 2007 and beyond.

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The restructuring accrual is included in other accrued liabilities and other long-term obligations on the Consolidated Balance Sheets. The following table summarizes activity relating to the accrual:

	Severance and Related Costs			Plant Shutdown and Related Costs			Total
	(Dollars in thousands)
Balance at January 1, 2004	$	19,253		$	9,410		$	28,663
Restructuring charges		4,321			985			5,306
Change in estimates		—			(5,854	)		(5,854	)
Payments and settlements,     including non-cash items of $2,814		(18,367	)		(1,300	)		(19,667	)
Effect of change in currency exchange rates		340			64			404
Balance at December 31, 2004		5,547			3,305			8,852
Restructuring charges		10,880			474			11,354
Change in estimates		(260	)		(1,365	)		(1,625	)
Payments and settlements,     majority of which are cash payments		(4,999	)		(1,671	)		(6,670	)
Effect of change in currency exchange rates		(435	)		51			(384	)
Balance at December 31, 2005	$	10,733		$	794		$	11,527

At December 31, 2005, the outstanding balance of our restructuring reserve was $11,527. We expect the majority of the remaining payments to be paid by the end of 2007. The components of the balance at December 31, 2005 consisted primarily of:

Synthetic Graphite:

• $6,044 related to the rationalization of our synthetic graphite facilities, including Brazil, France, and Russia;

• $3,897 related to the closure of our graphite electrode manufacturing operations in Caserta, Italy; and

• $700 related to the phase out of our graphite electrode machining operations in Clarksville, Tennessee.

Other Segment and Corporate:

• $794 related primarily to remaining lease payments on our former corporate headquarters; and

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• $92 related to the relocation of our corporate headquarters from Wilmington, Delaware to our research & development center in Parma, Ohio.

In 2005, we recorded a $2,904 charge related to the impairment of our long-lived carbon electrode fixed assets in Columbia, Tennessee as a result of our 2005 fourth quarter review of our carbon electrode forecasts. The future estimated undiscounted cash flows expected to result from the use of these assets were below their respective carrying amounts. As a result, an impairment loss was measured as the difference between the assets’ carrying amount and fair value, which was based on current estimates of market price.

We recorded a $1,262 charge for additional potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims in the 2004 first quarter. This charge was offset by a gain due to the refund of €10 million ($12,163 based on currency exchange rates then in effect) that we received from the EU Competition Authority as a result of the reduction of the EU antitrust fine to €42 million, plus accrued interest of a €7.7 million (which was calculated at a rate of 8.04% per annum), an aggregate of about $59 million at currency exchange rates in effect at the time the decision on our appeal thereof was issued.

The following table presents an analysis of interest expense:

	For the Year Ended December 31,
	2004			2005
	(Dollars in thousands)
Interest incurred on debt	$	49,808		$	50,984
Interest rate swap benefit		(10,092	)		(1,633	)
Amortization of fair value adjustments for terminated hedge     instruments		(2,468	)		(1,744	)
Accelerated amortization of fair value adjustments for terminated
hedge instruments due to reduction of Senior Notes		(4,746	)		—
Amortization of debt issuance costs		4,834			3,569
Interest on DOJ antitrust fine		710			507
Amortization of premium on Senior Notes		(243	)		(162	)
Amortization of discount on Debentures		867			885
Interest incurred on other items		508			310
Interest expense	$	39,178		$	52,716

Average total debt outstanding was $675,553 in 2004 as compared to $708,791in 2005. The average annual interest rate was 5.5% in 2004 as compared to 6.9% in 2005. These average rates represent the average rates on total debt outstanding and include the benefits, if any, of our interest rate swaps.

We recorded interest income in 2004 of $1,161 primarily attributable to interest earned on cash proceeds from the issuance and sale of the Debentures. We recorded interest income in 2005 of $1,200 primarily attributable to interest earned on prepayments made to the government.

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Provision for income taxes was a charge of $165,813 in 2005 as compared to a charge of $46,310 in 2004. The effective income tax rate was approximately 411% in 2005. The higher effective income tax rate was primarily due to a charge resulting from a net change in the total valuation allowance for 2005 of $153,079. During the 2005 year-end financial accounting closing process, we determined that the timing of when we will generate sufficient U.S. taxable income to realize our U.S. deferred tax assets became less certain; therefore, we recorded a valuation allowance, primarily against our net federal deferred tax assets in the U.S., of $149,734. We recorded similar valuation allowances in certain other jurisdictions in both the second and fourth quarters of 2005, which resulted in charges totaling $3,345.

The effective income tax rate was 72% in 2004. The higher effective income tax rate was primarily due to the implementation of the 2004 special tax election that accelerated approximately $215,177 of taxable income in the U.S. that resulted in the utilization of approximately $26,219 in deferred tax assets, of which approximately $19,969 were existing foreign tax credits, and $6,250 of net operating loss carryforward. The effective rate in 2004 was also impacted by a benefit from the EU Competition Authority refund, which was non-taxable in the U.S., and by nondeductible expenses associated with certain restructuring charges.

Excluding the change in valuation allowances, impact of restructuring charges and the tax expense resulting from the 2004 special tax election, the 2005 effective tax rate was 38%. Excluding the impact of restructuring charges, the tax expense resulting from the 2004 special tax election and the antitrust benefits, the 2004 effective tax rate was 36%.

As a result of the matters described above, our net loss was $125,180 in 2005 as compared to net income of $17,041 in 2004.

Synthetic Graphite. Net sales of $784,148 in 2005 represented a $31,712, or 4%, increase from net sales of $752,436 in 2004.

Net sales of graphite electrodes increased $14,162 primarily due to higher average graphite electrode sales revenue per metric ton, offset by lower sales volumes and a less favorable product sales mix. The average sales revenue per metric ton of graphite electrodes in 2005 was $2,846 per metric ton as compared to the average in 2004 of $2,515 per metric ton. The higher average sales revenue per metric ton represented an increase of $87,165 in net sales, including the net unfavorable impact of changes in currency exchange rates. Volume of graphite electrodes sold was 201,300 metric tons in 2005 as compared to 222,000 metric tons in 2004. The lower volumes of graphite electrodes sold represented a decrease of $52,780 in net sales and resulted primarily from pricing initiatives. The effect of a less favorable product sales mix decreased net sales $15,999. Other decreases in net sales amounted to $4,224.

Advanced graphite materials net sales increased $9,326 due primarily to higher sales volumes, which increased net sales $5,814, and improved pricing, which increased net sales $3,512, including the net favorable impact of changes in currency exchange rates of $377. Net sales of cathodes increased $8,224 due to higher sales volumes of $5,529 along with a more favorable product sales mix of $4,410, offset by negative pricing impacts.

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Cost of sales of $573,220 in 2005 represented an $7,638, or 1%, increase from cost of sales of $565,582 in 2004. Cost of sales increased $25,178 due to higher operating costs, $3,545 due to a less favorable product sales mix, $7,265 due to the net unfavorable impact of changes in currency exchange rates and $2,939 due to other costs, partially offset by a decrease of $31,289 due to lower sales volumes.

As a result, gross profit in 2005 was $210,928, 13% or $24,074 higher than in 2004. Gross margin was 26.9% of net sales in 2005, while gross margin was 24.8% of net sales in 2004.

Other. Net sales of $102,551 in 2005 represented a $7,286, or 8%, increase from net sales of $95,265 in 2004. Net sales of natural graphite increased $4,556 primarily due to an increase in ETM net sales of $7,127, partially offset by decreases in sales of other natural graphite products, primarily relating to softer automotive end market conditions. Remaining increases in net sales of the other segment were primarily due to an increase in net sales of carbon electrodes, primarily driven by increased volumes.

Cost of sales of $81,122 in 2005 represented an $8,518, or 12%, increase from cost of sales of $72,604 in 2004. The cost of sales of carbon electrodes increased $3,283 due to higher sales volumes and higher costs. Cost of sales of natural graphite increased $4,662 primarily due to an increase in certain higher raw material costs and higher overhead costs. Remaining increases were primarily within refractories and were due primarily to higher production costs.

As a result, gross profit in 2005 was $21,429, 5% or $1,232 lower than in 2004. Gross margin was 20.9% of net sales in 2005, while gross margin was 23.8% of net sales in 2004.

Effects of Inflation

We incur costs in the U.S. and each of the six non-U.S. countries in which we have a manufacturing facility. In general, our results of operations, cash flows and financial condition are affected by the effects of inflation on our costs incurred in each of these countries. See “Currency Translation and Transactions” for a further discussion of highly inflationary countries.

During the past three years, we experienced higher freight, energy and other raw material costs primarily due to substantial increases in regional and worldwide market prices of natural gas and other petroleum-based raw materials. We seek to mitigate the effects of those increases on our cost of sales through improved operating efficiencies, higher prices for our products and ongoing cost savings, and, in some cases, fixed price or derivative contracts.

We have in the past entered into, and may in the future enter into, natural gas derivative contracts and short duration fixed rate purchase contracts to effectively fix some or all of our natural gas cost exposure. At December 31, 2005, we had fixed about 23% of our worldwide natural gas exposure through 2006 using such contracts. As of February 15, 2006, we had fixed about 32% of our worldwide natural gas exposure through such contracts.

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Currency Translation and Transactions

We account for our non-U.S. subsidiaries under SFAS No. 52, “Foreign Currency Translation.” Accordingly, except for highly inflationary countries, the assets and liabilities of our non-U.S. subsidiaries are translated into dollars for consolidation and reporting purposes. Foreign currency translation adjustments are generally recorded as part of stockholders’ deficit and identified as part of accumulated other comprehensive loss on the Consolidated Balance Sheets until such time as their operations are sold or substantially or completely liquidated.

Highly inflationary economies are defined as having cumulative inflation of about 100% or more over a period of three calendar years. In general, the financial statements of foreign operations in highly inflationary economies are remeasured as if the functional currency of their economic environments were the dollar and translation gains and losses relating to these foreign operations are included in other (income) expense, net, on the Consolidated Statements of Operations rather than as part of stockholders’ deficit on the Consolidated Balance Sheets. We have subsidiaries in Russia, Mexico, Brazil and other countries which have had in the past, and may have in the future, highly inflationary economies.

We account for our Mexican and Russian subsidiaries using the dollar as their functional currency, as sales and purchases for each subsidiary are predominantly dollar-denominated. Our remaining subsidiaries use their local currency as their functional currency.

We also record foreign currency transaction gains and losses as part of other (income) expense, net.

Significant changes in currency exchange rates impacting us are described under “Effects of Changes in Currency Exchange Rates” and “Results of Operations.”

Effects of Changes in Currency Exchange Rates

We incur costs in dollars and the currency of each of the six non-U.S. countries in which we have a manufacturing facility, and we sell our products in multiple currencies. In general, our results of operations, cash flows and financial condition are affected by changes in currency exchange rates affecting these currencies relative to the dollar and, to a limited extent, each other.

When the currencies of non-U.S. countries in which we have a manufacturing facility decline (or increase) in value relative to the dollar, this has the effect of reducing (or increasing) the dollar equivalent cost of sales and other expenses with respect to those facilities. This effect is, however, partially offset by the cost of petroleum coke, a principal raw material used by us, which is priced in dollars. In certain countries where we have manufacturing facilities, and in certain instances where we price our products for sale in export markets, we sell in currencies other than the dollar. Accordingly, when these currencies increase (or decline) in value relative to the dollar, this has the effect of increasing (or reducing) net sales. The result of these effects is to increase (or decrease) operating profit and net income.

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Many of the non-U.S. countries in which we have a manufacturing facility have been subject to significant economic changes, which have significantly impacted currency exchange rates. We cannot predict changes in currency exchange rates in the future or whether those changes will have net positive or negative impacts on our net sales, cost of sales or net income.

During 2003, the average exchange rate of the euro and the South African rand increased about 20% and 40%, respectively, when compared to the average exchange rate for 2002. During 2003, the average exchange rate for the Brazilian real and the Mexican peso declined about 1% and 11%, respectively, when compared to the average exchange rate for 2002. During 2004, the average exchange rate of the euro, South African rand, and Brazilian real increased about 10%, 17% and 5%, respectively, when compared to the average exchange rate for 2003. The Mexican peso declined about 5% when compared to the average exchange rate for 2003. During 2005, the average exchange rate of the euro, the South African rand, the Brazilian real and the Mexican peso increased about 1%, 2%, 21% and 4%, respectively, when compared to the average exchange rate for 2004.

In the case of net sales of graphite electrodes, the impact of these events was an increase of about $33,499 in 2003, an increase of about $18,484 in 2004 and a decrease of about $604 in 2005. In the case of cost of sales of graphite electrodes, the impact of these events was an increase of about $24,400 in 2003, an increase of about $17,900 in 2004 and an increase of about $5,262 in 2005. The impact of these events on net sales of cathodes was an increase of about $12,482 in 2003, an increase of about $9,191 in 2004 and a decrease of about $132 in 2005. The impact of these events on cost of sales of cathodes was an increase of about $10,529 in 2003, an increase of about $7,597 in 2004 and an increase of about $1,730 in 2005.

We have non-dollar denominated intercompany loans between GrafTech Finance and some of our foreign subsidiaries. At December 31, 2005, the aggregate principal amount of these loans was $414,622. These loans are subject to remeasurement gains and losses due to changes in currency exchange rates. A portion of these loans are deemed to be essentially permanent and, as a result, remeasurement gains and losses on these loans are recorded as a component of accumulated other comprehensive loss in the stockholders’ deficit section of the Consolidated Balance Sheets. The balance of these loans are deemed to be temporary and, as a result, remeasurement gains and losses on these loans are recorded as currency (gains) losses in other (income) expense, net, on the Consolidated Statements of Operations. In 2003, we had a net total of $42,149 in currency gains, including $41,920 of exchange gains due to the remeasurement of intercompany loans and translation of financial statements of foreign subsidiaries which use the dollar as their functional currency. In 2004, we had a net total of $8,527 in currency gains, including $9,835 of exchange gains due to the remeasurement of intercompany loans and translation of financial statements of foreign subsidiaries which use the dollar as their functional currency. In 2005, we had a net total of $14,868 of currency losses, including $14,611 of exchange losses due to the remeasurement of intercompany loans and translation of financial statements of foreign subsidiaries which use the dollar as their functional currency. We have in the past and may in the future use various financial instruments to manage certain exposures to specific financial market risks caused by changes in currency exchange rates, as described under “Item 7A–Quantitative and Qualitative Disclosures about Market Risks.”

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Liquidity and Capital Resources

Our sources of funds have consisted principally of invested capital, cash flow from operations and debt and equity financings. Our uses of those funds (other than for operations) have consisted principally of capital expenditures, payment of fines, liabilities and expenses in connection with antitrust investigations, lawsuits and claims, payment of restructuring costs, pension and post-retirement contributions, debt reduction payments and other obligations.

We are highly leveraged and have other substantial obligations. At December 31, 2005, we had total debt of $704,148, cash and cash equivalents of $5,968 and a stockholders’ deficit of $209,577.

As part of our cash management activities, we manage accounts receivable credit risk, collections, and accounts payable and payments thereof to maximize our free cash at any given time and minimize accounts receivable losses. Certain subsidiaries sold receivables totaling $175,130 in 2003 and $7,036 in 2004. During 2005, certain subsidiaries sold receivables totaling $17,682, at a cost lower than the cost to borrow a comparable amount for a comparable period under the Revolving Facility. Proceeds of the sale of receivables were used to reduce debt. If we had not sold such receivables, our accounts receivable and our debt would have been unchanged at December 31, 2004 and about $13,095 higher at December 31, 2005. All such receivables sold during 2005 were sold without recourse, and no amount of accounts receivable sold remained on the Consolidated Balance Sheet at December 31, 2005.

We use cash and cash equivalents, funds available under the Revolving Facility (subject to continued compliance with the financial covenants and representations under the Revolving Facility) as well as cash flow from operations as our primary sources of liquidity. The Revolving Facility provides for maximum borrowings of up to $215 million. At December 31, 2005, $167,947 was available (after consideration of outstanding revolving and swingline loans of $39,000 and outstanding letters of credit of $8,053). It is possible that our future ability to borrow under the Revolving Facility may effectively be less because of the impact of additional borrowings upon our compliance with the maximum net senior secured debt leverage ratio permitted or minimum interest coverage ratio required under the Revolving Facility.

At December 31, 2005, we were in compliance with all financial and other covenants contained in the Senior Notes, the Debentures and the Revolving Facility, as applicable. Based on expected operating results and expected cash flows, we expect to be in compliance with these covenants over the next twelve months. If we were to believe that we would not continue to comply with these covenants, we would seek an appropriate waiver or amendment from the lenders thereunder. We cannot assure you that we would be able to obtain such waiver or amendment on acceptable terms or at all.

At December 31, 2005, 6% (or $40,376) of our total debt (excluding the fair value adjustments to debt and the unamortized bond premium and including the original value of the Debenture derivative liability relating to the Debentures redemption feature with a make-whole

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provision) consists of variable rate obligations. Such amount includes $39,000 outstanding under the Revolving Facility and $1,376 of other debt.

At December 31, 2005, the Revolving Facility had an effective interest rate of 6.8%, our $434,631 principal amount of Senior Notes had a fixed rate of 10.25% and an effective rate of 10.02% (including the effect of the amortization of fair value adjustments for terminated hedge instruments) and our $225,000 principal amount of Debentures had a fixed rate of 1.625%. We estimate interest expense to be approximately $58 million for 2006.

We continue to implement interest rate management initiatives to seek to minimize interest expense and optimize the risk in our portfolio of fixed and variable interest rate obligations as described under “Item 7A–Quantitative and Qualitative Disclosures about Market Risk” in this Report.

Long-Term Contractual, Commercial and Other Obligations and Commitments. The following tables summarize our long-term contractual obligations and other commercial commitments at December 31, 2005.

	Payment Due By Period
	Total		Year Ending December 2006		Two Years Ending December 2008		Two Years Ending December 2010		Years Ending After December 2010
	(Dollars in thousands)
Contractual and Other Obligations
Long-term debt	$	699,602	$	39,045	$	434	$	191	$	659,932
Capital lease obligations		—		—		—		—		—
Operating leases		15,208		4,063		5,124		4,097		1,924
Unconditional purchase obligations (a)		26,776		7,974		8,776		8,776		1,250
Total contractual obligations (a)		741,586		51,082		14,334		13,064		663,106
Estimated liabilities and expenses in    connection with antitrust    investigations and related lawsuits    and claims (b)		26,000		20,625		5,375		—		—
Postretirement, pension and related
benefits (c)		76,983		11,996		6,499		6,499		51,989
Interest (d)		310,929		48,244		96,488		96,488		69,709
Other long-term obligations		17,200		7,371		2,484		853		6,492
Total contractual and other           obligations (a)(b)(c)	$	1,172,698	$	139,318	$	125,180	$	116,904	$	791,296
Other Commercial Commitments
Lines of credit (e)		—		—	$	—	$	—		—
Letters of credit		8,017		7,747		270		—		—
Guarantees		3,680		3,438		135		—		107
Total other commercial           commitments	$	11,697	$	11,185	$	405	$	—	$	107

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_________________

(a) Effective April 2001, we entered into a ten-year service contract with CGI Group Inc. (“CGI”) valued at that time at $75 million ($23 million of which is the unconditional purchase obligation at December 31, 2005 included in the above table). Pursuant to this contract, CGI became the delivery arm for our global information services. Under the outsourcing provisions of this contract, CGI managed our data center services, networks, desktops, telecommunications and legacy systems. This contract was amended, effective September 2005, to reduce the scope of CGI’s management of our data center services, networks, desktops and telecommunications. We are dependent on CGI for these services. A failure by CGI to provide any of these services to us in a timely manner could have an adverse effect on our results of operations.

In the 2002 third quarter, we entered into a ten-year outsourcing contract with CGI valued at that time at $36 million. Such amounts are excluded from the above table, as these amounts do not include an unconditional purchase obligation. Pursuant to this contract, CGI became the delivery arm for our finance and accounting business process services (“BPS”), including accounts receivable and accounts payable activities, and provided various related analytical services such as general accounting, cost accounting and financial analysis activities. During the fourth quarter of 2005, we entered into a memorandum of agreement with CGI, terminating such services. The memorandum was entered into after the parties determined that the termination of the contract was in their mutual best interest. Such termination is effective during the first quarter of 2006. Thereafter, we will be solely and entirely responsible for all of the services previously rendered by CGI under the contract.

(b) Consists of the outstanding balance of the DOJ antitrust fine.

(c) Represents estimated postretirement, pension and related benefits obligations based on actuarial calculations.

(d) Excludes the accounting for deferred financing costs or gains on the sale of hedge instruments. Payments assume Senior Notes, with a fixed rate of interest of 10.25%, mature on February 15, 2012 and the Debentures, with a fixed rate of interest of 1.625%, effectively mature on January 15, 2011.

(e) Local lines of credit are established by our foreign subsidiaries for working capital purposes and are not part of the Revolving Facility. The total amount available under the lines of credit amounted to $19 million at December 31, 2005.

Cash Flow and Plans to Manage Liquidity. As a result of our significant leverage and other substantial obligations, our business strategies include efforts to enhance our capital structure by further reducing our gross obligations. Accordingly, we have placed the highest priority on accelerating the amount and speed of cash generated every day. Our efforts include leveraging our unique global manufacturing network by driving higher utilization rates and more productivity from our existing assets, accelerating commercialization initiatives across all of our businesses and realizing other global efficiencies. In addition, we may exchange or repurchase Senior Notes or Debentures as described below. We also continue to evaluate other

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opportunities to reduce our obligations, including the obligations associated with our U.S. defined benefit plan, which was frozen in 2003.

Typically, the first quarter of each year results in neutral or negative cash flow from operations due to various factors. These factors include customer order patterns, fluctuations in working capital requirements and other factors. Typically, the other three quarters result in positive cash flow from operations. The third quarter tends to produce relatively less positive cash flow from operations primarily as a result of scheduled plant shutdowns by our customers for vacations. Our cash flow from operations in the first and third quarters typically is adversely impacted by the semi-annual interest payments on the Senior Notes and the Debentures. The second and fourth quarters correspondingly benefit from the absence of such interest payments.

In addition to the above factors, in 2003 and 2004, we had negative cash flow from operations primarily due to payments in connection with restructurings, antitrust investigations, lawsuits and claims and uses of cash from working capital. In 2005, we had positive cash flow from operations despite continued payments in connection with restructurings and antitrust investigations and the continued use of cash for working capital to, among other things, build inventories. For 2006, we expect increasingly positive cash flows from operations. In addition to the factors described above, we expect a weaker than normal 2006 first quarter due to, lower sales and profit because of weaker than normal customer shipments because graphite electrode customers took full contract volumes in the 2005 fourth quarter and a higher use of cash for temporarily higher inventory because of higher graphite electrode operating levels in the first quarter as compared to the lower shipments. This is expected to result in negative cash flow during the 2006 first quarter and debt levels that may be $40 million or more higher in the 2006 first quarter than those at the 2005 year end and generally higher than the average level expected for the full year 2006.

As part of our cash management activities, we seek to manage accounts receivable credit risk and collections, and payment of accounts payable to seek to maximize our free cash at any given time and minimize accounts receivable losses. In order to seek to minimize our credit risks, we reduced our sales of, or refused to sell (except for cash on delivery), graphite electrodes to some customers and potential customers in the U.S. and, to a limited extent, elsewhere. Our unrecovered trade receivables worldwide were only 0.1% of global net sales during the last 3 years. We cannot assure you that we will not be materially adversely affected by accounts receivable losses in the future. In addition, we have historically factored a portion of our accounts receivable and used the proceeds to reduce debt.

We use cash and cash equivalents, funds available under the Revolving Facility and cash flow from operations as our primary sources of liquidity. We believe that our business strategies will continue to improve the amount and speed of cash generated from operations under current economic conditions. Improvements in cash flow from operations resulting from these strategies are being partially offset by associated cash implementation costs while they are being implemented. We also believe that our planned asset sales together with these improvements in cash flow from operations should allow us to reduce our debt and other obligations over the long term.

We may from time to time and at any time repurchase Senior Notes or Debentures in open market or privately negotiated transactions, opportunistically on terms that we believe to be favorable. These purchases may be effected for cash (from cash and cash equivalents, borrowings under the Revolving Facility or new credit facilities, or proceeds from sale of debt or equity securities or assets), in exchange for common stock or other equity or debt securities, or a combination thereof. We will evaluate any such transaction in light of then prevailing market conditions and our then current and prospective liquidity and capital resources, including projected and potential needs and prospects for access to capital markets. Any such transactions may, individually or in the aggregate, be material.

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Our high leverage and other substantial obligations could have a material impact on our liquidity. Cash flow from operations services payment of our debt and other obligations thereby reducing funds available to us for other purposes. Our leverage and these obligations make us more vulnerable to economic downturns in the event that these obligations are greater or timing of payment is sooner than expected.

We believe that the long term fundamentals of our business continue to be sound. Accordingly, although we cannot assure you that such will be the case, we believe that, based on our expected cash flow from operations, our existing capital resources, and taking into account our working capital needs and our efforts to reduce costs, improve efficiencies and product quality and accelerate commercialization of new products and cash flow, we will be able to manage our liquidity to permit us to service our debt and meet our obligations when due. Based on expected operating results and expected cash flows, we expect to be in compliance with financial covenants in 2006.

Related Party Transactions. Since January 1, 2003, we have not engaged in or been a party to any material transactions with affiliates or related parties other than transactions with our subsidiaries (including Carbone Savoie and AET) and compensatory transactions with directors and officers (including employee benefits, stock option and restricted stock grants, compensation deferral, executive employee loans and stock purchases).

Off-Balance Sheet Arrangements and Commitments. We have not undertaken or been a party to any material off-balance-sheet financing arrangements or other commitments (including non-exchange traded contracts), other than:

• Interest rate caps, interest rate swaps, currency exchange rate contracts and natural gas contracts, which are described under “Item 7A – Quantitative and Qualitative Disclosures About Market Risk.”

• Commitments under non-cancelable operating leases that, at December 31, 2004, totaled no more than $4 million in each year and about $7,697 in the aggregate, and, at December 31, 2005, totaled no more than $4 million in each year and about $15,208 in the aggregate.

• Minimum required purchase commitments under our information technology outsourcing services agreement with CGI described above that, at December 31, 2004, totaled approximately $5 million in each year and about $32,484 in the aggregate and at December 31, 2005, totaled no more than $5 million in each year and about $23,276 in the aggregate.

• Factoring accounts receivable as described above.

We are not affiliated with or related to any special purpose entity other than GrafTech Finance, our wholly-owned and consolidated finance subsidiary.

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Cash Flows.

Cash Flow (Used in) Provided by Operating Activities. Cash flow (used in) provided by operating activities was ($25,106) in 2003, ($132,266) in 2004 and $7,989 in 2005.

Cash used in operating activities was $25,106 in 2003. Income from continuing operations, after adding back the net effect from non-cash items, amounted to $19,502. Such income was used in operating activities primarily as follows: a reduction in payables of $12,309 primarily due to timing of payment patterns, including our semi-annual interest payments on the Senior Notes and the Debentures, an increase in inventories of $8,674 to primarily support anticipated customer demand and an increase of $4,971 in accounts receivables.

Other uses in 2003 consisted of $4,588 of payments for antitrust investigations and related lawsuits and claims, $5,692 of restructuring costs related to severance and related payments and $9,796 of other payments consisting primarily of pension and post-retirement contributions and payments. Net cash provided from discontinued operations amounted to $1,422.

Cash used in operating activities was $132,266 in 2004. Net income, after adding back the net effect from non-cash items, amounted to $72,624. Such income was used in operating activities primarily as follows: an increase in accounts receivables of $66,300 primarily from the discontinuance of accounts receivable factoring and increased sales, and an increase in inventories of $6,276 primarily in anticipation of increased demand, offset by an increase in payables of $6,859 due primarily to timing of payment patterns.

Other uses in 2004 consisted of $83,480 of payments for antitrust investigations and related lawsuits and claims, $16,853 of restructuring costs related to severance and related payments and $38,840 of other payments consisting primarily of pension and post-retirement contributions and payments.

Cash provided by operating activities was $7,989 in 2005. Income from continuing operations, after adding back the net effect from non-cash items, amounted to $80,699. Such income was used in operating activities primarily as follows: an increase in inventories of $45,430 primarily to support anticipated growth in customer demand and an $2,690 decrease in payables primarily due to timing of payment patterns, offset by a decrease in accounts receivables of $10,921 primarily from increased factoring.

Other uses in 2005 consisted of $16,900 of payments for antitrust investigations and related lawsuits and claims, $6,670 of restructuring costs related to severance and related payments and $11,941 of other payments consisting primarily of pension and post-retirement contributions and payments.

Cash Flow Used in Investing Activities.Cash flow used in investing activities was $22,113 in 2003, $56,310 in 2004 and $60,381 in 2005.

Cash used in investing activities was $22,113 in 2003. Capital expenditures in 2003 were $40,485. Capital expenditures related primarily to the expansion of graphite electrode

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manufacturing capacity, implementation of People Soft Enterprise One (formerly known as J.D. Edwards One World) information systems and essential capital maintenance. Expenditures were offset by $18,372 of cash, primarily provided from the sale of our non-strategic composite tooling business and the sale of other assets.

Cash used in investing activities was $56,310 in 2004. Capital expenditures in 2004 were $59,117 and related primarily to the expansion of graphite electrode manufacturing capacity, including expansion of our graphite electrode manufacturing facilities in Spain, France, and South Africa, implementation of People Soft Enterprise One (formerly known as J.D. Edwards One World) information systems and essential capital maintenance. Other investing uses of $3,539 pertained primarily to the purchase of derivative instruments. Such uses were offset by $6,346 in proceeds from the sale of assets, primarily pertaining to the sale of our fixed assets in connection with closure of our advanced synthetic graphite machining operations in Sheffield, United Kingdom.

Cash used in investing activities was $60,381 in 2005. Capital expenditures amounted to $48,071 in 2005 and related primarily to graphite electrode productivity and production stability initiatives and other essential capital maintenance. Such uses were offset primarily by proceeds from the sale of derivative instruments and the sale of other assets. Other investing uses of $15,597 pertained primarily to payments in connection with the sale of interest rate swaps. Such uses were partially offset by $3,287 from the sale of certain assets.

Cash Flow Provided by Financing Activities. Cash flow provided by financing activities was $69,133 in 2003, $176,606 in 2004 and $36,184 in 2005.

During 2003, we received net proceeds of $189,877 from a registered public offering of common stock and $30,188 from the sale of interest rate swaps. We used these proceeds primarily to repay term loans of $115,986 outstanding under the Senior Facilities, reduce the outstanding balance under the Revolving Facility and repay other short-term debt.

Cash provided by financing activities was $176,606 in 2004. During 2004, we received gross proceeds of $225,000 (less issuance costs of $7,355) from the issuance and sale of the Debentures and $7,843 from the exercise of stock options. We used these proceeds to repay term loans of $21,398 outstanding under the Senior Facilities, to pay $83,480 primarily to the EU Competition Authority and to replace cash previously provided by factoring of accounts receivable as described above in “Cash Flow Used in Operating Activities.” In addition, we purchased $22,869 aggregate principal amount of Senior Notes, plus accrued interest, for $27,342 in cash.

Cash provided by financing activities was $36,184 in 2005. During 2005, we incurred borrowings of $173,325, primarily under the Revolving Facility. We used these net borrowings to fund working capital requirements, primarily inventory that we have replenished and built in anticipation of stronger demand. Such borrowings were offset by payments under the Revolving Facility of $131,562 and $5,579 in financing and other costs.

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Costs Relating to Protection of the Environment

We have been and are subject to increasingly stringent environmental protection laws and regulations. In addition, we have an on-going commitment to rigorous internal environmental protection standards. Environmental considerations are part of all significant capital expenditure decisions. The following table sets forth certain information regarding environmental expenses and capital expenditures.

	For the Year Ended December 31,
	2003		2004		2005
	(Dollars in thousands)
Expenses relating to environmental protection	$	13,074	$	13,056	$	12,525
Capital expenditures related to environmental protection		2,118		2,787		2,749

Critical Accounting Policies

Critical accounting policies are those that require difficult, subjective or complex judgments by management, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements. The following accounting policies are deemed to be critical.

Reliance on Estimates. In preparing the Consolidated Financial Statements, we use and rely on estimates in determining the economic useful lives of our assets, obligations under our employee benefit plans, provisions for doubtful accounts, provisions for restructuring charges and contingencies, tax valuation allowances, evaluation of goodwill and other intangible assets, pension and postretirement benefit obligations and various other recorded or disclosed amounts. Estimates require us to use our judgment. While we believe that our estimates for these matters are reasonable, if the actual amount is significantly different than the estimated amount, our assets, liabilities or results of operations may be overstated or understated.

Employee Benefit Plans. We sponsor various retirement and pension plans, including defined benefit and defined contribution plans and postretirement benefit plans that cover most employees worldwide. Accounting for these plans requires assumptions as to the discount rate, expected return on plan assets, expected salary increases and health care cost trend rate. See Note 11 to the Consolidated Financial Statements for further details.

Financial Instruments. We are exposed to market risks primarily from changes in interest rates and currency exchange rates. We routinely enter into various transactions that have been authorized according to documented policies and procedures to manage well-defined currency exchange rate risks and interest rate risks. These transactions relate primarily to financial instruments described under “Item 7A–Quantitative and Qualitative Disclosures about Market Risks.” Since the counterparties to these financial instruments are large commercial banks and similar financial institutions, we do not believe that we are exposed to material counterparty credit risk. We do not use financial instruments for trading purposes. Accounting for financial instruments requires us to make judgments about the value of those instruments at specified dates. While we believe that our estimates of values are reasonable, if the actual values

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are significantly different than the estimated values, our assets, liabilities or results of operations may be overstated or understated.

Derivative Liability Associated with our Debentures. In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, the redemption option and its make-whole provision (the “Redemption Make-Whole Option”) contained in the Debentures, qualify as an embedded derivative that was not clearly and closely related to the characteristics of the Debentures upon issuance. Since the Redemption Make-Whole Option does not currently qualify for any scope exception within SFAS No. 133, it is required by SFAS No. 133 to be accounted for separately from the debt instrument and recorded as derivative financial instruments. The embedded derivative financial instrument was classified as a derivative liability upon issuance and is included in other long-term obligations in the Consolidated Balance Sheet.

We estimate the fair value of the Redemption Make-Whole Option using a financial model that uses several assumptions, including: historical stock price volatility, risk-free interest rates, remaining maturity and the closing price of our common stock to determine estimated fair value of our derivative liability. We believe that the assumption that has the greatest impact on the determination of fair value is the closing price of our common stock during each quarterly period.

Contingencies. We account for contingencies by recording an estimated loss or gain from a loss or gain contingency when information available prior to issuance of the Consolidated Financial Statements indicates that it is probable that an asset has been impaired or a liability has been incurred or a gain has become receivable at the date of the Consolidated Financial Statements and the amount of the loss or gain can be reasonably estimated. Accounting for contingencies such as those relating to environmental, legal and income tax matters requires us to use our judgment. While we believe that our accruals for these matters are adequate, if the actual loss or gain from a contingency is significantly different from the estimated loss or gain, our results of operations may be overstated or understated. Legal costs expected to be incurred in connection with a loss contingency are expensed as incurred.

Impairments of Long-Lived Assets. We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the discounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated future net cash flows to be generated by the asset. If the asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. Assets to be disposed are reported at the lower of the carrying amount or fair value less estimated costs to sell. Estimates of the discounted future cash flows are subject to significant uncertainties and assumptions. If the actual value is significantly less than the estimated fair value, our assets may be overstated. Future events and circumstances, some of which are described below, may result in an impairment charge:

• new technological developments that provide significantly enhanced benefits over our current technology;

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• significant negative economic or industry trends;

• changes in our business strategy that alter the expected usage of the related assets;

• significant increases or decreases in our cost of capital; and

• future economic results that are below our expectations used in the current assessments.

Accounting for Income Taxes. When we prepare the Consolidated Financial Statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process requires us to make the following assessments:

• estimate our actual current tax liability in each jurisdiction;

• estimate our temporary differences resulting from differing treatment of items, such as lease revenue and related depreciation, for tax and accounting purposes (which result in deferred tax assets and liabilities that we include within the Consolidated Balance Sheets); and

• assess the likelihood that our deferred tax assets will be recovered from future taxable income and, if we believe that recovery is not likely, establish a valuation allowance.

If our estimates are incorrect, our deferred tax assets or liabilities may be overstated or understated.

Recent Accounting Pronouncements

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), Share-Based Payment. SFAS No. 123(R) revises SFAS No. 123, Accounting for Stock-Based Compensation, and requires companies to expense the fair value of employee stock options and other forms of stock-based compensation. Under SFAS No. 123(R), companies are to (1) use fair value to measure stock-based compensation awards and (2) cease using the “intrinsic value” method of accounting, which Accounting Principles Board Opinion (“APB”) No. 25 allowed and resulted in no expense for many awards of stock options for which the exercise price of the option equaled the price of the underlying stock at the grant date. In addition, SFAS No. 123(R) retains the modified grant date model from SFAS No. 123. Under that model, compensation cost is measured at the grant date and adjusted to reflect actual forfeitures and the outcome of certain conditions. The fair value of an award is not remeasured after its initial estimation on the grant date (except in the case of a liability award or if the award is modified). SFAS No. 123(R) is effective for annual periods beginning after June 15, 2005. We will be required to adopt SFAS No. 123(R) in the first quarter of 2006. The actual impact of the adoption of SFAS No. 123(R) will depend upon the amount, nature and type of stock-based compensation awards outstanding upon implementation and that we may issue in the future. Based on the current stock-based compensation plans in effect and awards issued, our estimated expense in 2006 for stock-based compensation is $4,055, $3,338 of which relates to 2005 restricted stock grants and $717 of which relates to unvested stock options.

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The information required by this Item 7 with respect to other recent accounting pronouncements is set forth under “New Accounting Standards” in Note 3 to the Notes to the Consolidated Financial Statements contained in this Report, and is incorporated herein by reference.

Description of Our Financing Structure

The information required by this Item 7 with respect to our financing structure is set forth under “Long-Term Debt and Liquidity” in Note 5 to the Notes to the Consolidated Financial Statements contained in this Report, and is incorporated herein by reference.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

(Unless otherwise noted, all dollars are presented in thousands)

We are exposed to market risks primarily from changes in interest rates, currency exchange rates, commercial energy rates and changes to the fair value of the Redemption Make-Whole Option. We routinely enter into various transactions that have been authorized according to documented policies and procedures to manage these well-defined risks. These transactions relate primarily to financial instruments described below. Since the counterparties, if any, to these financial instruments are large commercial banks and similar financial institutions; we do not believe that we are exposed to material counterparty credit risk. We do not use financial instruments for trading purposes.

Our exposure to changes in currency exchange rates results primarily from:

• sales made by our subsidiaries in currencies other than local currencies;

• raw material purchases made by our foreign subsidiaries in currencies other than local currencies; and

• investments in and intercompany loans to our foreign subsidiaries and our share of the earnings of those subsidiaries, to the extent denominated in currencies other than the dollar.

Our exposure to changes in energy costs results primarily from the purchase of natural gas and electricity for use in our manufacturing operations. Our exposure to changes in the fair value of the Redemption Make-Whole Option results primarily from changes in the closing price of our common stock.

Interest Rate Management. We implement interest rate management initiatives to seek to minimize our interest expense and optimize the risk in our portfolio of fixed and variable interest rate obligations. Use of these initiatives is allowed under the Senior Notes and the Revolving Facility. We use interest rate swaps to effectively convert fixed rate debt (represented by the Senior Notes) into variable rate debt. At December 31, 2004, we had swaps for a notional amount of $450 million. At December 31, 2005, we had no interest rate swaps outstanding.

At December 31, 2004, $434,631 (out of our total outstanding $450 million notional amount) of interest rate swaps were designated as hedging the exposure to changes in the fair

93

value of the related debt (called a fair value hedge). The related debt for those swaps is the Senior Notes, of which $434,631 aggregate principal amount was outstanding at December 31, 2004. At December 31, 2004 (excluding the offsetting value of our interest rate caps), the principal value of our debt was reduced by $9,891 as a result of our current fair value hedges. The market values of those interest rate swaps, excluding changes in value resulting from accrued interest payable or receivable from the counterparty, are recorded as part of other long-term obligations on the Consolidated Balance Sheets. Accrued interest receivable from or payable to the counterparty is recorded as a component of interest expense on the Consolidated Statement of Operations.

At December 31, 2004, the remaining $15 million of our interest rate swaps were not designated as hedging exposure to changes in the fair value of any specific debt instrument. Any changes in the market value of those swaps are recorded in other (income) expense, net, on the Consolidated Statement of Operations. In 2004, the mark-to-market impact of the undesignated swaps was $350.

All of our swaps are valued monthly, and we are required to provide cash collateral to the counterparty to the extent that the fair market value of the swap liability, net of the fair market value of our interest rate caps, exceeds a specific threshold. At December 31, 2004, all of our swaps were with one counterparty and this threshold was $15 million. We were not required to provide any cash collateral at December 31, 2004.

During the first quarter of 2005, we sold $15 million notional amount of undesignated swaps and paid a nominal fee. Additionally, we sold $150 million notional amount of our fair value hedge swaps and paid $2,950 in cash. Immediately thereafter, we repurchased $150 million notional amount of fair value hedge swaps with a different counterparty. During the second quarter of 2005, we sold $285 million notional amount of swaps and paid $4,831. During the fourth quarter of 2005, we sold $150 million notional amount of swaps and paid $6,845. As a result of these transactions, at December 31, 2005, we had no interest rate swaps outstanding.

At December 31, 2004, the variable interest rate was calculated based on the six month LIBOR rate as of the date of payment plus 5.7940%, calculated in arrears. During 2005, a portion of the variable interest rate was calculated based on the six month LIBOR rate as of the date of payment plus 5.7940% calculated in arrears and a portion of the variable interest rate was calculated based on the six month LIBOR, set in advance, plus 5.7967%. At December 31, 2005, the Senior Notes are at a fixed rate of 10.25% per annum.

When we sell a fair value hedge swap, the gain or loss is amortized as a credit or charge to interest expense over the remaining term of the Senior Notes. When we effectively reduce the outstanding principal amount of the Senior Notes (through debt-for-equity exchanges, repurchases or otherwise), the related portion of such credit or charge is accelerated and recorded in the period in which such reduction occurs. At December 31, 2004 and 2005, the principal value of our debt was increased by $24,484 and $7,404, respectively, as a result of gains realized from previously sold swaps. The net impact of current and terminated hedge instruments was a $14,593 and a $7,404 increase in the fair value of our debt at December 31, 2004 and 2005,

94

respectively, and was recorded on the Consolidated Balance Sheets on the line entitled “fair value adjustments for hedge instruments.”

Additional information with respect to the impact of our swaps on interest expense is set forth under “Interest Expense” in Note 7 to the Consolidated Financial Statements and is incorporated herein by reference.

We enter into agreements with financial institutions that are intended to limit, or cap, our exposure to the incurrence of additional interest expense due to increases in variable interest rates. These instruments effectively cap our interest rate exposure, represented by the net impact of our swaps on the Senior Notes, to no greater than 11.3% per annum. At December 31, 2004, we had interest rate caps for a notional amount of $500 million. During 2005, we sold all of our outstanding interest rate caps. All of our interest rate caps are marked-to-market monthly. Gains and losses are recorded in other (income) expense, net, on the Consolidated Statements of Operations. The fair value adjustment on caps was a $914 loss for 2003, a $3,827 loss for 2004, and a $527 loss for 2005.

Currency Rate Management. We enter into foreign currency instruments to attempt to manage exposure to changes in currency exchange rates. These foreign currency instruments, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures, net, relating to euro-denominated debt and identifiable foreign currency receivables, payables and commitments held by our foreign and domestic subsidiaries. Forward exchange contracts are agreements to exchange different currencies at a specified future date and at a specified rate. Purchased foreign currency options are instruments, which give the holder the right, but not the obligation, to exchange different currencies at a specified rate at a specified date or over a range of specified dates. The result is the creation of a range in which a best and worst price is defined, while minimizing option cost. Forward exchange contracts and purchased currency options are carried at market value.

The notional amount of open foreign exchange contracts, used by us to minimize foreign currency exposure against euro depreciation, amounted to $54,481 at December 31, 2004. In 2005, one contract expired and we sold all remaining open foreign exchange contracts. As a result, at December 31, 2005, we had no such contracts outstanding. Gains and losses associated with these contracts amounted to a loss of $6,650 in 2003, a loss of $406 in 2004 and a gain of $1,268 in 2005.

Commercial Energy Rate Management. We have in the past entered into, and may in the future enter into, natural gas derivative contracts and short duration fixed rate purchase contracts to effectively fix some or all of our natural gas cost exposure. The unrealized gain on outstanding contracts at December 31, 2003 amounted to $917. At December 31, 2005, we had fixed about 23% of our worldwide natural gas exposure through 2006 using such contracts. The outstanding contracts at December 31, 2005 were a nominal receivable. As of February 15, 2006, we had fixed about 32% of our worldwide natural gas exposure through such contracts.

We are required to provide cash collateral to certain counterparties to the extent that the fair market value of the natural gas derivative contracts exceeds a specific threshold. At

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December 31, 2005, this threshold was $15 million. We were not required to provide any cash collateral at December 31, 2005.

Derivative Liability Associated with the Debentures. The Redemption Make-Whole Option is accounted for separately from the underlying debt evidenced by the Debentures and is recorded as a derivative financial instrument. The embedded derivative financial instrument was classified as a derivative liability upon issuance and is included in the other long-term obligations in the Consolidated Balance Sheet. At each balance sheet date, we adjust the derivative liability to its estimated fair value. Upon issuance at January 22, 2004, the estimated fair value of the derivative liability was $6,462. At December 31, 2004, the estimated fair value of the derivative liability was $3,986. At December 31, 2005, the estimated fair value of the derivative liability was $1,284. We estimate the fair value by using a financial model that uses several assumptions, including historical stock price volatility, risk-free interest rates, remaining maturity and the closing price of our common stock. We believe that the assumption that has the greatest impact on the determination of fair value is the closing price of our common stock.

Sensitivity Analysis. We used a sensitivity analysis to assess the potential effect of changes in currency exchange rates on gross margin, changes in interest rates on interest expense and changes in the more relevant variables on the Redemption Make-Whole Option for 2005 (particularly our current stock price, historical stock price volatility and borrowing costs). Based on this analysis, a hypothetical 10% weakening or strengthening in the dollar across all other currencies would have changed our reported gross margin for 2005 by about $12 million. In addition, based on this analysis, a hypothetical increase in interest rates of 100 basis points across all maturities would have increased our interest expense for 2005 by about $3 million. The sensitivity analysis used to assess the potential effect of changes in the more relevant variables impacting the Redemption Make-Whole Option (which was based on hypothetical changes of 10%) did not result in material changes.

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Item 8.  Financial Statements and Supplementary Data

(Unless otherwise noted, all dollars are presented in thousands)

Page               

Management’s Report on Internal Control over Financial Reporting 98

Reports of Independent Registered Public Accounting Firms 99

Consolidated Balance Sheets 102

Consolidated Statements of Operations 103

Consolidated Statements of Cash Flows 104

Consolidated Statements of Stockholders’ Deficit 106

Notes to Consolidated Financial Statements 107

See the Table of Contents located at the beginning of this Report for more detailed page references to information contained in this Item.

97

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process, designed by, or under the supervision of, the chief executive officer and chief financial officer and effected by the board of directors, management and other personnel of a company, 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, and includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the company;

• 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 the board of directors; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the company that could have a material effect on its financial statements.

Internal control over financial reporting has inherent limitations which 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 because the level of compliance with related policies or procedures may deteriorate.

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2005 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2005.

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report on page 99 of this Report.

Date: March 15, 2006

                    /s/ Craig S. Shular                    

Craig S. Shular,                    

Chief Executive Officer, President and
          Interim Chief Financial Officer

98

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of GrafTech International Ltd.:

We have completed integrated audits of GrafTech International Ltd.’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the consolidated financial statements listed in the accompanying index  present fairly, in all material respects, the financial position of GrafTech International Ltd. and its subsidiaries at December 31, 2005 and December 31, 2004, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting, appearing in Item 8, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’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. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting 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. An audit of

99

internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

March 15, 2006

100

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

GrafTech International Ltd.

Wilmington, Delaware

We have audited the accompanying consolidated statements of operations, cash flows and stockholders’ deficit for the year ended December 31, 2003. These financial statements of Graftech International Ltd. and Subsidiaries are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of Graftech International Ltd. for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania

March 12, 2004

101

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

	At December 31,
	2004			2005
ASSETS
Current Assets:
Cash and cash equivalents	$	23,484		$	5,968
Accounts and notes receivable, net of allowance for doubtful accounts of $4,001 at
December 31, 2004 and $3,132 at December 31, 2005		205,981			184,580
Inventories		225,104			255,038
Prepaid expenses and other current assets		24,883			14,101
Total current assets		479,452			459,687
Property, plant and equipment		1,131,220			1,086,393
Less: accumulated depreciation		752,768			724,196
Net property, plant and equipment		378,452			362,197
Deferred income taxes		152,539			12,103
Goodwill		22,895			20,319
Other assets		34,480			32,514
Total assets	$	1,067,818		$	886,820
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	85,889		$	92,192
Short-term debt		644			405
Accrued income and other taxes		38,162			24,826
Other accrued liabilities		98,802			96,990
Total current liabilities		223,497			214,413
Long-term debt:
Principal value		655,242			694,893
Fair value adjustments for hedge instruments		14,593			7,404
Unamortized bond premium		1,611			1,446
Total long-term debt		671,446			703,743
Other long-term obligations		149,462			107,704
Deferred income taxes		46,259			43,669
Commitments & contingencies		—			—
Minority stockholders’ equity in consolidated entities		30,126			26,868
Stockholders’ deficit:
Preferred stock, par value $.01, 10,000,000 shares authorized, none issued		–			–
Common stock, par value $.01, 150,000,000 shares authorized, 100,520,240 shares
issued at December 31, 2004 and 100,821,434 shares issued at December 31, 2005		1,017			1,023
Additional paid-in capital		941,075			944,581
Accumulated other comprehensive loss		(276,465	)		(311,429	)
Accumulated deficit		(626,307	)		(751,487	)
Less: cost of common stock held in treasury, 2,451,035 shares at December 31,
2004 and 2,455,466 shares at December 31, 2005		(85,583	)		(85,621	)
Less: common stock held in employee benefit and compensation trusts, 522,732         shares at December 31, 2004 and 518,301 shares at December 31, 2005		(6,709	)		(6,644	)
Total stockholders’ deficit		(52,972	)		(209,577	)
Total liabilities and stockholders’ deficit	$	1,067,818		$	886,820

See accompanying Notes to Consolidated Financial Statements

102

GRAFTECH INTERNATIONALLTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share and per share data)

	For the Year Ended December 31,
	2003			2004			2005
Net sales	$	712,337		$	847,701		$	886,699
Cost of sales		544,196			638,186			654,342
Gross profit		168,141			209,515			232,357
Research and development		10,410			8,040			9,437
Selling, administrative and other expenses		85,546			89,369			100,439
Restructuring charges		19,765			(548	)		9,729
Impairment loss on long-lived and other assets		6,991			—			2,904
Antitrust investigations and related lawsuits and claims		32,073			(10,901	)		—
Other (income) expense, net		(12,060	)		21,189			18,020
Interest expense		45,141			39,178			52,716
Interest income		(351	)		(1,161	)		(1,200	)
		187,515			145,166			192,045
Income (loss) from continuing operations before provision for income    taxes and minority stockholders’ share of income (loss)		(19,374	)		64,349			40,312
Provision for income taxes		4,695			46,310			165,813
Income (loss) from continuing operations before minority interest		(24,069	)		18,039			(125,501	)
Less: minority stockholders’ share of income (loss)		1,245			998			(321	)
Income (loss) from continuing operations		(25,314	)		17,041			(125,180	)
Income from discontinued operations, net of tax		476			—			—
Gain on sale of discontinued operations, net of tax		561			—			—
Net income (loss)	$	(24,277	)	$	17,041		$	(125,180	)
Basic income (loss) per common share:
Net income (loss) per share from continuing operations	$	(0.38	)	$	0.18		$	(1.28	)
Net income per share from discontinued operations		0.02			—			—
Net income (loss) per share	$	(0.36	)	$	0.18		$	(1.28	)
Diluted income (loss) per common share:
Net income (loss) per share from continuing operations	$	(0.38	)	$	0.17		$	(1.28	)
Net income per share from discontinued operations		0.02			—			—
Net income (loss) per share	$	(0.36	)	$	0.17		$	(1.28	)

See accompanying Notes to Consolidated Financial Statements

103

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

		For the Year Ended December 31,
	2003			2004			2005
Cash flow from operating activities:
Net income (loss)	$	(24,277	)	$	17,041		$	(125,180	)
Income from discontinued operations		476			—			—
Gain on sale of discontinued operations		561			—			—
Income (loss) from continuing operations		(25,314	)		17,041			(125,180	)
Adjustments to reconcile net income (loss) to cash provided by operations:
Depreciation and amortization		30,623			35,459			36,926
Deferred income taxes		529			26,582			154,819
Antitrust investigations and related lawsuits and claims		32,073			1,260			(119	)
Restructuring charges		19,765			(548	)		9,729
Loss on exchange of common stock for Senior Notes		—			5,682			—
Impairment loss on long-lived and other assets		6,991			—			2,904
Interest expense		—			(2,159	)		1,596
Post retirement plan changes		—			(10,341	)		(14,000	)
Gain on sale of assets		—			(2,847	)		(748	)
Fair value adjustments on interest rate caps		—			3,827			652
Fair value adjustments on Redemption Make-Whole Option		—			(2,475	)		(2,702	)
Other (credits) charges, net		(45,165	)		1,143			16,822
(Increase) decrease in working capital (see * on next page)		(36,180	)		(167,068	)		(61,787	)
(Increase) decrease long-term assets and liabilities		(9,850	)		(37,822	)		(10,923	)
Net cash (used in) provided by operating activities from continuing operations		(26,528	)		(132,266	)		7,989
Net cash provided by operating activities from discontinued operations		1,422			—			—
Net cash provided by (used in) operating activities		(25,106	)		(132,266	)		7,989
Cash flow from investing activities:
Capital expenditures		(40,485	)		(59,117	)		(48,071	)
Patent capitalization		(534	)		(298	)		(797	)
Cost of interest rate swap termination		—			—			(14,800	)
Purchase of derivative investments		—			(3,241	)		—
Sale of derivative investments		—			755			1,913
Proceeds from sale of assets		3,214			5,591			1,374
Proceeds from sale of discontinued operations		15,692			—			—
Net cash provided by (used in) investing activities		(22,113	)		(56,310	)		(60,381	)
Cash flow from financing activities:
Short-term debt borrowings (reductions), net		(18,891	)		(780	)		1,881
Revolving Facility borrowings		357,131			—			171,138
Revolving Facility payments		(367,266	)		—			(131,562	)
Long-term debt borrowings		111			225,000			306
Long-term debt reductions		(115,986	)		(44,571	)		(338	)
Proceeds from sale of interest rate swap		30,188			—			—
Purchase of interest rate caps		(5,512	)		—			—
Proceeds from sale of common stock		189,877			—			—
Proceeds from exercise of stock options		3,759			7,843			—
Financing costs		(529	)		(7,355	)		(5,241	)
Premium on repurchase of Senior Notes		—			(3,531	)		—
Dividends paid to minority stockholders		(3,749	)		—			—
Net cash provided by (used in) financing activities		69,133			176,606			36,184
Net increase (decrease) in cash and cash equivalents		21,914			(11,970	)		(16,208	)
Effect of exchange rate changes on cash and cash equivalents		1,482			1,448			(1,308	)
Cash and cash equivalents at beginning of period		10,610			34,006			23,484
Cash and cash equivalents at end of period	$	34,006		$	23,484		$	5,968
Supplemental disclosures of cash flow information:
Net cash paid during the periods for:
Interest expense		61,467			39,052			43,547
Income taxes		10,629			11,967			28,183
Non-cash operating, investing and financing activities:
Exchanges of common stock for Senior Notes which decrease long-term debt		55,000			35,000			—
Common stock issued to savings and pension plan trusts		8,069			1,572			1,622

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GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Dollars in thousands)

	For the Year Ended December 31,
	2003			2004			2005
*Net change in working capital due to the following components:
(Increase) decrease in current assets:
Accounts and notes receivable, net	$	(4,971	)	$	(21,642	)	$	(2,174	)
Effect of factoring of accounts receivable		-			(44,658	)		13,095
Inventories		(8,674	)		(6,276	)		(45,430	)
Prepaid expenses and other current assets		54			(1,018	)		(1,018	)
Payment for antitrust investigations and related lawsuits and claims		(4,588	)		(83,480	)		(16,900	)
Restructuring payments		(5,692	)		(16,853	)		(6,670	)
Increase (decrease) in accounts payables and accruals		(12,309	)		6,859			(2,690	)
Increase in working capital	$	(36,180	)	$	(167,068	)	$	(61,787	)

See accompanying Notes to Consolidated Financial Statements

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GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

(Dollars in thousands, except share data)

	Issued Shares of Common Stock		Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Treasury Stock			Common Stock Held in Employee Benefit & Compensation Trust			Total Stockholders’ Deficit			Total Comprehensive Income (Loss)
Balance at January 1, 2003		59,211,664	$	606		$	635,956		$	(304,723	)	$	(619,071	)	$	(88,778	)	$	(5,551	)	$	(381,561	)
Comprehensive loss:
Net loss		—		—			—			—			(24,277	)		—			—			(24,277	)	$	(24,277	)
Other comprehensive income (loss):
Minimum pension liability, net of $2,506 of tax		—		—			—			5,701			—			—			—			5,701			5,701
Unrealized losses on securities		—		—			—			(184	)		—			—			—			(184	)		(184	)
Foreign currency translation adjustments .		—		—			—			12,418			—			—			—			12,418			12,418
Total comprehensive loss										—			—			—			—					$	(6,342	)
Exchange of common stock for Senior Notes		9,888,870		100			57,286			—			—			—			—			57,386
Treasury stock		—		—			(3,195	)		—			—			3,195			—			—
Common stock issued to savings and pension		—
plan trusts		1,403,475		10			8,059			—			—			—			—			8,069
Stock-based compensation		—		—			972			—			—			—			(615	)		357
Sale of common stock in equity offering, net .		25,300,000		257			189,620			—			—			—			—			189,877
Sale of common stock under stock options		598,278		4			4,226			—			—			—			—			4,230
Balance at December 31, 2003		96,402,287		977			892,924			(286,788	)		(643,348	)	$	(85,583	)		(6,166	)		(127,984	)
Comprehensive loss:
Net income		—		—			—			—			17,041			—			—			17,041		$	17,041
Other comprehensive income (loss):
Minimum pension liability, net of $5,147 of tax		—		—			—			(11,520	)		—			—			—			(11,520	)		(11,520	)
Unrealized losses on securities		—		—			—			(147	)		—			—			—			(147	)		(147	)
Foreign currency translation adjustments,		—
net of $2,408 of tax		—		—			—			21,990			—			—			—			21,990			21,990
Total comprehensive income																								$	27,364
Exchange of common stock for Senior Notes		3,161,131		32			40,650			—			—			—			—			40,682
Stock options granted		—		—			1,005			—			—			—			—			1,005
Common stock issued to savings and        pension plan trusts		146,285		—			1,572			—			—			—			—			1,572
Stock-based compensation		—		(1	)		(637	)		—			—			—			(543	)		(1,181	)
Sale of common stock under stock options		810,537		9			9,562			—			—			—			—			9,571
Other stock option activity		—		—			(4,001	)					—			—			—			(4,001	)
Balance at December 31, 2004		100,520,240		1,017			941,075			(276,465	)		(626,307	)		(85,583	)		(6,709	)		(52,972	)
Comprehensive income (loss):
Net income		—		—			—			—			(125,180	)		—			—			(125,180	)	$	(125,180	)
Other comprehensive income:
Minimum pension liability		—		—			—			(17,326	)		—			—			—			(17,326	)		(17,326	)
Unrealized losses on securities		—		—			—			41			—			—			—			41			41
Foreign currency translation adjustments .		—		—			—			(17,679	)		—			—			—			(17,679	)		(17,679	)
Total comprehensive income (loss)																								$	(160,144	)
Stock-based compensation		—		—			1,890			—			—			—			—			1,890
Treasury stock		—		—			—			—			—			(38	)		—			(38	)
Stock held in employee benefit and        compensation trusts		—		—			—			—			—			—			65			65
Common stock issued to savings        and pension plan trusts		301,194		6			1,616			—			—			—			—			1,622
Balance at December 31, 2005		100,821,434	$	1,023		$	944,581		$	(311,429	)	$	(751,487	)	$	(85,621	)	$	(6,644	)	$	(209,577	)

See accompanying Notes to Consolidated Financial Statements

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GRAFTECH INTERNATIONALLTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except as otherwise noted)

(1)           Discussion of Business and Structure

We have six major product categories: graphite electrodes, cathodes, carbon electrodes, carbon refractories, advanced graphite materials, and natural graphite, the results of which are reported in the following segments:

• Synthetic graphite, which primarily serves the steel, aluminum, transportation and semiconductor industries and includes graphite electrodes, cathodes and advanced synthetic graphite materials and related services. We have a strategic alliance in the cathode business with Alcan/Pechiney, one of the world’s largest aluminum producers, which is a 30% owner of our cathode subsidiary, Carbone Savoie.

• Other, which includes carbon electrodes, carbon refractories and natural graphite. Our natural graphite products business, which is conducted by AET, primarily serves the electronics, automotive, petrochemical and power generation industries and includes advanced flexible graphite and flexible graphite solutions and related services. We have a strategic alliance in the natural graphite business with Ballard Power Systems, the world’s recognized leader in PEM fuel cells. Ballard Power Systems became a strategic investor in AET in June 2001, by investing $5 million in shares of Ballard Power Systems common stock for a 2.5% equity ownership interest in AET. Our other carbon product businesses serve the silicon metal, steel and ferro-alloy industries.

Important Terms

Reference is made to “Part I. Preliminary Notes – Important Terms” for certain defined terms used in the Notes to the Consolidated Financial Statements.

(2)            Summary of Significant Accounting Policies

The Consolidated Financial Statements include the financial statements of GTI and its majority-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation.

Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, we consider all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Cash equivalents consist of overnight repurchase agreements and certificates of deposit.

Investments

Investments in marketable debt and equity securities are generally classified and accounted for as trading, held-to-maturity or available-for-sale securities. We determine the

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appropriate classification of debt and equity securities at the time of purchase and reassess the classification at each reporting date. Debt securities classified as held-to-maturity are reported at amortized cost plus accrued interest. Securities classified as available-for-sale are reported at fair value with unrealized gains and losses, net of related tax, recorded as a separate component of comprehensive loss on the Consolidated Statement of Stockholders’ Deficit until realized. Interest and amortization of premiums and discounts for debt securities are included in interest expense. Gains and losses on securities sold are determined based on the specific identification method and are included in other (income) expense, net. Unrealized losses on investment securities that are other than temporary are recognized in net income (loss). We do not hold securities for speculative or trading purposes.

Revenue Recognition

Revenue from sales of our products is recognized when persuasive evidence of an arrangement exists, delivery has occurred, title has passed, the amount is determinable and collection is reasonably assured. Revenue from sales of services is recognized when persuasive evidence of an arrangement exists, services are completed, the amount is determinable and collection is reasonably assured. Product warranty claims and returns are estimated and recorded as a reduction to revenue. Volume discounts and rebates are recorded as a reduction of revenue in conjunction with the sale of the related products. Changes to estimates are recorded when they become probable. Shipping and handling revenues relating to products sold are included as an increase to revenue. Shipping and handling costs related to products sold are included as an increase to cost of sales.

Inventories

Inventories are stated at cost or market, whichever is lower. Cost is determined on the “first-in first-out” (“FIFO”) method.

Fixed Assets and Depreciation

Fixed assets are carried at cost. Expenditures for replacements are capitalized and the replaced assets are retired. Gains and losses from the sale of property are included in other (income) expense, net. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The average estimated useful lives are as follows:

	Years
Buildings		25
Land improvements		20
Machinery and equipment		20
Furniture and fixtures		10
Transportation equipment		6

The carrying value of fixed assets is assessed when events and circumstances indicating impairment are present. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net cash flows expected to be generated

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by the assets. If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed are reported at the lower of the carrying amount or fair value less costs to sell.

Allowance for Doubtful Accounts

A considerable amount of judgment is required in assessing the realizability of receivables, including the current creditworthiness of each customer, related aging of the past due balances and the facts and circumstances surrounding any non-payment. We evaluate specific accounts when we become aware of a situation where a customer may not be able to meet its financial obligations. The reserve requirements are based on the best facts available to us and are reevaluated and adjusted as additional information is received. The allowance for doubtful accounts amounted to $4,001 and $3,132 at December 31, 2004 and 2005, respectively.

Capitalized Interest

We capitalize interest expense during the new construction or upgrade of qualifying assets. We capitalized $993, $1,412 and $952 of interest expense in 2003, 2004 and 2005, respectively.

Capitalized Bank Fees

We capitalize bank fees upon the incurrence of debt. At December 31, 2004 and December 31, 2005, capitalized bank fees amounted to $21,255 and $22,219, respectively. We amortize such amounts over the life of the respective debt instrument. The estimated useful life may be adjusted upon the occurrence of a triggering event. The expense associated with capitalized bank fees amounted to $6,823 and $5,051 in 2004 and 2005, respectively.

Derivative Financial Instruments

We do not use derivative financial instruments for trading purposes. They are used to manage well-defined currency exchange rate risks, interest rate risks and commercial energy contract risks.

In conjunction with the issuance of the Debentures, we incurred an embedded derivative financial instrument associated with the redemption option and the related make-whole provision (the “Redemption Make-Whole Option”) contained in the Debentures. Since the Redemption Make-Whole Option does not currently qualify for any scope exception within SFAS No. 133, it is required by SFAS No. 133 to be accounted for separately from the debt instrument and recorded as derivative financial instruments. The embedded derivative financial instrument was classified as a derivative liability upon issuance and is included in the other long-term obligations in the Consolidated Balance Sheet. At January 22, 2004, the estimated fair value of our derivative liability was $6,462.

At each balance sheet date, we adjust the Redemption Make-Whole Option to its estimated fair value. At December 31, 2004 and December 31, 2005, the estimated fair value of our derivative liability was $3,986 and $1,284, respectively. We estimate the fair value of the

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Redemption Make-Whole Option using a financial model that uses several assumptions, including: historical stock price volatility, risk-free interest rates, remaining maturity and the closing price of our common stock.

We enter into foreign currency instruments to manage exposure to changes in currency exchange rates. These instruments, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures, net, relating to euro-denominated debt and identifiable foreign currency receivables, payables and commitments held by our foreign and domestic subsidiaries. Forward exchange contracts are agreements to exchange different currencies at a specified future date and at a specified rate. Purchased foreign currency options are instruments which give the holder the right, but not the obligation, to exchange different currencies at a specified rate at a specified date or over a range of specified dates. The result is the creation of a range in which a best and worst price is defined, while minimizing option cost. Forward exchange contracts and purchased currency options are carried at market value. Changes in market values related to these contracts are recognized in other (income) expense, net, on the Consolidated Statements of Operations.

We implement interest rate management initiatives to seek to minimize our interest expense and optimize the risk in our portfolio of fixed and variable interest rate obligations. Use of these initiatives is allowed under the Senior Notes and the Revolving Facility. We may enter into interest rate swaps that effectively convert fixed rate debt into variable rate debt.

We also may enter into agreements with financial institutions that are intended to limit, or cap, our exposure to the incurrence of additional interest expense due to increases in variable interest rates. Interest rate caps are carried at market value. Changes in market values are recorded in other (income) expense, net, on the Consolidated Statements of Operations.

Since the counterparties to these financial instruments are large commercial banks and similar financial institutions, we do not believe that we are exposed to material counterparty credit risk.

We may enter into short duration fixed rate natural gas purchase contracts with certain of our natural gas suppliers in order to mitigate commodity price risk. In addition, we may enter into natural gas derivative contracts to effectively fix a portion of our natural gas cost exposure.Natural gas derivative contracts are carried at market value. Changes in market values are recorded as part of cost of sales on the Consolidated Statements of Operations.

Research and Development

Expenditures relating to the development of new products and processes, including significant improvements to existing products, are expensed as incurred.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are

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measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in the period that includes the enactment date. A valuation allowance is recorded when it is determined that it is more likely than not that any portion of a recorded deferred tax asset will not be realized.

Stock-Based Compensation Plans

We account for stock-based compensation plans under the recognition and measurement of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. As such, compensation expense is recorded on the date of award only if the market price of the underlying stock exceeded the exercise price or if ultimate vesting is subject to performance conditions. If an award results in recognition of compensation expense, the total amount of recorded compensation expense is based on the number of awards that eventually vest. No compensation expense is recognized for forfeited awards, including awards forfeited due to a failure to satisfy a service requirement or failure to satisfy a performance condition. Our accruals of compensation expense for awards subject to performance conditions are based on our assessment of the probability of satisfying the performance conditions.

Compensation expense associated with our restricted stock grants has been recorded in the Consolidated Statements of Operation and in the stockholders’ deficit section of the Consolidated Balance Sheets. Compensation expense associated with options granted to non-employees has been recognized in the Consolidated Statements of Operations and in the stockholders’ deficit section of the Consolidated Balance Sheets. No compensation expense has been recognized for our time vesting options granted with exercise prices at not less than market price on the date of grant. At December 31, 2005, all awards subject to performance conditions were fully vested. If compensation expense for our stock-based compensation plans was determined by the fair value method prescribed by SFAS No. 123, “Accounting for Stock Based Compensation,” our net income (loss) and net income (loss) per share would have been reduced to the pro forma amounts indicated below:

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	For the Year Ended December 31,
	2003			2004			2005
	(Dollars in thousands, except per share data)
Net income (loss) as reported	$	(24,277	)	$	17,041		$	(125,180	)
Add:  Total stock-based employee compensation expense, net            of related tax effects included in the determination of net            income as reported		–			604			1,890
Deduct:  Total stock-based employee compensation expense                 determined under fair value based method for all awards,                 net of related tax effects		(564	)		(4,536	)		(9,485	)
Pro forma net income (loss)	$	(24,841	)	$	13,109		$	(132,775	)
Earnings per share:
Basic--as reported	$	(0.36)		$	0.18		$	(1.28)
Basic--pro forma		(0.37)			0.14			(1.36)
Diluted--as reported		(0.36)			0.17			(1.28)
Diluted--pro forma		(0.37)			0.13			(1.36)

The calculation of weighted average common shares outstanding for the 2004 diluted calculations exclude the shares underlying the Debentures, as the effect would have been anti-dilutive.

The calculation of weighted average common shares outstanding for the 2005 diluted calculations exclude the effect of stock options, restricted stock and the shares underlying the Debentures, as the effect would have been anti-dilutive.

On November 30, 2005, the Compensation, Organization and Pension Committee of GrafTech’s Board of Directors approved the vesting of the remaining unvested stock options granted as part of the 2003-2005 Long Term Incentive Program, having an exercise price in the range of $6.56-$13.80 and held by current and former employees. Stock options relating to approximately 3 million shares of common stock were subject to this vesting. The decision to accelerate the vesting of these stock options was within the discretion of the Compensation, Organization and Pension Committee of GrafTech’s Board of Directors. Such decision was made due primarily to the achievement of a significant portion of the performance metrics for vesting as well as the achievement of other strategic initiatives.   In addition, the decision to accelerate the vesting of stock options may have a positive effect on employee morale, retention and perception of option value. This vesting eliminates an estimated $4.5 million of future pre-tax compensation expense that would have otherwise been recognized in the Consolidated Statement of Operations under SFAS No. 123(R).

Retirement Plans

The cost of pension benefits under our retirement plans is recorded in accordance with SFAS No. 87, “Employee Accounting for Pensions,” as determined by us with assistance from

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independent actuarial firms using the “projected unit credit” actuarial cost method. Contributions to the qualified U.S. retirement plan are made in accordance with the requirements of the Employee Retirement Income Security Act of 1974. Benefits under the non-qualified retirement plan have been accrued, but not funded. Plan settlements and curtailments are recorded in accordance with SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and Termination Benefits.” Additional information with respect to benefits plans is set forth in Note 11 to the Consolidated Financial Statements.

Postretirement Health Care and Life Insurance Benefits

The estimated cost of future postretirement medical and life insurance benefits is determined by the Company with assistance from independent actuarial firms using the “projected unit credit” actuarial cost method. Such costs are recognized as employees render the service necessary to earn the postretirement benefits. Benefits have been accrued, but not funded. Effective November 1, 2001, the U.S. plan was modified to limit our cost of future annual postretirement medical benefits to the cost in 2001. Additional information with respect to benefits plans is set forth in Note 11 to the Consolidated Financial Statements.

Post-employment Benefits

We accrue the estimated cost of post-employment benefits expected to be paid before retirement, principally severance, over employees’ active service periods.

Environmental, Health and Safety Matters

Our operations are governed by laws addressing protection of the environment and worker safety and health. These laws provide for civil and criminal penalties and fines, as well as injunctive and remedial relief, for noncompliance and require remediation at sites where hazardous substances have been released into the environment.

We have been in the past, and may become in the future, the subject of formal or informal enforcement actions or proceedings regarding noncompliance with these laws or the remediation of company-related substances released into the environment. Historically, such matters have been resolved by negotiation with regulatory authorities resulting in commitments to compliance, abatement or remediation programs and in some cases payment of penalties. Historically, neither the commitments undertaken nor the penalties imposed on us have been material.

Environmental considerations are part of all significant capital expenditure decisions. Environmental remediation, compliance and management expenses were approximately $13,074 in 2003, $13,056 in 2004 and $12,525 in 2005. The accrued liability relating to environmental remediation was $7,669 at December 31, 2004 and $6,610 at December 31, 2005. When payments are fixed or determinable, the liability is discounted using a rate at which the payments could be effectively settled. A charge to income is recorded when it is probable that a liability has been incurred and the cost can be reasonably estimated. Our environmental liabilities do not take into consideration possible recoveries of insurance proceeds. Because of the uncertainties associated with environmental remediation activities at sites where we may be potentially liable, future expenses to remediate sites could be considerably higher than the accrued liability.

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However, while neither the timing nor the amount of ultimate costs associated with known environmental remediation matters can be determined at this time, management does not believe that these matters will have a material adverse effect on our financial position, results of operations or net cash flows.

Foreign Currency Translation

We account for our non-U.S. subsidiaries under SFAS No. 52, “Foreign Currency Translation.” Accordingly, except for highly inflationary countries, the assets and liabilities of our non-U.S. subsidiaries are translated into dollars for consolidation and reporting purposes. Foreign currency translation adjustments are generally recorded as part of stockholders’ deficit and identified as part of accumulated other comprehensive loss on the Consolidated Balance Sheets until such time as the operations of such non-U.S. subsidiaries are sold or substantially or completely liquidated.

Highly inflationary economies are defined as having cumulative inflation of about 100% or more over a period of three calendar years. In general, the financial statements of foreign operations in highly inflationary economies are remeasured as if the functional currency of their economic environments were the dollar and translation gains and losses relating to these foreign operations are included in other (income) expense, net, on the Consolidated Statements of Operations rather than as part of stockholders’ deficit on the Consolidated Balance Sheets. We have subsidiaries in Russia, Mexico, Brazil and other countries which have had in the past, and may have in the future, highly inflationary economies.

We account for our Mexican and Russian subsidiaries using the dollar as their functional currency, as sales and purchases for each subsidiary are predominantly dollar-denominated. Our remaining subsidiaries use their local currency as their functional currency.

We also record foreign currency transaction gains and losses as part of other (income) expense, net, on the Consolidated Statements of Operations.

We have non-dollar denominated intercompany loans between GrafTech Finance and some of our foreign subsidiaries. These loans are subject to remeasurement gains and losses due to changes in currency exchange rates. A portion of these loans are deemed to be essentially permanent and, as a result, remeasurement gains and losses on these loans are recorded as a component of accumulated other comprehensive loss in the stockholders’ deficit section of the Consolidated Balance Sheets. The balance of these loans are deemed to be temporary and, as a result, remeasurement gains and losses on these loans are recorded as currency (gains/losses) in other (income) expense, net, on the Consolidated Statements of Operations.

Restructuring

Effective January 1, 2003, we adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which was effective for exit or disposal activities initiated after December 31, 2002. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.

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Software Development Costs

In connection with our development and implementation of global enterprise resource planning systems with advanced manufacturing, planning and scheduling software, we capitalized certain computer software costs after technological feasibility was established. These capitalized costs are amortized utilizing the straight-line method over the economic lives of the related products. Total costs capitalized as of December 31, 2004 and 2005 amounted to $16,692 and $17,262, respectively. Amortization expense was $860 for 2004 and $1,393 for 2005.

Intangibles

Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Effective January 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” The adoption of SFAS No. 142 did not have a significant impact on our consolidated financial position, results of operations or net cash flows, except that we no longer amortize goodwill. In the 2005 fourth quarter, we performed the goodwill impairment reviews required by SFAS No. 142 and the results of these reviews did not require our existing goodwill to be written down. Goodwill, which pertains primarily to our synthetic graphite segment, amounted to $22,895 at December 31, 2004 and $20,319 at December 31, 2005, with the decrease due to changes in currency exchange rates.

Patents, net of accumulated amortization, amounted to $2,321 at December 31, 2004 and $2,784 at December 31, 2005.

Use of Estimates

We have made a number of estimates and assumptions relating to the recording and disclosure of assets and liabilities, including contingent assets and liabilities, to prepare the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America. Actual amounts and values could differ from those estimates.

Reclassification

Certain amounts previously reported have been reclassified to conform to the current year presentation.

(3)           New Accounting Standards

In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140.” This Statement (1) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, (2) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, (3) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; and (4) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives. SFAS

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No. 155 is effective for all financial instruments acquired or issued after the beginning of our first fiscal year that begins after September 15, 2006. The fair value election of SFAS No. 155 may also be applied upon adoption of SFAS No. 155 for hybrid financial instruments that had been bifurcated under paragraph 12 of SFAS No. 133, prior to the adoption of this Statement. We will be required to adopt SFAS No. 155 in the first quarter of 2007. We are currently in the process of assessing the impact of the adoption of SFAS No. 155 on our consolidated results of operations and financial position.

On December 16, 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment.” SFAS No. 123(R) revises SFAS No. 123, “Accounting for Stock-Based Compensation,” and requires companies to expense the fair value of employee stock options and other forms of stock-based compensation. Under SFAS No. 123(R), companies are to (1) use fair value to measure stock-based compensation awards and (2) cease using the “intrinsic value” method of accounting, which APB Opinion No. 25 allowed and resulted in no expense for many awards of stock options for which the exercise price of the option equaled the price of the underlying stock at the grant date. In addition, SFAS No. 123(R) retains the modified grant date model from SFAS No. 123. Under that model, compensation cost is measured at the grant date and adjusted to reflect actual forfeitures and the outcome of certain conditions. The fair value of an award is not remeasured after its initial estimation on the grant date (except in the case of a liability award or if the award is modified). This Statement is effective for annual periods beginning after June 15, 2005. We will be required to adopt SFAS No. 123(R) in the first quarter of 2006. The actual impact of the adoption of SFAS No. 123(R) will depend upon the amount, nature and type of stock-based compensation awards outstanding upon implementation and that we may issue in the future. Based on the current stock-based compensation plans in effect and awards issued our estimated expense in 2006 for stock-based compensation is $4,055, $3,338 of which relates to 2005 restricted stock grants and $717 of which relates to unvested stock options.

On October 18, 2005, the FASB Staff issued FASB Staff Position (“FSP”) No. FAS 123(R)-2, “Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123(R).” This FSP is in response to recent inquiries regarding the application of grant date as defined in SFAS No. 123(R). The definition of grant date under SFAS No. 123(R) includes criteria for determining that a share-based payment award has been granted. One of the criteria is a mutual understanding by the employer and employee of the key terms and conditions of a share-based payment award. Considering the practical difficulties of personally communicating the key terms and conditions of a share-based payment award, the FASB Staff believed a practical solution was warranted related to application of the concept of mutual understanding. As a practical accommodation, in determining the grant date of an award subject to SFAS No.123(R), a mutual understanding of the key terms and conditions of an award with an individual employee shall be presumed to exist at the date the award is approved in accordance with the relevant corporate governance requirements if both of the following conditions are met: (a) the award is a unilateral grant and, therefore, the recipient does not have the ability to negotiate the key terms and conditions of the award with the employer; and (b) the key terms and conditions of the award are expected to be communicated to an individual recipient within a relatively short time periodfrom the date of approval.

On November 10, 2005, the FASB Staff issued FSP No. FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment

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Awards.” This FSP provides a practical transition election related to accounting for the tax effects of share-based payment awards to employees. SFAS No. 123 (R), paragraph 81, indicates that, for purposes of calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS No. 123 (R) (an “APIC pool”), an entity shall include the net excess tax benefits that would have qualified as such had the entity adopted SFAS No. 123for recognition purposes. The FASB Staff has learned that a significant number of constituents do not have this information readily available. As a result, this FSP provides an elective alternative transition method. An entity may follow either the transition guidance for the APIC pool in paragraph 81 of SFAS No. 123(R) or the alternative transition method described in this FSP. We may take up to one year from the initial adoption of SFAS No. 123(R) to evaluate our available transition alternatives and make our one time election.

On August 31, 2005, the FASB Staff issued FSP No. FAS 123(R)-1, “Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R)”, which defers, at this time, the requirement of SFAS No. 123 (revised 2004), Share-Based Payment, that a freestanding financial instrument originally subject to SFAS 123(R) becomes subject to the recognition and measurement requirements of other applicable generally accepted accounting principles (“GAAP”) when the rights conveyed by the instrument to the holder are no longer dependent on the holder being an employee of the entity. It is the current FASB Staff position that a freestanding financial instrument issued to an employee in exchange for past or future employee servicesthat is subject to SFAS No. 123(R) or was subject to SFAS No. 123(R) upon initial adoption of that Statement shall continue to be subject to the recognition and measurement provisions of SFAS No. 123(R) throughout the life of the instrument, unless its terms are modified when the holder is no longer an employee. The guidance in this FSP supersedes EITF Issue No. 00-19-1, “Application of EITF Issue No. 00-19 to Freestanding Financial Instruments Originally Issued as Employee Compensation,” and amends paragraph 11(b) of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 133 Implementation Issue No. C3, “Scope Exceptions: Exception Related to Share-Based Payment Arrangements.” The adoption of this FSP will not have a significant impact on our consolidated results of operations or financial position.

In May 2005, the FASB directed the FASB Staff to issue a Position on “Application of Emerging Issues Task Force Issue No. 00-19 to Freestanding Financial Instruments Originally Issued as Employee Compensation” to clarify the application of EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.” This FASB Staff Position clarifies that a requirement to deliver registered shares, in and of itself, will not result in liability classification for freestanding financial instruments originally issued as employee compensation. This clarification is consistent with the FASB’s intent in issuing SFAS No. 123(R). The adoption of this Position will not have a significant impact on our consolidated results of operations or financial position.

SFAS No.133 Implementation Issue No. B39 was posted by the FASB in June 2005. This Issue addresses circumstances in which an embedded call option (including a prepayment option), that can accelerate the settlement of a hybrid instrument containing a debt host contract, would not be subject to the conditions in paragraph 13(b) of SFAS No. 133. The FASB concluded that the conditions in paragraph 13(b) do not apply to an embedded call option in a

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hybrid instrument containing a debt host contract if the right to accelerate the settlement of the debt can be exercised only by the debtor (issuer/borrower). Issue No. B39 will be effective for the first day of the first fiscal quarter beginning after December 15, 2005. The adoption of Issue No. B39 will not have any impact on our consolidated results of operations or financial position.

In May 2005, FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3,” whichchanges the requirements for the accounting for and reporting of a change in accounting principle.  This Statement applies to all voluntary changes in accounting principle.  It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. This Statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change.  This Statement defines retrospective application as the application of a different accounting principle to prior accounting periods as if that principle had always been used or as the adjustment of previously issued financial statements to reflect a change in the reporting entity.  This Statement also redefines restatement as the revising of previously issued financial statements to reflect the correction of an error. This Statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We will adopt this Statement effective January 1, 2006. Based on our current evaluation of this Statement, we do not expect the adoption of SFAS No. 154 to have a significant impact on our consolidated results of operations or financial position.

On November 24, 2004, the FASB issued SFAS No. 151, “Inventory Costs - an amendment of APB No. 43,” Chapter 4, which is the result of its efforts to converge U.S. accounting standards for inventories with International Accounting Standards. SFAS No. 151 requires abnormal amounts of idle facility expense, freight, handling costs and wasted material (spillage) to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Therefore, we are required to adopt this Statement effective January 1, 2006. We are currently in the process of assessing the impact of the adoption of SFAS No. 151 on our consolidated results of operations and financial position.

(4)          Segment Reporting

Our businesses are reported in the following reportable segments: synthetic graphite, which consists of graphite electrodes, cathodes and advanced graphite materials and related services; and other, which consists of natural graphite, carbon electrodes and refractories and related services.

We evaluate the performance of our segments based on gross profit. Intersegment sales and transfers are not material. The accounting policies of the reportable segments are the same as those for our Consolidated Financial Statements as a whole.

The following tables summarize financial information concerning our reportable segments.

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	For the Year Ended December 31,
	2003			2004			2005
	(Dollars in thousands)
Net sales to external customers:
Synthetic Graphite	$	640,128		$	752,436		$	784,148
Other		72,209			95,265			102,551
Net sales	$	712,337		$	847,701		$	886,699
Gross profit:
Synthetic Graphite	$	150,998		$	186,854		$	210,928
Other		17,143			22,661			21,429
Gross profit	$	168,141		$	209,515		$	232,357
Reconciliation of gross profit to income before provision for
income taxes and minority stockholders' share of income:
Gross profit	$	168,141		$	209,515		$	232,357
Research and development		10,410			8,040			9,437
Selling, administrative and other expenses		85,546			89,369			100,439
Other (income) expense, net		(12,060	)		21,189			18,020
Restructuring charges		19,765			(548	)		9,729
Impairment loss on long-lived and other assets		6,991			--			2,904
Antitrust investigations and related lawsuits           and claims charges		32,073			(10,901	)		--
Interest expense		45,141			39,178			52,716
Interest (income)		(351	)		(1,161	)		(1,200	)
Income (loss) from continuing operations before provision for
(benefit from) income taxes and minority stockholders' share
of income (loss)	$	(19,374	)	$	64,349		$	40,312

We do not report assets by reportable segment. Assets are managed based on geographic location because both reportable segments share certain facilities. The following tables summarize information as to our operations in different geographic areas.

	For the Year Ended December 31,
	2003		2004		2005
	(Dollars in thousands)
Net sales (a):
U.S	$	205,548	$	240,303	$	263,208
Canada		5,696		3,995		4,469
Mexico		33,442		36,913		47,936
Brazil		40,679		52,199		53,400
France		168,228		183,648		188,561
Italy		32,122		34,808		26,243
Switzerland		102,587		144,123		152,834
South Africa		65,488		69,558		75,947
Spain		27,665		39,419		22,066
Other countries		30,882		42,735		52,035
Total	$	712,337	$	847,701	$	886,699

___________

(a)    Net sales are based on location of seller.

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	At December 31,
	2004		2005
	(Dollars in thousands)
Long-lived assets (b):
U.S	$	70,691	$	74,365
Mexico		51,394		52,584
Brazil		27,990		32,982
France		151,232		130,701
Spain		36,723		31,428
South Africa		52,198		46,328
Switzerland		10,568		8,660
Other countries		551		5,468
Total	$	401,347	$	382,516

___________

(b)    Long-lived assets represent fixed assets, net of accumulated depreciation and goodwill.

(5)         Long-Term Debt and Liquidity

The following table presents our long-term debt.

	At December 31,
	2004			2005
	(Dollars in thousands)
Revolving Facility	$	-		$	39,000
Senior Notes:
Senior Notes due 2012		434,631			434,631
Fair value adjustments for current hedge instruments		(9,891	)		-
Fair value adjustments for terminated hedge instruments*		24,484			7,404
Unamortized bond premium		1,611			1,446
Total Senior Notes		450,835			443,481
Debentures**		219,405			220,291
Other European debt		1,206			971
Total	$	671,446		$	703,743

* Fair value adjustments for terminated hedge instruments will be amortized as a credit to interest expense over the remaining term of the Senior Notes.

** Excludes the derivative liability relating to our redemption feature with a make-whole provision, which amounts to $3,986 at December 31, 2004 and $1,284 at December 31, 2005 and is included in other long-term obligations on the Consolidated Balance Sheets.

The aggregate maturities of long-term debt (excluding the fair value adjustments to debt and unamortized bond premium relating to the Senior Notes and including the original value of the derivative liability relating to the Debentures redemption feature with a make-whole provision) for each of the four years subsequent to 2005 and thereafter are set forth in the following table:

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2006		2007		2008		2009		2010 (and thereafter)		Total
(Dollars in thousands)
$	45	$	222	$	212	$	191	$	698,932	$	699,602

At December 31, 2004 and 2005, we were in compliance with all financial and other covenants contained in the Senior Notes, the Debentures and the Senior Facilities, as applicable.

Revolving Facility

On February 8, 2005, we entered into an amended and restated Credit Agreement relating to the Revolving Facility. JPMorgan Chase Bank, N.A. is the administrative agent thereunder.

The Credit Agreement now provides for a Revolving Facility of $215 million, subject to provisions described below regarding the base credit limit. It also provides among other things, for an extension until July 15, 2010 of the maturity of the Revolving Facility and, subject to certain conditions (including a maximum senior secured leverage ratio test), an accordion feature that permits GrafTech Finance to establish additional credit facilities thereunder in an aggregate amount, together with the Revolving Facility, of up to $425 million.

The interest rate applicable to the Revolving Facility is, at our option, either LIBOR plus a margin ranging from 1.25% to 2.25% or, in the case of dollar denominated loans, the alternate base rate plus a margin ranging from 0.25% to 1.25%. The alternate base rate is the higher of (i) the prime rate announced by JP Morgan Chase Bank, N.A. or (ii) the federal fund effective rate plus 0.50%. GrafTech Finance pays a per annum fee ranging from 0.250% to 0.500% (depending on such ratio or rating) on the undrawn portion of the commitments under the Revolving Facility.

The Revolving Facility permits voluntary prepayments (without reducing availability for future revolving borrowings) and voluntary commitment reductions at any time, in each case without premium or penalty.

The obligations under the Revolving Facility are secured (with certain exceptions) by all of the assets of GrafTech Finance (except the unsecured intercompany term notes and unsecured intercompany term note guarantees created under, and pledged in part to secure, the Senior Notes). The obligations under the Revolving Facility are guaranteed (with certain exceptions) by GTI, each of our other domestic subsidiaries (other than AET) and our Swiss subsidiary, our French holding company, our French operating company engaged in the graphite electrode business, and our United Kingdom subsidiary. These guarantees and any intercompany loans of proceeds of borrowings under the Revolving Facility are secured (with certain exceptions, including the assets of AET) by all of the assets (including the AET Pledged Stock) of the respective guarantors and subsidiary borrowers.

Repayment of intercompany loans made to our foreign subsidiaries is restricted unless the relevant subsidiary borrower has no business use for the funds being repaid. The intent of this restriction is to seek to maximize the secured claims of the lenders against the assets of our foreign operating subsidiaries.

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The guarantee of the Revolving Facility by our Swiss subsidiary is subject to the limitation under Swiss law that the amount guaranteed cannot exceed the amount that our Swiss subsidiary can distribute to its shareholders, after payment of any Swiss withholding tax. If such amount is or would become less than $100 million, our Swiss subsidiary will become subject to certain restrictions, including restrictions on distributions, investments and indebtedness.

The amount outstanding under the Credit Agreement (including any debt incurred under the accordion feature) at any time may not exceed a specified base credit limit. The intent of this provision is to seek to reduce credit availability under the Credit Agreement to the extent that there is a net diminution in the value of domestic or Swiss collateral. This provision would not affect the Revolving Facility until net diminution exceeded $110 million.

The Revolving Facility contains a number of covenants that restrict corporate activities. The covenants may restrict our ability to repurchase or redeem the Senior Notes and the Debentures, even if so required thereby. These covenants include financial covenants relating to specified minimum interest coverage ratios and maximum net senior secured debt leverage ratios (which is the ratio of our net senior secured debt to our EBITDA (as defined in the Revolving Facility)). The interest coverage ratio becomes more restrictive if our financial performance were to significantly deteriorate.

In addition to the failure to pay principal, interest and fees when due, events of default under the Revolving Facility include: failure to pay when due, or other defaults permitting acceleration of, other indebtedness exceeding $7.5 million or certain cash management arrangements or interest rate, exchange rate or commodity price derivatives; judgment defaults in excess of $7.5 million to the extent not covered by insurance; and certain changes in control.

Senior Notes

On February 15, 2002, GrafTech Finance issued $400,000 aggregate principal amount of Senior Notes. Interest on the Senior Notes is payable semi-annually on February 15 and August 15 of each year, commencing August 15, 2002, at the rate of 10.25% per annum. The Senior Notes mature on February 15, 2012.

On May 6, 2002, GrafTech Finance issued $150,000 aggregate principal amount of additional Senior Notes at a purchase price of 104.5% of principal amount, plus accrued interest from February 15, 2002, under the Senior Note Indenture. All of the Senior Notes constitute one class of debt securities under the Senior Note Indenture. The additional Senior Notes bear interest at the same rate and mature on the same date as the Senior Notes issued in February 2002. The $7 million premium received upon issuance of the additional Senior Notes was added to the principal amount of the Senior Notes shown on the Consolidated Balance Sheets and is amortized (as a credit to interest expense) over the term of the additional Senior Notes. As a result of our receipt of such premium, the effective annual interest rate on the additional Senior Notes is about 9.5%. Additional information regarding interest rate swaps is set forth in Note 6 to the Consolidated Financial Statements.

GrafTech Finance may not redeem the Senior Notes prior to February 15, 2007. On or after that date, GrafTech Finance may redeem the Senior Notes, in whole or in part, at specified redemption prices beginning at 105.125% of the principal amount redeemed for the year

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commencing February 15, 2007 and reducing to 100.00% of the principal amount redeemed for the years commencing February 15, 2010 and thereafter, in each case plus accrued and unpaid interest to the redemption date.

Upon the occurrence of a change of control, GrafTech Finance will be required to make an offer to repurchase the Senior Notes at a price equal to 101.00% of the principal amount redeemed, plus accrued and unpaid interest to the redemption date. For this purpose, a change in control occurs on:

• the date on which any person beneficially owns more than 35% of the total voting power of GTI;

• the date on which individuals, who on the issuance date of the Senior Notes were directors of GTI (or individuals nominated or elected by a vote of 66 2/3% of such directors or directors previously so elected or nominated), cease to constitute a majority of GTI’s Board of Directors then in office;

• the date on which a plan relating to the liquidation or dissolution of GTI is adopted;

• the date on which GTI merges or consolidates with or into another person, or another person merges into GTI, or all or substantially all of GTI’s assets are sold (determined on a consolidated basis), with certain specified exceptions; or

• the date on which GTI ceases to own, directly or indirectly, all of the voting power of GrafTech Global, UCAR Carbon and GrafTech Finance.

GTI, GrafTech Global and UCAR Carbon and other U.S. subsidiaries that collectively hold a substantial majority of our U.S. assets have guaranteed the Senior Notes on a senior unsecured basis, except for the guarantee by UCAR Carbon. The guarantee by UCAR Carbon has been secured by a junior pledge of all of the shares of capital stock (constituting 97.5% of the outstanding shares of capital stock) of AET held by UCAR Carbon (called the “AET Pledged Stock”), subject to certain limitations. Additional information with respect to the guarantees and the pledge is set forth in Note 18 to the Consolidated Financial Statements.

The Senior Notes contain a number of covenants that restrict corporate activities. The covenants may restrict our ability to repurchase or redeem the Debentures, even if so required thereby. In addition to the failure to pay principal and interest when due or to repurchase Senior Notes when required, events of default under the Senior Notes include: failure to pay at maturity or upon acceleration indebtedness exceeding $10 million; and judgment defaults in excess of $10 million to the extent not covered by insurance.

In 2004, we exchanged $35,000 aggregate principal amount of Senior Notes, plus accrued interest of $432, for 3.2 million shares of common stock. Additionally, we purchased $22,869 aggregate principal amount of Senior Notes, plus accrued interest of $942, for $27,342 in cash. These transactions resulted in a loss of $8,724, which has been recorded in other (income) expense, net, on the Consolidated Statements of Operations.

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Debentures

On January 22, 2004, GTI issued $225,000 aggregate principal amount of Debentures. Interest on the Debentures is payable semi-annually on January 15 and July 15 of each year, commencing July 15, 2004, at the rate of 1.625% per annum. The Debentures mature on January 15, 2024, unless earlier converted, redeemed or repurchased. We recorded the Debentures at the discounted principal value of $218,538 at issuance. Upon issuance, we also recorded a derivative liability of $6,462 for the embedded derivative portion of the Debentures, which is included in other long-term obligations on the Consolidated Balance Sheets. The net proceeds from the offering were approximately $218,812.

A holder of Debentures may convert its Debentures into shares of our common stock at a conversion rate of 60.3136 shares per $1,000 principal amount (equal to a conversion price of approximately $16.58 per share), subject to adjustment upon certain events, only under the following circumstances:

• prior to January 15, 2019, in any fiscal quarter after the fiscal quarter ending March 31, 2004, if the last reported sale price of our common stock for at least 20 trading days during the 30 consecutive trading days ending on the first trading day of such fiscal quarter is greater than 125% of the then current conversion price;

• on or after January 15, 2019, at any time after the last reported sale price of our common stock on any date is greater than 125% of the then current conversion price;

• during the 5 business days after any 10 consecutive trading days in which the trading price per $1,000 principal amount of Debentures for each such trading day was less than 98% of the product of the last reported sale price of our common stock and the then current conversion rate;

• if the credit rating or ratings on the Debentures are reduced by two rating categories below those initially assigned to the Debentures by S&P and Moody’s;

• if the Debentures are called for redemption; or

• upon the occurrence of certain corporate transactions.

Upon conversion, GTI will have the right to deliver, in lieu of shares of our common stock, cash or a combination of cash and shares of our common stock.

Prior to January 15, 2011, the Redemption Make-Whole Option provides that GTI may redeem the Debentures, in whole or in part, at any time, for cash at a redemption price equal to 100% of principal amount, plus accrued and unpaid interest and liquidated damages, if any, only if the last reported sale price of our common stock has exceeded 125% of the then current conversion price for at least 20 trading days during the 30 consecutive trading days ending on the trading day prior to the date on which we mail the notice of redemption. If GTI so redeems the Debentures, GTI will make an additional “make-whole” payment in cash, shares of our common stock or a combination thereof on the redeemed Debentures equal to the present value of all remaining scheduled payments of interest on the redeemed Debentures through January 15,

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2011. The Redemption Make-Whole Option qualified as an embedded derivative that was not clearly and closely related to the characteristics of the Debentures upon issuance. Since the Redemption Make-Whole Option does not currently qualify for any scope exception within SFAS No. 133, it is required by SFAS No. 133 to be accounted for separately from the debt instrument and recorded as derivative financial instruments. The embedded derivative financial instrument was classified as a derivative liability upon issuance and is included in the other long-term obligations in the Consolidated Balance Sheet.

On or after January 15, 2011, GTI may redeem the Debentures, in whole or in part, at any time, for cash at a redemption price equal to 100% of principal amount, plus accrued and unpaid interest and liquidated damages, if any.

A holder may require GTI to repurchase some or all of its Debentures on (i) January 15, 2011, January 15, 2014 or January 15, 2019, or (ii) if we experience a “fundamental change” at a repurchase price equal to 100% of principal amount, plus accrued and unpaid interest and liquidated damages, if any. For this purpose, a fundamental change occurs on:

• the date on which a change in control (which has the same meaning as under the Senior Notes) occurs; or

• subject to certain exceptions, the date on which our common stock ceases to be listed on a U.S. national or regional securities exchange or approved for trading on the NASDAQ National Market or similar system of automated dissemination of quotations of securities prices.

GrafTech Finance, GrafTech Global and UCAR Carbon and other U. S. subsidiaries that together hold a substantial majority of our U. S. assets have guaranteed the Debentures on a senior unsecured basis. Additional information with respect to the guarantees is set forth in Note 18 to the Consolidated Financial Statements.

Events of default under the Debentures are similar to those under the Senior Notes.

(6)           Financial Instruments

We use derivative financial instruments to manage well-defined currency exchange rate, interest rate and commercial energy contract risks. We do not use derivative financial instruments for trading purposes.

Foreign Currency Contracts

The notional amount of open foreign exchange contracts, used by us to minimize foreign currency exposure against euro depreciation, amounted to $54,481 at December 31, 2004. In 2005, one contract expired and we sold all remaining open foreign exchange contracts. As a result, at December 31, 2005, we had no such contracts outstanding. These contracts are marked-to-market monthly and gains and losses are recorded in other (income) expense, net, on the Consolidated Statements of Operations. Gains and losses associated with these contracts amounted to a loss of $6,650 in 2003, a loss of $406 in 2004, and a gain of $1,268 in 2005.

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Interest Rate Risk Management

We implement interest rate management initiatives to seek to minimize our interest expense and optimize the risk in our portfolio of fixed and variable interest rate obligations. Use of these initiatives is allowed under the Senior Notes and the Revolving Facility. We use interest rate swaps to effectively convert fixed rate debt (represented by the Senior Notes) into variable rate debt. At December 31, 2004, we had swaps for a notional amount of $450 million.

At December 31, 2004, $434,631 (out of our total outstanding $450 million notional amount) of interest rate swaps were designated as hedging the exposure to changes in the fair value of the related debt (called a fair value hedge). The related debt for those swaps is the Senior Notes, of which $434,631 aggregate principal amount was outstanding at December 31, 2004. At December 31, 2004 (excluding the offsetting value of our interest rate caps), the principal value of our debt was reduced by $9,891 as a result of our current fair value hedges. The market values of those interest rate swaps, excluding changes in value resulting from accrued interest payable or receivable from the counterparty, are recorded as part of other long-term obligations on the Consolidated Balance Sheets. Accrued interest receivable from or payable to the counterparty is recorded as a component of interest expense on the Consolidated Statement of Operations.

At December 31, 2004, the remaining $15 million of our interest rate swaps were not designated as hedging exposure to changes in the fair value of any specific debt instrument. Any changes in the market value of those swaps are recorded in other (income) expense, net, on the Consolidated Statement of Operations. In 2004, the mark-to-market impact of the undesignated swaps was $350.

All of our swaps are valued monthly, and we are required to provide cash collateral to the counterparty to the extent that the fair market value of the swap liability, net of the fair market value of our interest rate caps, exceeds a specific threshold. At December 31, 2004, all of our swaps were with one counterparty and this threshold was $15 million. We were not required to provide any cash collateral at December 31, 2004.

During the first quarter of 2005, we sold $15 million notional amount of undesignated swaps and paid a nominal fee. Additionally, we sold $150 million notional amount of our fair value hedge swaps and paid $2,950 in cash. Immediately thereafter, we repurchased $150 million notional amount of fair value hedge swaps with a different counterparty. During the second quarter of 2005, we sold $285 million notional amount of swaps and paid $4,831. During the fourth quarter of 2005, we sold $150 million notional amount of swaps and paid $6,845. As a result of these transactions, at December 31, 2005, we had no notional amount of swaps outstanding.

At December 31, 2004, the variable interest rate was calculated based on the six month LIBOR rate as of the date of payment plus 5.7940%, calculated in arrears. During 2005, a portion of the variable interest rate was calculated based on the six month LIBOR rate as of the date of payment plus 5.7940% calculated in arrears and a portion of the variable interest rate was calculated based on the six month LIBOR, set in advance, plus 5.7967%. At December 31, 2005, the Senior Notes are at a fixed rate of 10.25% per annum.

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When we sell a fair value hedge swap, the gain or loss is amortized as a credit or charge to interest expense over the remaining term of the Senior Notes. When we effectively reduce the outstanding principal amount of the Senior Notes (through debt-for-equity exchanges, repurchases or otherwise), the related portion of such credit or charge is accelerated and recorded in the period in which such reduction occurs. At December 31, 2004 and 2005, the principal value of our debt was increased by $24,484 and $7,404, respectively, as a result of gains realized from previously sold swaps. The net impact of current and terminated hedge instruments was a $14,593 and a $7,404 increase in the fair value of our debt at December 31, 2004 and 2005, respectively, and was recorded on the Consolidated Balance Sheets on the line entitled “fair value adjustments for hedge instruments.”

Additional information with respect to the impact of our swaps on interest expense is set forth in Note 7 to the Consolidated Financial Statements.

We enter into agreements with financial institutions that are intended to limit, or cap, our exposure to the incurrence of additional interest expense due to increases in variable interest rates. At December 31, 2004, we had interest rate caps for a notional amount of $500 million, which effectively capped our interest rate exposure, represented by the net impact of our swaps on the Senior Notes, to no greater than 11.3% per annum. During 2005, we sold all of our outstanding interest rate caps. All of our interest rate caps are marked-to-market monthly. Gains and losses are recorded in other (income) expense, net, on the Consolidated Statements of Operations. The fair value adjustment on caps was a $914 loss for 2003, a $3,827 loss for 2004, and a $527 loss for 2005.

Commercial Energy Rate Contracts

We have in the past entered into, and may in the future enter into, natural gas derivative contracts and short duration fixed rate purchase contracts to effectively fix some or all of our natural gas cost exposure. The unrealized gain on outstanding contracts at December 31, 2003 amounted to $917. At December 31, 2005, we had fixed about 23% of our worldwide natural gas exposure through 2006 using such contracts. The outstanding contracts at December 31, 2005 were a nominal receivable.

We are required to provide cash collateral to certain counterparties to the extent that the fair market value of the natural gas derivative contracts exceeds a specific threshold. At December 31, 2005, this threshold was $15 million. We were not required to provide any cash collateral at December 31, 2005.

Fair Market Value Disclosures

SFAS No. 107, “Disclosure about Fair Market Value of Financial Instruments,” defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. Such fair values must often be determined by using one or more methods that indicate value based on estimates of quantifiable characteristics as of a particular date. Values were estimated as follows:

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Cash and cash equivalents, short-term notes and accounts receivables, accounts payable and other current payables—The carrying amount approximates fair value because of the short maturity of these instruments.

Long-Term Debt—Fair value of long-term debt, including the embedded derivative instrument in the Debentures was $720,175 at December 31, 2004 and $663,695 at December 31, 2005.

Foreign currency contracts—Foreign currency contracts are carried at market value. The fair market value of open foreign exchange contracts used by us to minimize foreign currency exposure was an asset of $528 at December 31, 2004. We did not have any such contracts outstanding at December 31, 2005.

Interest rate swaps and caps—The fair value of our interest rate swaps was $9,891 at December 31, 2004. The fair value of our interest rate caps was $769 at December 31, 2004. We had no such instruments outstanding at December 31, 2005. See “Interest Rate Risk Management” above.

Natural gas contracts—See “Commercial Energy Rate Contracts” above.

(7)           Interest Expense

The following table presents an analysis of interest expense:

	For the Year Ended December 31,
	(Dollars in thousands)
	2003			2004			2005
Interest incurred on debt	$	62,351		$	49,808		$	50,984
Interest rate swap benefit		(13,022	)		(10,092	)		(1,633	)
Amortization of fair value adjustments for terminated hedge
instruments		(2,222	)		(2,468	)		(1,744	)
Accelerated amortization of fair value adjustments for
terminated hedge instruments due to reduction of Senior
Notes		(5,734	)		(4,746	)		-
Amortization of debt issuance costs		3,148			4,834			3,569
Interest on DOJ antitrust fine, including imputed interest		955			710			507
Amortization of premium on Senior Notes		(687	)		(243	)		(162	)
Amortization of discount on Debentures		-			867			885
Interest incurred on other items		352			508			310
Total interest expense	$	45,141		$	39,178		$	52,716

Interest rates

At December 31, 2004, the Revolving Facility had an effective interest rate of 6.2%, our $435,000 principal amount of Senior Notes had an effective rate of 8.6% (i.e., a fixed rate of 10.25%, effectively swapped to a variable rate of the LIBOR plus 5.7940%) and our $225,000 principal amount of Debentures had a fixed rate of 1.625%.

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At December 31, 2005, the Revolving Facility had an effective interest rate of 6.8%, our $434,631 principal amount of Senior Notes had a fixed rate of 10.25% and an effective rate of 10.02% (including the effect of the amortization of fair value adjustments for terminated hedge instruments) and our $225,000 principal amount of Debentures had a fixed rate of 1.625%.

(8)           Other (Income) Expense, Net

The following table presents an analysis of other (income) expense, net:

	For the Year Ended December 31,
	(Dollars in thousands)
	2003			2004			2005
Loss on reduction of Senior Notes	$	616		$	8,782		$	-
Currency (gains) losses		(42,149	)		(8,527	)		14,868
Bank and other financing fees		4,503			3,137			2,433
Legal, environmental and other related costs		2,670			8,510			2,814
Employee benefit curtailment, settlement and other		3,504			(182	)		(145	)
Fair value adjustments on interest rate caps		914			3,827			527
Foreign currency exchange rate contracts (gains) losses		6,650			406			(1,268	)
Fair value adjustments on Debenture Redemption Make-Whole
Option		-			(2,475	)		(2,702	)
Former parent company lawsuit legal expenses		-			692			-
Relocation expenses		820			927			905
Non-income taxes		3,434			3,395			-
Write-off of fixed or other assets		4,278			2,049			-
Gain on sale of assets		(1,026	)		(2,847	)		(748	)
Write-off of capitalized bank fees and related debt
extinguishment costs		2,357			344			1,557
Other		1,369			3,151			(221	)
Total other (income) expense, net	$	(12,060	)	$	21,189		$	18,020

We have non-dollar-denominated intercompany loans between GrafTech Finance and some of our foreign subsidiaries. At December 31, 2004 and 2005, the aggregate principal amount of these loans was $414,457 and $318,663, respectively (based on currency exchange rates in effect at such date). These loans are subject to remeasurement gains and losses due to changes in currency exchange rates. A portion of these loans are deemed to be essentially permanent and, as a result, remeasurement gains and losses on these loans are recorded as a component of accumulated other comprehensive loss in the stockholders’ deficit section of the Consolidated Balance Sheets. The balance of these loans are deemed to be temporary and, as a result, remeasurement gains and losses on these loans are recorded as currency (gains) losses in other income (expense), net, on the Consolidated Statements of Operations. In 2003, we had a net total of $42,149 of currency gains, including $41,920 of exchange gains due to the remeasurement of intercompany loans and translation of financial statements of foreign subsidiaries which use the dollar as their functional currency. In 2004, we had a net total of $8,527 of currency gains, including $9,835 of exchange gains due to the remeasurement of intercompany loans and translation of financial statements of foreign subsidiaries which use the

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dollar as their functional currency. In 2005, we had a net total of $14,868 of currency losses, including $14,611 of exchange losses due to the remeasurement of intercompany loans and translation of financial statements of foreign subsidiaries which use the dollar as their functional currency.

(9)          Supplementary Balance Sheet Detail

The following tables present supplementary balance sheet details:

	At December 31,
	2004			2005
	(Dollars in thousands)
Accounts and notes receivable, net:
Trade	$	184,363		$	170,014
Other		25,619			17,698
		209,982			187,712
Allowance for doubtful accounts		(4,001	)		(3,132	)
	$	205,981		$	184,580
Inventories:
Raw materials and supplies	$	59,388		$	74,650
Work in process		141,586			150,816
Finished goods		24,130			29,572
	$	225,104		$	255,038
Property, plant and equipment:
Land and improvements	$	30,516		$	29,802
Buildings		159,910			154,947
Machinery and equipment and other		899,370			865,841
Construction in progress		41,424			35,803
	$	1,131,220		$	1,086,393
Accounts payable:
Trade	$	66,967		$	73,363
Interest		18,922			18,829
	$	85,889		$	92,192
Other accrued liabilities:
Accrued vendors payable	$	40,426		$	33,173
Payrolls (including incentive programs)		6,132			4,410
Restructuring		6,079			10,190
Employee compensation and benefits		12,098			11,828
Accrued interest		424			1,319
Liabilities and expenses associated with antitrust investigations          and related lawsuits and claims		17,077			20,625
Other		16,566			15,445
	$	98,802		$	96,990
Other long term obligations:
Postretirement benefits	$	44,333		$	25,749
Pension and related benefits		35,260			51,243
Liabilities and expenses associated with antitrust investigations
and related lawsuits and claims		26,000			5,375
Long-term environmental liabilities		4,990			4,429
Fair value of interest rate swap		9,891			-
Derivative liability (Redemption Make-Whole Option)		3,986			1,284
Restructuring		2,773			1,337
Other		22,229			18,287
	$	149,462		$	107,704

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The following table presents an analysis of the allowance for doubtful accounts:

	At December 31,
	2004			2005
	(Dollars in thousands)
Balance at beginning of year	$	3,921		$	4,001
Additions		368			479
Deductions		(288	)		(1,348	)
Balance at end of year	$	4,001		$	3,132

(10)        Leases and Other Long Term Obligations

Lease commitments under non-cancelable operating leases extending for one year or more will require the following future payments:

	(Dollars in thousands)
2006	$	4,063
2007		2,720
2008		2,404
2009		2,093
2010		2,004
After 2010		1,924

Total lease and rental expenses under non-cancelable operating leases extending one year or more were about $2,248 in 2003, $2,227 in 2004 and $4,067 in 2005.

During 2001, we outsourced our information technology function to CGI Group Inc. (“CGI”). Under this ten-year agreement, CGI manages our data services, networks, desktops and telecommunications. This contract was amended in the third quarter of 2005, effectively reducing the scope of services provided by CGI. The following schedule sets forth the future payments for base services.

	(Dollars in thousands)
2006	$	4,474
2007		4,388
2008		4,388
2009		4,388
2010		4,388
After 2010		1,250

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In September 2002, we entered into a ten-year outsourcing contract with CGI to provide finance and accounting business process services valued at $36 million. On November 15, 2005, we entered into a memorandum of agreement with CGI, terminating such services. The memorandum was entered into after the parties determined that the termination of the ten-year outsourcing contract was in their mutual best interest. Such termination is effective during the first quarter of 2006. Thereafter, we will be solely and entirely responsible for all of the services previously rendered by CGI under this contract. As a result, at December 31, 2005, our future payments amount to about $750 and will be paid during 2006.

(11)        Benefit Plans

Defined Benefit Plans

Until February 25, 1991, we participated in the U.S. retirement plan of Union Carbide Corporation (“Union Carbide”). Effective February 26, 1991, we formed our own U.S. retirement plan which covers substantially all U.S. employees. Retirement and death benefits related to employee service through February 25, 1991 are covered by the Union Carbide plan. Benefits paid by the Union Carbide plan are based on final average pay through February 25, 1991, plus salary increases (not to exceed 6% per year) until January 26, 1995 when Union Carbide ceased to own at least 50% of the equity of GTI. All our employees who retired prior to February 25, 1991 are covered under the Union Carbide plan. Pension benefits under our plan are based primarily on years of service and compensation levels prior to retirement. Prior to January 1, 2002, our plan was a defined benefit plan. Effective January 1, 2002, a new defined contribution plan was established for U.S. employees. Some employees had the option to remain in the defined benefit plan for an additional period of up to five years. Those employees without the option to remain in the defined benefit plan for an additional five years began participating in the defined contribution plan and their benefits under the defined benefit plan were frozen as of December 31, 2001. Those employees with the initial option to remain in the defined benefit plan began participating in the defined contribution plan as of April 1, 2003 and their benefits under the defined benefit plan were frozen as of March 31, 2003. Effective March 31, 2003, we froze the qualified defined benefit plan for our remaining U.S. employees and closed our non-qualified U.S. defined benefit plan for the participating salaried workforce. Under the new defined contribution plan, we make quarterly contributions to each individual employee’s account equal to 2.5% of the employee’s pay up to the social security wage base ($90 in 2004 and $94 in 2005) plus 5% of their pay above the social security wage base. In 2005, we recorded expense of $1,355 related to this plan.

Pension coverage for employees of foreign subsidiaries is provided, to the extent deemed appropriate, through separate plans. Obligations under such plans are systematically provided for by depositing funds with trustees, under insurance policies or by book reserves.

We use a December 31 measurement date for all of our plans.

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The components of our consolidated net pension costs are set forth in the following table.

	For the Year Ended December 31,
	2003						2004						2005
	U.S.			Foreign			U.S.			Foreign			U.S.			Foreign
	(Dollars in thousands)
Service cost	$	2,050		$	1,007		$	912		$	309		$	740		$	424
Interest cost		7,904			4,178			7,528			4,349			7,714			4,434
Expected return on assets .		(7,248	)		(3,907	)		(8,329	)		(4,123	)		(8,768	)		(4,265	)
Amortization		455			411			176			354			1,355			990
Special termination benefits		2,490			298			-			-			-			485
Settlement (gain) loss		(5,514	)		(128	)		-			(535	)		-			743
Curtailment loss		254			366			-			1			-			(212	)
	$	391		$	2,225		$	287		$	355		$	1,041		$	2,599

The reconciliation of beginning and ending balances of benefit obligations under, fair value of assets of and the funded status of our pension plans are as follows:

	Pension Benefits at December 31,
	2004						2005
	U.S.			Foreign			U.S.			Foreign
Changes in Benefit Obligation:
Net benefit obligation at beginning of year	$	124,875		$	73,172		$	131,009		$	74,773
Service cost		912			309			740			424
Interest cost		7,528			4,349			7,714			4,434
Impact of plan amendments		-			528			-			-
Participant contributions		-			-			-			96
Foreign currency exchange rates		-			6,345			-			(7,464	)
Actuarial loss		7,796			2,792			10,994			9,851
Divestiture		-			-			-			-
Curtailment		(1,901	)		-			-			-
Settlement		-			(9,374	)		-			(1,443	)
New plan 87		-			-			-			1,189
Special termination benefits		-			241			-			485
Benefits paid		(8,203	)		(3,587	)		(8,381	)		(6,194	)
Net benefit obligation at end of year	$	131,007		$	74,775		$	142,076		$	76,151
Changes in Plan Assets:
Fair value of plan assets at beginning of year	$	91,876		$	59,714		$	109,988		$	63,834
Actual return on plan assets		3,307			5,473			1,227			9,141
New plan		-			-			-			1,420
Foreign currency exchange rate changes		-			5,442			-			(6,216	)
Employer contributions		23,008			6,166			570			1,766
Employee contributions		-			-			-			96
Settlement		-			(9,374	)		-			(1,443	)
Benefits paid		(8,203	)		(3,587	)		(8,381	)		(6,194	)
Fair value of plan assets at end of year	$	109,988		$	63,834		$	103,404		$	62,404

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	Pension Benefits at December 31,
	2004						2005
	U.S.			Foreign			U.S.			Foreign
Reconciliation of funded status:
Funded status at end of year	$	(21,020	)	$	(10,941	)	$	(38,672	)	$	(13,748	)
Unrecognized net transition asset		-			(1,179	)		-			(729	)
Unrecognized prior service cost		-			1,673			-			1,328
Unrecognized net actuarial loss		25,180			14,959			42,362			16,490
Net amount recognized at end of year	$	4,160		$	4,512		$	3,690		$	3,341
Amounts recognized in the statement of financial position:
Prepaid benefit cost	$	-		$	3,138		$	-		$	2,630
Accrued benefit liability		(21,020	)		(8,012	)		(38,672	)		(7,845	)
Intangible asset		-			642			-			491
Accumulated other comprehensive loss		25,180			8,744			42,362			8,065
Net amount recognized	$	4,160		$	4,512		$	3,690		$	3,341

The accumulated benefit obligation for all defined pension plans was $197,607 at December 31, 2004 and $208,819 at December 31, 2005.

We annually re-evaluate assumptions and estimates used in projecting pension assets, liabilities and expenses. These assumptions and estimates may affect the carrying value of pension assets, liabilities and expenses in the Consolidated Financial Statements. Assumptions used to determine net pension costs and pension projected benefit obligations are set forth in the following table:

	Pension Benefit Obligations
	At December 31,
	2004			2005
Weighted average assumptions to determine benefit obligations:
Discount rate		5	.99%		5	.66%
Rate of compensation increase		4	.20%		3	.51%

	Pension Benefit Costs
	At December 31,
	2004			2005
Weighted average assumptions to determine net cost:
Discount rate		6	.36%		5	.99%
Expected return on plan assets		7	.73%		7	.71%
Rate of compensation increase		4	.15%		3	.51%

We adjust our discount rate annually in relation to the rate at which the benefits could be effectively settled. Discount rates are set for each plan in reference to the yields available on AA-rated corporate bonds of appropriate currency and duration. The appropriate discount rate is derived by developing an AA-rated corporate bond yield curve in each currency. The discount rate for a given plan is the rate implied by the yield curve for the duration of that plan's liabilities. In certain countries, where little public information is available on which to base discount rate assumptions, the discount rate is based on government bond yields or other indices and approximate adjustments to allow for the differences in weighted durations for the specific plans and/or allowance for assumed credit spreads between government and AA corporate bonds.

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The expected return on assets assumption represents our best estimate of the long-term return on plan assets and generally was estimated by computing a weighted average return of the underlying long-term expected returns on the different asset classes, based on the target asset allocations. The expected return on assets assumption is a long-term assumption that is expected to remain the same from one year to the next unless there is a significant change in the target asset allocation, the fees and expenses paid by the plan or market conditions.

The rate of compensation assumption is generally based on salary increases.

Plan Assets. The following table presents our retirement plan weighted average asset allocations at December 31, 2005, by asset category:

	Percentage of Plan
	Assets at December 31, 2005
	U.S.			Foreign
Equity securities		69	%		35	%
Fixed Income		30			52
Other		1			13
Total		100	%		100	%

Investment Policy and Strategy. The investment policy and strategy of the U.S. plan is to invest approximately 75% (60% large cap, 25% small- and mid-cap, 15% international) in equities and approximately 25% in short duration fixed income securities. The trust allows the plan to be invested up to 80% in equities, including shares of our common stock. Rebalancing is undertaken monthly. The investment policy of the U.K. plan is to invest 0% to 40% in equities and 60% to 100% debt securities. The goal of both plans is to fully fund the plans as soon as possible while investing plan assets prudently. To the extent we maintain plans in other countries, asset diversification ranges are between 5%-30% for equity investments and between 7%-95% for fixed income investments. For each plan, the investment policy is set within both asset return and local statutory requirements.

The following table presents our retirement plan weighted average target asset allocations at December 31, 2005, by asset category:

	Percentage of Targeted Plan
	Assets at December 31, 2005
	U.S.			Foreign
Equity securities		75	%		35	%
Fixed Income		25			53
Other		-			12
Total		100	%		100	%

The following table presents information for pension plans with an accumulated benefit obligation in excess of plan assets at December 31:

	2004				2005
	U.S.		Foreign		U.S.		Foreign
	(Dollars in thousands)
Accumulated benefit obligation	$	131,009	$	59,252	$	142,076	$	64,989
Fair value of plan assets		109,988		51,241		103,404		60,226

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The following table presents information for pension plans with a projected benefit obligation in excess of plan assets at December 31:

	2004				2005
	U.S.		Foreign		U.S.		Foreign
	(Dollars in thousands)
Projected benefit obligation	$	131,008	$	74,774	$	142,076	$	75,187
Fair value of plan assets		109,988		63,834		103,404		61,238

The following table represents projected future pension plan cash flow by year:

	U.S.		Foreign
	(Dollars in thousands)
Expected contributions in 2006:
Expected employer contributions	$	570	$	4,250
Expected employee contributions		-		-
Estimated future benefit payments reflecting expected future      service for the fiscal years ending December 31:
2006		9,022		8,753
2007		9,206		3,484
2008		9,108		3,082
2009		8,873		3,105
2010		8,848		3,627
2011-2015		45,819		34,671

Postretirement Benefit Plans

We provide healthcare and life insurance benefits for eligible retired employees. These benefits are provided through various insurance companies and health care providers. We accrue the estimated net postretirement benefit costs during the employees’ credited service periods. We use a December 31 measurement date for all of our plans.

In July 2002, we amended our U.S. postretirement medical coverage. In 2003 and 2004, we discontinued the Medicare Supplement Plan (for retirees 65 years or older or those eligible for Medicare benefits). This change applied to all U.S. active employees and retirees. In June 2003, we announced the termination of the existing early retiree medical plan for retirees under age 65, effective December 31, 2005. In addition, we limited the amount of retiree’s life insurance after December 31, 2004. These modifications are accounted for prospectively. The impact of these changes is being amortized over the average remaining period to full eligibility of the related postretirement benefits and resulted in a $7,618 net benefit in 2003, a $11,902 net benefit in 2004 and a $14,000 net benefit in 2005, reflected on the Consolidated Statements of Operations.

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The components of our consolidated net postretirement cost (benefit) are set forth in the following table:

	For the Year Ended December 31,
	2003					2004					2005
	U.S.			Foreign		U.S.			Foreign		U.S.			Foreign
	(Dollars in thousands)
Service Cost	$	278		$	127	$	109		$	215	$	18		$	238
Interest Cost		2,164			993		1,275			1,181		743			1,292
Amortization		(11,195	)		15		(14,733	)		51		(16,387	)		96
	$	(8,753	)	$	1,135	$	(13,349	)	$	1,447	$	(15,626	)	$	1,626

The reconciliation of beginning and ending balances of benefit obligations under, fair value of assets of and the funded status of our postretirement plans is set forth in the following table:

	Postretirement Benefits at December 31,
	2004						2005
	U.S.			Foreign			U.S.			Foreign
Changes in Benefit Obligation:
Net benefit obligation at beginning of year	$	27,703		$	16,090		$	14,939		$	18,793
Service cost		109			215			18			238
Interest cost		1,275			1,181			743			1,292
Impact of plan amendments		(12,077	)		—			—			—
Foreign currency exchange rates		—			1,776			—			(237	)
Actuarial loss		1,767			861			(252	)		(157	)
Divestiture		—			—			—			—
Curtailment		—			—			—			—
Settlement		—			—			—			—
Special termination benefits		—			—			—			—
Gross benefits paid		(3,838	)		(1,331	)		(3,202	)		(1,145	)
Net benefit obligation at end of year	$	14,939		$	18,792		$	12,246		$	18,784
Changes in Plan Assets:
Fair value of plan assets at beginning of year	$	—		$	—		$	—		$	—
Actual return on plan assets		—			—			—			—
Foreign currency exchange rate changes		—			—			—			—
Employer contributions		3,838			1,331			3,202			1,145
Settlement		—			—			—			—
Gross benefits paid		(3,838	)		(1,331	)		(3,202	)		(1,145	)
Fair value of plan assets at end of year	$	—		$	—		$	—		$	—

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	Postretirement Benefits at December 31,
	2004						2005
	U.S.			Foreign			U.S.			Foreign
Reconciliation of funded status:
Funded status at end of year	$	(14,939	)	$	(18,792	)	$	(12,246	)	$	(18,784	)
Unrecognized prior service cost		(52,478	)		(4,301	)		(31,366	)	$	(4,165	)
Unrecognized net actuarial loss		39,536			6,641			34,559			6,253
Net amount recognized at end of year	$	(27,881	)	$	(16,452	)	$	(9,053	)	$	(16,696
Amounts recognized in the statement of financial position:
Prepaid benefit cost	$	-		$	-		$	-		$	-
Accrued benefit liability		(27,881	)		(16,452	)		(9,053	)		(16,969	)
Intangible asset		—			—			—			—
Accumulated other comprehensive income		—			—			—			—
Net amount recognized	$	(27,881	)	$	(16,452	)	$	(9,053	)	$	(16,969	)

We annually re-evaluate assumptions and estimates used in projecting the postretirement liabilities and expenses. These assumptions and estimates may affect the carrying value of postretirement plan liabilities and expenses in our Consolidated Financial Statements. Assumptions used to determine net postretirement benefit costs and postretirement projected benefit obligation are set forth in the following table:

	Postretirement Benefit Obligations
	At December 31,
	2004			2005
Weighted average assumptions to determine benefit obligations:
Discount rate		6	.69%		6	.07%
Health care cost trend on covered charges:
Initial		8	.00%		8	.23%
Ultimate		4	.79%		5	.77%
Years to ultimate		9			8

	Postretirement Benefit Costs
	At December 31,
	2004			2005
Weighted average assumptions to determine net cost:
Discount rate		6	.99%		6	.69%
Health care cost trend on covered charges:
Initial		8	.47%		7	.81%
Ultimate		4	.13%		5	.62%
Years to ultimate		9			7

For 2003, 2004 and 2005, as a result of certain amendments to our U.S. postretirement benefits, health care cost trend rates have no material effect on the amounts reported for net postretirement benefits.

Discount rates are set for each plan in reference to the yields available on AA-rated corporate bonds of appropriate currency and duration. The appropriate discount rate is derived by developing an AA-rated corporate bond yield curve in each currency. The discount rate for a given plan is the rate implied by the yield curve for the duration of that plan's liabilities. In certain countries, where little public information is available on which to base discount rate assumptions, the discount rate is based on government bond yields or other indices and

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approximate adjustments to allow for the differences in weighted durations for the specific plans and/or allowance for assumed credit spreads between government and AA-rated corporate bonds.

The following table represents projected future postretirement cash flow by year:

	U.S.		Foreign
	(Dollars in thousands)
Expected contributions in 2006:
Expected employer contributions	$	383	$	1,190
Expected employee contributions		-		-
Estimated future benefit payments reflecting expected   future service for the fiscal years ending December 31:
2006		383		1,190
2007		340		1,244
2008		376		1,291
2009		510		1,351
2010		526		1,415
2011-2015		1,364		8,033

Other Non-Qualified Benefit Plans

Since January 1, 1995, we have established various unfunded, non-qualified supplemental retirement and deferred compensation plans for certain eligible employees. We established benefits protection trusts (collectively, the “Trust”) to partially provide for the benefits of employees participating in these plans. At December 31, 2004 and December 31, 2005, the Trust had assets of approximately $505 and $915, respectively, which are included in other assets on the Consolidated Balance Sheets. These assets include 426,400 shares of common stock that we contributed to the Trust in March 2001. These shares, if later sold, could be used for partial funding of our future obligations under certain of our compensation and benefit plans. The shares held in Trust are not considered outstanding for purposes of calculating earnings per share until they are committed to be sold or otherwise used for funding purposes.

Savings Plan

Our employee savings plan provides eligible employees the opportunity for long-term savings and investment. On January 1, 2002, the plan was revised to allow employees to contribute up to 5% of pay as a basic contribution and an additional 45% of pay as supplemental contribution. For 2003, 2004 and 2005, we contributed on behalf of each participating employee, in units of a fund that invests entirely in our common stock, 100% on the first 3% contributed by the employee and 50% on the next 2% contributed by the employee. We contributed 128,241 shares in 2004, resulting in expense of $1,565 and 301,194 shares in 2005, resulting in expense of $1,622.

(12)        Restructuring and Impairment Charges

At December 31, 2005, the outstanding balance of our restructuring reserve was $11,527. We expect the majority of the remaining payments to be paid by the end of 2007. The components of the balance at December 31, 2005 consisted primarily of:

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Synthetic Graphite Segment:

• $6,044 related to the rationalization of our synthetic graphite facilities, including those in Brazil, France, and Russia;

• $3,897 related to the closure of our graphite electrode manufacturing operations in Caserta, Italy; and

• $700 related to the phase out of our graphite electrode machining operations in Clarksville, Tennessee.

Other Segment and Corporate:

• $794 related primarily to remaining lease payments on our former corporate headquarters; and

• $92 related to the relocation of our corporate headquarters from Wilmington, Delaware to Parma, Ohio.

In 2003, we recorded a net restructuring charge of $19,765, consisting of an $11,266 charge associated with the closure and settlement with certain of our U.S pension plans, with the remaining primarily due to further organizational changes.

In 2004, we recorded a net restructuring benefit of $548, comprised primarily of the following:

• a $2,473 net benefit associated with the closure of our graphite electrode manufacturing operations in Caserta, Italy (consisting of a reduction in cost estimate, partially offset by the completion of further severance agreements for employees terminated in connection with the closure), offset by

• a $1,329 charge relating primarily to severance programs and related benefits associated with the closure of our advanced graphite machining operations in Sheffield, United Kingdom; and

• a $596 charge associated primarily with changes in estimates related to U.S. voluntary and selective severance programs.

In 2005, we recorded a net restructuring charge of $9,729, comprised primarily of the following:

• a $6,100 charge associated with the rationalization of our synthetic graphite facilities, including those in Brazil, France, and Russia;

• a $3,194 charge associated with the closure of our graphite electrode manufacturing operations at Caserta, Italy;

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• a $523 charge primarily associated with the relocation of our Corporate Headquarters from Wilmington, Delaware to Parma, Ohio;

• an $804 charge associated with the phase out of our graphite electrode machining operations in Clarksville, Tennessee, scheduled for completion in the third quarter of 2006, and the closure of our administrative offices in Clarksville, scheduled for completion at the end of the first quarter of 2006; and

• a $430 charge associated with the closure of our advanced graphite machining operations in Sheffield, United Kingdom; offset by

• a $1,322 benefit associated with a change in estimate pertaining to the closure of certain graphite electrode manufacturing operations.

We expect to record additional charges in 2006 related to such initiatives.

The restructuring accrual is included in other accrued liabilities and other long-term obligations on the Consolidated Balance Sheets. The following table summarizes activity relating to the accrual:

	Severance and Related Costs			Plant Shutdown and Related Costs			Total
	(Dollars in thousands)
Balance at December 31, 2003	$	19,253		$	9,410		$	28,663
Restructuring charges		4,321			985			5,306
Change in estimates		—			(5,854	)		(5,854	)
Payments and settlements,     including non-cash items of $2,814		(18,367	)		(1,300	)		(19,667	)
Effect of change in currency exchange rates		340			64			404
Balance at December 31, 2004		5,547			3,305			8,852
Restructuring charges		10,880			474			11,354
Change in estimates		(260	)		(1,365	)		(1,625	)
Payments and settlements,     majority of which are cash payments		(4,999	)		(1,671	)		(6,670	)
Effect of change in currency exchange rates		(435	)		51			(384	)
Balance at December 31, 2005	$	10,733		$	794		$	11,527

In 2003, we recorded impairment charges of $6,991. Such charges consisted of $5,370 pertaining primarily to write-off of the remaining fixed assets in connection with the closure of our graphite electrode manufacturing operation in Caserta, Italy and $1,621 pertaining primarily

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to the net write-off of the remaining book value of assets of our former graphite electrode manufacturing operations in Clarksville, Tennessee.

In 2005, we recorded a $2,904 charge related to the impairment of our long-lived carbon electrode fixed assets in Columbia, Tennessee. The future estimated undiscounted cash flows expected to result from the use of these assets were below their respective carrying amounts. As a result, an impairment loss was measured as the difference between the assets’ carrying amount and fair value, which was based on current estimates of market price.

(13)      Management Compensation and Incentive Plans

Stock Options

We historically have maintained several stock incentive plans. The aggregate number of shares reserved under the plans since their initial adoption was 14,500,000 shares at December 31, 2003 and December 31, 2004 and 19,300,000 shares at December 31, 2005. Such plans permitted options, restricted stock and other awards to be granted to employees and, in the case of two plans, also to non-employee directors.

The 2005 Equity Incentive Plan (the “2005 Plan”) was adopted in the second quarter of 2005. The 2005 Plan provides that the Management Stock Incentive Plan (Original Version), the Management Stock Incentive Plan (Senior Version), the Management Stock Incentive Plan (Mid-Management Version), the 1995 Equity Incentive Plan and the 1996 Mid-Management Equity Incentive Plan (collectively, the “existing plans”) are frozen and will remain in effect only to the extent of awards outstanding under the existing plans on May 25, 2005. The 2005 Plan initially covers 4,800,000 shares. Shares under the existing plans are added to and become available for awards under the 2005 Plan to the extent (but only to the extent) that stock options or stock grants outstanding on May 25, 2005 under the existing plans expire or are canceled or forfeited before they are exercised or vest, respectively, and limited to the extent of the current outstanding awards.

In 2003, we granted options to purchase shares as follows:

• Options for 3,188,435 shares were issued to certain officers, management and directors at exercise prices ranging from $2.85 to $12.23 per share. We granted 10-year options for 91,935 shares that vest one year from the grant date and 10-year options for 25,000 shares that vest two years from the grant date. In addition, we granted options for 3,071,500 shares in connection with our long-term incentive program. These options were scheduled to vest on July 31, 2008 and expire December 31, 2008. Accelerated vesting occurs if certain cash flow performance targets are achieved in each of 2003, 2004 and 2005. At December 31, 2004, 1,109,634 of such options were vested. On November 30, 2005 the Compensation, Organization and Pension Committee of GrafTech’s Board of Directors vested the balance of these shares. At December 31, 2005, 3,061,767 of these options were vested.

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In 2004, we granted options to purchase shares as follows:

• Options for 199,421 shares were issued to certain officers, management and directors at exercise prices ranging from $8.91 to $14.82 per share. We granted 10-year options for 30,421 shares that vest one year from the grant date and 10-year options for 84,500 shares that vest two years from the grant date. In addition, we granted options for 84,500 shares in connection with our long-term incentive program. These options were scheduled to vest July 31, 2008 and expire December 31, 2008. Accelerated vesting could occur if certain cash flow performance targets were achieved in each of 2004 and 2005. At December 31, 2004, none of these options were vested. On November 30, 2005 the Compensation, Organization and Pension Committee of GrafTech’s Board of Directors vested such options. Therefore, at December 31, 2005, 114,921 of these options were vested.

In 2005, we granted 10-year options to purchase shares as follows:

• Options for 195,000 shares were issued to certain officers and management at exercise prices ranging from $4.00 to $9.01 per share. All of these options vest two years from the date of grant. At December 31, 2005, none of these shares were vested.

The following table summarizes the status of our stock-based compensation plans at the dates and for the periods indicated:

	For the Year Ended December 31,
	2003					2004					2005
	Shares			Weighted-Average Exercise Price		Shares			Weighted-Average Shares Exercise Price		Shares			Weighted-Average Exercise Price
	(Shares in thousands)
Time vesting options:
Outstanding at beginning of year		9,005		$	15.34		11,208		$	13.14		10,631		$	13.42
Granted at market price		3,208			6.59		199			12.01		195			6.62
Exercised		(552	)		8.45		(712	)		8.36		-			-
Forfeited/canceled		(453	)		15.81		(64	)		17.65		(243	)		13.81
Outstanding at end of year		11,208			13.14		10,631			13.42		10,583			13.28
Options exercisable at year end		7,593			15.44		7,108			16.32		10,240			13.40
Weighted-average fair value of      options granted during year:
At market					6.59					7.16					4.80
Performance vesting options:
Outstanding at beginning of      year		378		$	7.60		332		$	7.60		242		$	7.60
Granted		-			-		-			-		-			-
Exercised		(46	)		7.60		(90	)		7.60		-			-
Forfeited/canceled		-			-		-			-		-			-
Outstanding at end of year		332			7.60		242			7.60		242			7.60
Options exercisable at year end		332		$	7.60		242		$	7.60		242		$	7.60

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The fair value of each stock option is estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions for grants in 2003, 2004 and 2005, respectively: dividend yield of 0.0% for all years; expected volatility of 76% in 2003, 67% in 2004 and 72% in 2005; risk-free interest rates of 4.0% in 2003, 3.7% in 2004 and 4.2% in 2005; and expected lives of 6 years in 2003, 6 years in 2004 and 8 years in 2005.

The following table summarizes information about stock options outstanding at December 31, 2005.

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Prices	Number Exercisable	Weighted- Average Exercise Prices
	(Shares in thousands)
Time vesting options:
$2.83 to 11.10	6,609	4 years	$  7.51	6,414	$  7.54
$11.60 to $19.06	2,486	3 years	16.46	2,338	16.64
$22.82 to $29.22	116	2 years	25.54	116	25.54
$30.59 to $40.44	1,372	1 year	34.28	1,372	34.28
	10,583		13.28	10,240	13.40
Performance vesting options:
$7.60	242	1 year	7.60	242	7.60

Restricted Stock

In 2005, we granted 1,355,907 shares of restricted stock to certain directors, officers and employees at prices ranging from $3.80 to $8.49.  Of these shares, 40,000 shares vest one year from the date of grant, 455,907 shares vest two years from the date of grant and 860,000 shares vest over a three-year period, with one-third of the shares vesting on the anniversary date of the grant in each of the next three years. 

Incentive Compensation Plans

In 2000, we implemented global incentive programs for our worldwide salaried and hourly employees. These plans were based on our financial performance and achievement of strategic or, in the case of hourly employees, local targets. The cost for this plan was nil in 2002. In 2003, the Incentive Compensation Program (the “ICP”) replaced the former programs, creating one program for all employees. The ICP is based primarily on achieving cash flow targets and, to a lesser extent, strategic targets. The cost for the ICP was $11,413 in 2003 and nil in 2004 and 2005.

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(14)        Contingencies

Antitrust Investigations

In 1997, the DOJ and the EU Competition Authority commenced investigations into alleged violations of the antitrust laws in connection with the sale of graphite electrodes. The antitrust authorities in Canada, Japan and Korea subsequently began similar investigations. The EU Competition Authority also commenced an investigation into alleged antitrust violations in connection with the sale of specialty graphite. These antitrust investigations have been resolved. Several of the investigations resulted in the imposition of fines against us. These fines, or payments in accordance with a payment schedule in the case of the DOJ antitrust fine, have been timely paid. At December 31, 2004 and December 31, 2005, $43,077 and $26,000 remained in the reserve for liabilities and expenses in connection with these antitrust investigations and related lawsuits and claims, respectively. The reserve is unfunded and represents the remaining DOJ antitrust fine obligation, with quarterly payments scheduled through January 2007.

Antitrust Lawsuits

Through December 31, 2005, except as described in the following paragraphs, we have settled or obtained dismissal of all of the civil antitrust lawsuits (including class action lawsuits) previously pending against us, certain civil antitrust lawsuits threatened against us and certain possible civil antitrust claims against us arising out of alleged antitrust violations occurring prior to the date of the relevant settlements in connection with the sale of graphite electrodes, carbon electrodes and bulk graphite products. All payments due have been timely paid.

In 1999 and 2000, we and other producers of graphite electrodes were served with three complaints commencing three separate civil antitrust lawsuits in the United States District Court for the Eastern District of Pennsylvania (“EDPA District Court”.) In March 2002, we were served with another complaint commencing a separate civil antitrust lawsuit in the EDPA District Court. These lawsuits are called the “foreign customer lawsuits.” The first complaint, entitled Ferromin International Trade Corporation, et al. v. UCAR International Inc., et al., was filed by 27 steelmakers and related parties, all but one of whom are located outside the U.S. The second complaint, entitled BHP New Zealand Ltd. et al. v. UCAR International Inc., et al. was filed by 4 steelmakers, all of whom are located outside the U.S. The third complaint, entitled Saudi Iron and Steel Company v. UCAR International Inc., et al., was filed by a steelmaker who is located outside the U.S. The fourth complaint, entitled Arbed, S.A., et al. v. Mitsubishi Corporation, et al., was filed by 5 steelmakers, all of whom are located outside the U.S. In each complaint, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of graphite electrodes sold or sourced from the U.S. and those sold and sourced outside the U.S. The plaintiffs seek, among other things, an award of treble damages resulting from such alleged violations. We believe that we have strong defenses against claims alleging that purchases of graphite electrodes outside the U.S. are actionable under U.S. federal antitrust law. We filed motions to dismiss the first and second complaints. In June and July 2001, our motions to dismiss the first and second complaints were granted with respect to substantially all of the plaintiffs’ claims. The claims not dismissed relate to sales invoiced from the United States. Appeals were filed by the plaintiffs and the defendants with the U.S. Court of Appeals for the Third Circuit with regard to these dismissals. The U.S. Court of Appeals for the

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Third Circuit heard oral argument on these appeals on March 11, 2003. The third complaint was dismissed without prejudice to refile pending the resolution of such appeals. We filed a motion to stay the lawsuit commenced by the fourth complaint pending resolution of appeals in the other foreign customer lawsuits, and such motion was granted in July 2002. In June 2004, the U.S. Supreme Court issued its decision in the case of F. Hoffman-LaRoche v. Empagran S.A. et al., an antitrust case brought by foreign purchasers against the participants in an international vitamins cartel. Because of the relevance of this decision to the foreign customer lawsuits, the U.S. Court of Appeals for the Third Circuit reviewed the impact of this decision on the pending appeals in the foreign customer lawsuits. Subsequently, in August 2004, the U.S. Court of Appeals for the Third Circuit remanded the case to the EDPA District Court for its consideration of the impact of the Empagran decision on the foreign customer lawsuits.

We have been vigorously defending, and intend to continue to vigorously defend, against the foreign customer lawsuits as well as all threatened lawsuits and possible unasserted claims. We may at any time, however, settle these lawsuits as well as any threatened lawsuits and possible claims. It is possible that additional civil antitrust lawsuits seeking, among other things, to recover damages could be commenced against us in the U.S. and in other jurisdictions. We are currently not reserved for such matters.

Other Proceedings Against Us

We are involved in various other investigations, lawsuits, claims and other legal proceedings incidental to the conduct of our business. While it is not possible to determine the ultimate disposition of each of them, we do not believe that their ultimate disposition will have a material adverse effect on our financial position, results of operations or cash flows.

Product Warranties

We generally sell products with a limited warranty. We accrue for known warranty claims if a loss is probable and can be reasonably estimated. Claims accrued but not yet paid amounted to $646 at December 31, 2004 and $610 at December 31, 2005. The following table presents the activity in this accrual for 2005:

Balance at December 31, 2004	$	646
Product warranty charges		2,402
Payments and settlements		(2,438	)
Balance at December 31, 2005	$	610

(15)          Income Taxes

The following table summarizes the U.S. and non-U.S. components of income (loss) before provision for income taxes, minority interest and income from discontinued operations.

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	For the Year Ended December 31,
	2003			2004			2005
	(Dollars in thousands)
U.S	$	(49,414	)	$	(1,720	)	$	(43,891	)
Non-U.S		30,040			66,069			84,203
	$	(19,374	)	$	64,349		$	40,312

Total income taxes were allocated as set forth in the following table.

	For the Year Ended December 31,
	2003		2004		2005
	(Dollars in thousands)
Income tax expense from continuing operations	$	4,695	$	46,310	$	165,813
Income tax expense from discontinued operations		644		-		-
	$	5,339	$	46,310	$	165,813

Income tax expense (benefit) attributable to income from continuing operations consists of the items set forth in the following table.

	For the Year Ended December 31,
	2003			2004			2005
	(Dollars in thousands)
U.S income taxes:
Current	$	(4,928	)	$	1,968		$	-
Deferred		(6,906	)		27,996			155,575
	$	(11,834	)	$	29,964		$	155,575
Non-U.S. income taxes:
Current	$	7,564		$	17,760		$	10,994
Deferred		8,965			(1,414	)		(756	)
	$	16,529		$	16,346		$	10,238

We have an income tax exemption from the Brazilian government on income generated from cathode and graphite electrode production through 2005 and 2006, respectively. The exemption did not reduce the net expense associated with income taxes for 2003 or 2004; however, the exemption reduced the net expense associated with income taxes by $490 in 2005.

Income tax expense (benefit) attributable to income from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 35% to pretax income from operations as set forth in the following table.

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	For the Year Ended December 31,
	2003			2004			2005
	(Dollars in thousands)
Tax at statutory U.S. federal rate	$	(6,781	)	$	22,522		$	14,109
Impact of U.S. special tax election for certain non-U.S
entities to be included in the U.S. tax return		-			27,524			-
Tax return adjustments to estimated tax expense		3,492			-			(2,417	)
Adjustments to deferred tax asset valuation allowance, net		4,989			(2,337	)		153,079
Nondeductible expenses/(income) associated with antitrust             investigations and related lawsuits and claims		8,362			(4,175	)		-
State tax expense (benefit) (net of federal tax benefit) .		(5,312	)		(459	)		714
Restructuring charges/(reversal) with no tax benefit		2,974			(863	)		1,118
Impact of statutory tax rate changes		(724	)		(911	)		(2,391	)
Impact of deemed and actual dividends of foreign earnings		-			6,475			2,667
Non-U.S. tax exemptions, holidays and credits		(1,179	)		(735	)		(920	)
Tax effect of permanent differences		(1,659	)		586			781
Foreign withholding taxes for which no tax credit can
be claimed		1,506			-			-
Other		(973	)		(1,317	)		(927	)
Total tax expense (benefit) from continuing operations	$	4,695		$	46,310		$	165,813

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2004 and December 31, 2005 are set forth in the following table.

	At December 31,
	2004			2005
	(Dollars in thousands)
Deferred tax assets:
Fixed assets	$	18,686		$	19,783
Postretirement and other employee benefits		36,640			48,202
Foreign tax credit and other carryforwards		106,506			136,807
Provision for scheduled plant closings and other
restructurings		7,446			7,356
Terminated hedge instruments		8,569			2,591
Capitalized research and experimental costs		9,732			9,304
Other		22,481			23,979
Total gross deferred tax assets		210,060			248,022
Less: valuation allowance		(23,189	)		(208,393	)
Total deferred tax assets	$	186,871		$	39,629
Deferred tax liabilities:
Fixed assets	$	60,525		$	60,937
Inventory		6,918			6,160
Other		3,815			1,986
Total deferred tax liabilities		71,258			69,083
Net deferred tax asset/(liability)	$	115,613		$	(29,454	)

Deferred income tax assets and liabilities are classified on a net current and non-current basis within each tax jurisdiction. Net deferred income tax assets are included in prepaid expenses and other current assets in the amount of $16,162 at December 31, 2004 and $8,257 at December 31, 2005 and separately stated as deferred income taxes in the amount of $152,539 at

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December 31, 2004 and $12,103 at December 31, 2005. Net deferred tax liabilities are included in accrued income and other taxes in the amount of $6,829 at December 31, 2004 and $6,145 at December 31, 2005 and separately stated as deferred income taxes in the amount of $46,259 at December 31, 2004 and $43,669 at December 31, 2005.

The change in the total valuation allowance for 2005 was an increase of $185,204. During the 2005 year-end financial accounting closing process, we determined that the timing of when we will generate sufficient U.S. taxable income to realize our U.S. deferred tax assets became less certain. Accordingly, during the fourth quarter of 2005, we recorded a valuation allowance of $149,734 against deferred tax assets in the U.S. and $1,722 in certain non-U.S. jurisdictions, which resulted in a total net charge of $151,456. We also recorded additional deferred tax assets and related valuation allowances of $27,477. Until we determine that it is more likely than not that we will generate sufficient U.S. taxable income to realize our deferred income tax assets, income tax benefits in each current period will be full reserved.

We have total excess foreign tax credit carryforwards of $91,680 at December 31, 2005. Of these tax credit carryforwards, $1,089 expire in 2010, $17,499 expire in 2011, $36,646 expire in 2012, $1,517 expire in 2013, $31 expire in 2014, $8,787 expire in 2015 and $26,111 expire in 2016 and beyond. In addition, we have federal, state and foreign net operating losses, on a gross tax effected basis, of $32,126. Of these tax loss carryforwards, $511 expire in 2006, $2,907 expire in 2007, $3,292 expire in 2008, $1,409 expire in 2009, $857 expire in 2010, $10 expire in 2010, $1,907 expire in 2012, $2,156 expire in 2013, $1,503 expire in 2014 and $17,574 expire in 2015 and beyond. Based upon the level of historical taxable income and projections for future taxable income over the periods during which these credits are utilizable, we believe it is more likely than not that we will realize the tax benefits of these deferred tax assets consisting of net operating losses, net of the corresponding valuation allowances that exist at December 31, 2005.

In 2004, we implemented a tax planning strategy that together with other planning efforts, accelerated the utilization of certain tax assets. The strategy accelerated approximately $215,177 of taxable income to the U.S. through a standard election (commonly referred to as “check the box”) that resulted in the utilization of approximately $26,219 of deferred tax assets, of which approximately $19,969 were foreign tax credits.

With the exception of our Swiss, South African, U.K. and French subsidiaries (the “check the box” entities), taxes have not been provided on undistributed earnings of foreign subsidiaries because our intention is to reinvest these undistributed earnings indefinitely. To the extent that our circumstances change or future earnings are repatriated, we will provide for income tax on the earnings of the affected foreign subsidiaries. We believe that any U.S. income tax on repatriated earnings would be substantially offset by U.S. foreign tax credits.

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(16)         Earnings Per Share

Basic and diluted EPS are calculated based upon the provisions of SFAS No. 128, “Earnings Per Share,” and EITF Issue No. 04-08, “Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effects on Diluted Earnings Per Share,” using the following data:

	2003			2004		2005
	(Dollars in thousands)
Net income, as reported	$	(24,277	)	$	17,041	$	(125,180	)
Add: Interest on Debentures, net of tax benefit		–			–		–
Add: Amortization of Debentures issuance costs, net      of tax benefit		–			–		–
Net income, as adjusted	$	(24,277	)	$	17,041	$	(125,180	)
Weighted average common shares      outstanding for basic calculation		67,980,838			96,547,733		97,688,734
Add: Effect of stock options and restricted stock		–			1,602,204		–
Add: Effect of Debentures		–			–		–
Weighted average common shares      outstanding for diluted calculation		67,980,838			98,149,937		97,688,734

Basic earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share are calculated by dividing net income by the sum of the weighted average number of common shares outstanding plus the additional common shares that would have been outstanding if potentially dilutive securities, including those underlying the Debentures, had been issued. As a result of the net loss reported for 2003 and 2005, 508,215 of potential common shares underlying dilutive securities and 276,161 of potential common shares underlying dilutive securities, respectively have been excluded from the calculation of diluted earnings (loss) per share because their effect would reduce the loss per share.

The calculation of weighted average common shares outstanding for the diluted calculation excludes consideration of stock options covering 4,058,695 shares in 2003, 4,094,348 shares in 2004 and 9,809,780 shares in 2005, because the exercise of these options would not have been dilutive for those periods due to the fact that the exercise prices were greater than the weighted average market price of our common stock for each of those periods.

The calculation of weighted average common shares outstanding for the 2004 and 2005 diluted calculation also excludes the shares underlying the Debentures, as the effect would have been anti-dilutive.

(17)         Stockholder Rights Plan

Effective August 7, 1998, GTI adopted a Stockholder Rights Plan (the “Rights Plan”). Under the Rights Plan, one preferred stock purchase right (a “Right”) was distributed on September 21, 1998 to stockholders of record on August 20, 1998 as a dividend on each share of common stock outstanding on the record date. Each share of common stock issued after the record date is accompanied by a Right.

150

When a Right becomes exercisable, it entitles the holder to buy one one-thousandth of a share of a new series of preferred stock for $110. The Rights are subject to adjustment upon the occurrence of certain dilutive events. The Rights will become exercisable only when a person or group becomes the beneficial owner of 15% or more of the outstanding shares of common stock or 10 days after a person or group announces a tender offer to acquire beneficial ownership of 15% or more of the outstanding shares of common stock. No certificates representing the Rights will be issued, and the Rights are not transferable separately from the common stock, unless the Rights become exercisable.

Under certain circumstances, holders of Rights, except a person or group described above and certain related parties, will be entitled to purchase shares of common stock (or, in certain circumstances, other securities or assets) at 50% of the price at which the common stock traded prior to the acquisition or announcement (or 50% of the value of such other securities or assets). In addition, if GTI is acquired after the Rights become exercisable, the Rights will entitle those holders to buy the acquiring company’s common shares at a similar discount.

GTI is entitled to redeem the Rights for one cent per Right prior to the time when the Rights become exercisable. If not redeemed, the Rights will expire on August 7, 2008.

The preferred stock issuable upon exercise of Rights consists of Series A Junior Participating Preferred Stock, par value $.01 per share, of GTI. In general, each share of that preferred stock will be entitled to a minimum preferential quarterly dividend payment equal to the greater of $10.00 per share or 1,000 times the quarterly dividend declared on the common stock, will be entitled to a liquidation preference of $110,000 and will have 1,000 votes, voting together with the common stock.

(18) Financial Information About the Issuer, the Guarantors and the Subsidiaries Whose Securities Secure the Senior Notes, the Debentures and Related Guarantees

On February 15, 2002, GrafTech Finance (“Finco”),a direct subsidiary of GTI (the “Parent”), issued $400,000 aggregate principal amount of Senior Notes and, on May 6, 2002, $150,000 aggregate principal amount of additional Senior Notes. All of the Senior Notes have been issued under a single Indenture and constitute a single class of debt securities. The Senior Notes mature on February 15, 2012. The Senior Notes have been guaranteed on a senior basis by the Parent and the following wholly-owned direct and indirect subsidiaries of the Parent: GrafTech Global, UCAR Carbon, UCAR International Trading Inc., UCAR Carbon Technology LLC, and UCAR Holdings V Inc. (“Holdings V”). The Parent, Finco and these subsidiaries together hold a substantial majority of our U.S. assets. Holdings V has no material assets or operations, and has been dissolved.

On January 22, 2004, the Parent issued $225,000 aggregate principal amount of Debentures. The guarantors of the Debentures are the same as the guarantors of the Senior Notes, except for the Parent (which is the issuer of the Debentures but a guarantor of the Senior Notes) and Finco (which is a guarantor of the Debentures but the issuer of the Senior Notes). The Parent and Finco are both obligors on the Senior Notes and the Debentures, although in different capacities.

151

The guarantors of the Senior Notes and the Debentures, solely in their respective capacities as such, are collectively called the “U.S. Guarantors.”Our other subsidiaries, which are not guarantors of either the Senior Notes or the Debentures, are called the “Non-Guarantors.”

All of the guarantees are unsecured, except that the guarantee of the Senior Notes by UCAR Carbon has been secured by a junior pledge of all of the shares of capital stock (constituting 97.5% of the outstanding shares of capital stock) of AET held by UCAR Carbon (called the “AET Pledged Stock”), subject to the limitation that in no event will the value of the pledged portion of the AET Pledged Stock exceed 19.99% of the principal amount of the then outstanding Senior Notes. All of the guarantees are full, unconditional and joint and several. Finco and each of the other U.S. Guarantors (other than the Parent) are 100% owned, directly or indirectly, by the Parent. All of the guarantees of the Senior Notes continue until the Senior Notes have been paid in full, and payment under such guarantees could be required immediately upon the occurrence of an event of default under the Senior Notes. All of the guarantees of the Debentures continue until the Debentures have been paid in full, and payment under such guarantees could be required immediately upon the occurrence of an event of default under the Debentures. If a guarantor makes a payment under its guarantee of the Senior Notes or the Debentures, it would have the right under certain circumstances to seek contribution from the other guarantors of the Senior Notes or the Debentures, respectively.

Provisions in the Revolving Facility restrict the payment of dividends by our subsidiaries to the Parent. At December 31, 2005, retained earnings of our subsidiaries subject to such restrictions were approximately $729,426. Investments in subsidiaries are recorded on the equity basis.

The following table sets forth condensed consolidating balance sheets at December 31, 2004 and December 31, 2005 and condensed consolidating statements of operations and cash flows for each of the years in the three-year period ended December 31, 2005 of the Parent, Finco, all other U.S. Guarantors and the Non-Guarantors.

152

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Balance Sheet

at December31, 2004

	Parent (Issuer of Debentures and Guarantor of Senior Notes)			Finco (Issuer of Senior Notes and Guarantor of Debentures)		All Other U.S. Guarantors			Non- Guarantors		Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	-		$	12,000	$	1,000		$	11,000	$	-		$	24,000
Intercompany loans		50,000			670,000		--			62,000		(782,000	)		--
Intercompany accounts receivable		3,000			3,000		35,000			30,000		(71,000	)		--
Accounts receivable - third party		--			3,000		33,000			170,000		--			206,000
Accounts and notes receivable, net		53,000			676,000		68,000			262,000		(853,000	)		206,000
Inventories		--			--		47,000			184,000		(6,000	)		225,000
Prepaid expenses and other current assets		13,000			--		4,000			22,000		(14,000	)		25,000
Total current assets		66,000			688,000		120,000			479,000		(873,000	)		480,000
Property, plant and equipment		--			--		45,000			338,000		(5,000	)		378,000
Deferred income taxes		72,000			12,000		73,000			2,000		(6,000	)		153,000
Investments in affiliates		27,000			--		--			--		(27,000	)		--
Goodwill		--			--		--			139,000		(116,000	)		23,000
Other assets		6,000			16,000		6,000			8,000		(2,000	)		34,000
Total assets	$	171,000		$	716,000	$	244,000		$	966,000	$	(1,029,000	)	$	1,068,000
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	2,000		$	17,000	$	7,000		$	61,000	$	(1,000	)	$	86,000
Intercompany loans		--			66,000		170,000			629,000		(865,000	)		--
Third party loans		--			--		--			1,000		--			1,000
Short-term debt		--			66,000		170,000			630,000		(865,000	)		1,000
Accrued income and other taxes		--			19,000		--			34,000		(15,000	)		38,000
Other accrued liabilities		--			--		34,000			67,000		(2,000	)		99,000
Total current liabilities		2,000			102,000		211,000			792,000		(883,000	)		224,000
Long-term debt		219,000			452,000		--			1,000		--			672,000
Other long-term obligations		3,000			9,000		86,000			47,000		4,000			149,000
Payable to equity of investees		--			--		73,000			--		(73,000	)		--
Deferred income taxes		--			--		--			56,000		(10,000	)		46,000
Commitments and contingencies		--			--		--			--		--			--
Minority stockholders' equity in       consolidated entities		--			--		--			30,000		--			30,000
Stockholders' equity (deficit)		(53,000	)		153,000		(126,000	)		40,000		(67,000	)		(53,000	)
Total liabilities and stockholders'              deficit	$	171,000		$	716,000	$	244,000		$	966,000	$	(1,029,000	)	$	1,068,000

153

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Balance Sheet

at December31, 2005

	Parent (Issuer of Debentures and Guarantor of Senior Notes)			Finco (Issuer of Senior Notes and Guarantor of Debentures)		All Other U.S. Guarantors			Non- Guarantors		Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	143		$	–	$	36		$	5,877	$	(88	)	$	5,968
Intercompany loans		51,315			166,292		–			108,716		(326,323	)		–
Intercompany accounts receivable		–			2,676		27,689			31,079		(61,444	)		–
Accounts receivable - third party		–			–		36,569			148,011		–			184,580
Accounts and notes receivable, net		51,315			168,968		64,258			287,806		(387,767	)		184,580
Inventories		–			–		59,975			195,108		(45	)		255,038
Prepaid expenses and other current assets .		7			16,431		1,793			12,287		(16,417	)		14,101
Total current assets		51,465			185,399		126,062			501,078		(404,317	)		459,687
Property, plant and equipment, net		–			–		46,586			320,096		(4,485	)		362,197
Deferred income taxes		–			–		8,980			4,067		(944	)		12,103
Intercompany loans		–			506,887		–			–		(506,887	)		–
Investments in affiliates		–			–		–			–		–			–
Goodwill		–			–		–			20,319		–			20,319
Other assets		5,359			16,860		3,426			6,869		–			32,514
Total assets	$	56,824		$	709,146	$	185,054		$	852,429	$	(916,633	)	$	886,820
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	1,836		$	17,242	$	12,392		$	60,810	$	(88	)	$	92,192
Intercompany loans		–			109,284		217,009			61,655		(387,948	)		–
Third party loans		–			–		–			405		–			405
Short-term debt		–			109,284		217,009			62,060		(387,948	)		405
Accrued income and other taxes		1,939			–		20,963			18,341		(16,417	)		24,826
Other accrued liabilities		–			–		34,644			62,346		–			96,990
Total current liabilities		3,775			126,526		285,008			203,557		(404,453	)		214,413
Long-term debt		220,290			482,481		–			972		–			703,743
Intercompany loans		–			–		–			506,903		(506,903	)		–
Other long-term obligations		1,284			37		59,051			47,332		–			107,704
Payable to equity of investees		41,045			–		(526,601	)		–		485,556			–
Deferred income taxes		7			–		–			44,606		(944	)		43,669
Commitments and contingencies		–			–		–			–		–			–
Minority stockholders' equity in
consolidated entities		–			–		–			26,868		–			26,868
Stockholders' equity (deficit)		(209,577	)		100,102		367,596			22,191		(489,889	)		(209,577	)
Total liabilities and stockholders'
deficit	$	56,824		$	709,146	$	185,054		$	852,429	$	(916,633	)	$	886,820

154

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

for the Year Ended December 31, 2003

	Parent (Issuer of Debentures and Guarantor of Senior Notes)			Finco (Issuer of Senior Notes and Guarantor of Debentures)			All Other U.S. Guarantors			Non- Guarantors		Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Net sales	$	-		$	-		$	234,000		$	629,000	$	(151,000	)	$	712,000
Cost of sales		-			-			186,000			509,000		(151,000	)		544,000
Gross profit		-			-			48,000			120,000		-			168,000
Research and development		-			-			5,000			6,000		-			11,000
Selling, administrative and other expenses		-			-			43,000			42,000		-			85,000
Restructuring charge		-			-			20,000			-		-			20,000
Impairment loss on long-lived and other assets		-			-			7,000			-		-			7,000
Antitrust investigations and related lawsuits
and claims		-			-			32,000			-		-			32,000
Other (income) expense, net		2,000			(32,000	)		8,000			10,000		-			(12,000	)
Interest expense		36,000			45,000			-			27,000		(63,000	)		45,000
Interest income		(3,000	)		(60,000	)		-			-		63,000			-
Income (loss) from continuing operations		(35,000	)		47,000			(67,000	)		35,000		-			(20,000	)
before provision for (benefit from) income
taxes and minority stockholders' share of
income
Provision for (benefit from) income taxes		(108,000	)		21,000			76,000			16,000		-			5,000
Minority stockholders' share of income		-			-			-			1,000		-			1,000
Income (loss) from continuing operations		73,000			26,000			(143,000	)		18,000		-			(26,000	)
Income from discontinued operations,
net of taxes		-			-			1,000			-		-			1,000
Gain on sale of discontinued operations,    net of taxes		-			-			1,000			-		-			1,000
Equity in earnings of subsidiaries		(97,000	)		-			18,000			-		79,000			-
Net income (loss)	$	(24,000	)	$	26,000		$	(123,000	)	$	18,000	$	79,000		$	(24,000	)

155

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

for the Year Ended December 31, 2004

	Parent (Issuer of Debentures and Guarantor of Senior Notes)			Finco (Issuer of Senior Notes and Guarantor of Debentures)			All Other U.S. Guarantors			Non- Guarantors			Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Net sales	$	-		$	-		$	261,000		$	757,000		$	(170,000	)	$	848,000
Cost of sales		-			-			202,000			574,000			(138,000	)		638,000
Gross profit		-			-			59,000			183,000			(32,000	)		210,000
Research and development		-			-			3,000			5,000			-			8,000
Selling, administrative and other expenses		-			-			41,000			76,000			(27,000	)		90,000
Restructuring charge		-			-			1,000			(1,000	)		-			-
Antitrust investigations and related lawsuits   and claims		-			-			(11,000	)		-			-			(11,000	)
Other (income) expense, net		5,000			-			7,000			9,000			-			21,000
Interest expense		29,000			43,000			20,000			22,000			(75,000	)		39,000
Interest income		(9,000	)		(41,000	)		(25,000	)		(1,000	)		75,000			(1,000	)
Income (loss) from continuing operations      before provision for (benefit from) income      taxes and minority stockholders' share of      income		(25,000	)		(2,000	)		23,000			73,000			(5,000	)		64,000
Provision for (benefit from) income taxes		27,000			(11,000	)		10,000			19,000			1,000			46,000
Minority stockholders' share of income		-			-			-			1,000			-			1,000
Equity in earnings of subsidiaries		(75,000	)		-			(53,000	)		-			128,000			-
Net income (loss)	$	23,000		$	9,000		$	66,000		$	53,000		$	(134,000	)	$	17,000

156

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations

for the year ended December31, 2005

	Parent (Issuer of Debentures and Guarantor of Senior Notes)			Finco (Issuer of Senior Notes and Guarantor of Debentures)			All Other U.S. Guarantors			Non- Guarantors			Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Net sales	$	-		$	-		$	264,104		$	802,178		$	(179,583	)	$	886,699
Cost of sales		-			-			204,654			618,044			(168,356	)		654,342
Gross profit		-			-			59,450			184,134			(11,227	)		232,357
Research and development		-			-			3,206			6,231			-			9,437
Selling, administrative and other expenses		1,814			236			40,130			88,563			(30,304	)		100,439
Restructuring charges		69			-			1,864			7,796			-			9,729
Impairment loss on long-lived and other assets		-			-			2,904			-			-			2,904
Antitrust investigations and related lawsuits
and claims		-			-			-			-			-			-
Other (income) expense, net		(2,770	)		(5,412	)		1,027			(4,179	)		29,354			18,020
Interest expense		5,262			47,685			4,797			24,152			(29,180	)		52,716
Interest income		-			(37	)		-			(1,163	)		-			(1,200	)
Income (loss) before provision for (benefit
from) income taxes and minority
stockholders' share of income		(4,375	)		(42,472	)		5,522			62,734			18,903			40,312
Provision for (benefit from) income taxes		74,514			(3,164	)		84,571			9,833			59			165,813
Minority stockholders' share of income (loss)		-			-			-			(321	)		-			(321	)
Deficit (equity) in earnings of subsidiaries		65,135			-			(53,222	)		-			(11,913	)		-
Net income (loss)	$	(144,024	)	$	(39,308	)	$	(25,827	)	$	53,222		$	30,757		$	(125,180	)

157

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

for the year ended December31, 2003

	Parent (Issuer of Debentures and Guarantor of Senior Notes)			Finco (Issuer of Senior Notes and Guarantor of Debentures)			All Other U.S. Guarantors			Non- Guarantors			Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Net cash provided by (used in) operating
activities from continuing operations	$	228,000		$	3,000		$	(81,000	)	$	40,000		$	(216,000	)	$	(26,000	)
Net cash provided by(used in) operating
activities from discontinued operations		-			-			1,000			-			-			1,000
Net cash provided by (used in) operating activities		228,000			3,000			(80,000	)		40,000			(216,000	)		(25,000	)
Net cash by provided (used in) investing activities		-			(97,000	)		11,000			121,000			(57,000	)		(22,000	)
Net cash provided by (used in) financing activities		(228,000	)		107,000			65,000			(148,000	)		273,000			69,000
Net increase (decrease) in cash and cash
equivalents		-			13,000			(4,000	)		13,000			-			22,000
Effect of exchange rate changes on cash and    cash equivalents		-			-			-			1,000			-			1,000
Cash and cash equivalents at beginning of period		-			-			4,000			7,000			-			11,000
Cash and cash equivalents at end of period	$	-		$	13,000		$	-		$	21,000		$	-		$	34,000

158

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

for the year ended December 31, 2004

	Parent (Issuer of Debentures and Guarantor of Senior Notes)			Finco (Issuer of Senior Notes and Guarantor of Debentures)			All Other U.S. Guarantors			Non- Guarantors			Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Cash flow from operating activities:
Net Income (loss)	$	23,000		$	9,000		$	66,000		$	53,000		$	(134,000	)	$	17,000
Adjustment to reconcile net income (loss) to
cash provided by operations:
Depreciation and amortization		-			-			3,000			32,000			-			35,000
Deferred income taxes		23,000			(13,000	)		10,000			(2,000	)		8,000			26,000
Antitrust investigations and related
lawsuits and claims		-			-			1,000			-			-			1,000
Restructuring charge		-			-			1,000			(1,000	)		-			-
Adjustment from cost to equity		(75,000	)		-			(53,000	)		-			128,000			-
Loss on exchange of common stock for
Senior Notes		5,000			-			-			-			-			5,000
Interest expense		-			(2,000	)		-			-			-			(2,000	)
Post retirement plan changes		-			-			(10,000	)		-			-			(10,000	)
Gain of sale of assets		-			-			-			(3,000	)		-			(3,000	)
Fair value adjustments on interest rate caps		-			4,000			-			-			-			4,000
Other charges, net		1,000			(4,000	)		-			4,000			-			1,000
(Increase) decrease in working capital		(62,000	)		(1,000	)		(253,000	)		(70,000	)		219,000			(167,000	)
Long term assets and liabilities		(6,000	)		19,000			(46,000	)		4,000			(9,000	)		(38,000	)
Net cash used in operating activities		(91,000	)		12,000			(281,000	)		17,000			212,000			(131,000	)
Cash flow from investing activities:
Intercompany investments		(141,000	)		45,000			299,000			9,000			(212,000	)		-
Capital expenditures		-			-			(17,000	)		(42,000	)		-			(59,000	)
Patent capitalization		-			-			-			-			-			-
Purchase of derivative investments		-			(3,000	)		-			-			-			(3,000	)
Sale of derivative investments		-			-			-			-			-			-
Proceeds from sales of assets		-			-			-			6,000			-			6,000
Net cash used in investing activities		(141,000	)		42,000			282,000			(27,000	)		(212,000	)		(56,000	)
Cash flow from financing activities:
Short-term debt borrowings (reductions), net		-			-			-			(1,000	)		-			(1,000	)
Revolving Facility borrowings		-			-			-			-			-			-
Revolving Facility payments		-			-			-			-			-			-
Long-term debt borrowings		225,000			-			-			-			-			225,000
Long-term debt reductions		-			(44,000	)		-			-			-			(44,000	)
Proceeds from exercise of stock options		7,000			-			-			-			-			7,000
Financing costs		-			(8,000	)		-			-			-			(8,000	)
Premium on repurchase of Senior Notes		-			(3,000	)		-			-			-			(3,000	)
Net cash provided by financing activities		232,000			(55,000	)		-			(1,000	)		-			176,000
Net increase (decrease) in cash and cash
equivalents:		-			(1,000	)		1,000			(11,000	)		-			(11,000	)
Effect of exchange rate changes on cash and    cash equivalents		-			-			-			1,000			-			1,000
Cash and cash equivalents at beginning of period		-			13,000			-			21,000			-			34,000
Cash and cash equivalents at end of period	$	-		$	12,000		$	1,000		$	11,000		$	-		$	24,000

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GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows

for the year ended December31, 2005

	Parent (Issuer of Debentures and Guarantor of Senior Notes)			Finco (Issuer of Senior Notes and Guarantor of Debentures)			All Other U.S. Guarantors			Non- Guarantors			Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Cash flow from operating activities:
Net Income (loss)	$	(78,889	)	$	(39,308	)	$	(79,049	)	$	53,223		$	18,843		$	(125,180	)
Adjustment to reconcile net income (loss) to net
cash (used in) provided by operations:
Depreciation and amortization		-			-			4,055			31,408			1,463			36,926
Deferred income taxes		74,514			(3,164	)		84,572			(1,099	)		(4	)		154,819
Adjustment from cost to equity		(65,134	)		-			53,223			-			11,911			-
Antitrust investigations and related lawsuits and claims		-			-			(119	)		-			-			(119	)
Interest expense		1,957			591			(952	)		-			-			1,596
Restructuring charges		-			-			1,327			8,402			-			9,729
Impairment loss on long-lived and other assets		-			-			2,904			-			-			2,904
Gain on sale of assets		-			-			(801	)		53			-			(748	)
Fair value adjustment on Debenture redemption make
whole option		(2,702	)		-			-			-			-			(2,702	)
Fair value adjustments on interest rate caps		-			652			-			-			-			652
Post retirement plan changes		-			-			(15,626	)		1,626			-			(14,000	)
Other (credits) charges, net		53,250			1,852			(105,522	)		81,231			(13,989	)		16,822
(Increase) decrease in working capital		15,031			(34,555	)		12,761			(32,714	)		(22,310	)		(61,787	)
Long term assets and liabilities		-			-			(5,270	)		(5,653	)		-			(10,923	)
Net cash used in operating activities		(1,973	)		(73,932	)		(48,497	)		136,477			(4,086	)		7,989
Cash flow from investing activities:
Intercompany loans receivable/payable		3,485			1,339			7,950			(12,030	)		(744	)		-
Intercompany debt, net		(1,369	)		39,220			46,549			(89,075	)		4,675			-
Capital expenditures		-			-			(8,253	)		(39,885	)		67			(48,071	)
Cost of sale of interest rate swaps		-			(14,800	)		-			-			-			(14,800	)
Proceeds from sale of assets		-			-			720			654			-			1,374
Patent capitalization		-			-			(374	)		(423	)		-			(797	)
Sale (purchase) of derivative investments		-			1,913			-			-			-			1,913
Net cash used in investing activities		2,116			27,672			46,592			(140,759	)		3,998			(60,381	)
Cash flow from financing activities:
Short-term debt borrowings (reductions), net		-			-			1,924			(43	)		-			1,881
Revolving Facility borrowings		-			171,138			-			-			-			171,138
Revolving Facility reductions		-			(131,562	)		-			-			-			(131,562	)
Long-term debt borrowings		-			-			-			306			-			306
Long-term debt reductions		-			-			-			(338	)		-			(338	)
Financing costs		-			(5,241	)		-			-			-			(5,241	)
Net cash provided by financing activities		-			34,335			1,924			(75	)		-			36,184
Net increase (decrease) in cash and cash
equivalents		143			(11,925	)		19			(4,357	)		(88	)		(16,208	)
Effect of exchange rate changes on cash and cash    equivalents		-			-			-			(1,308	)		-			(1,308	)
Cash and cash equivalents at beginning of period		-			11,925			17			11,542			-			23,484
Cash and cash equivalents at end of period	$	143		$	-		$	36		$	5,877		$	(88	)	$	5,968

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Unsecured intercompany term notes and unsecured guarantees of those unsecured intercompany term notes by certain of our foreign subsidiaries have been pledged by GrafTech Finance to secure the Senior Notes, subject to the limitation that at no time will the combined value of the pledged portion of any foreign subsidiary’s unsecured intercompany term note and unsecured guarantee of unsecured intercompany term notes issued by other foreign subsidiaries exceed 19.99% of the principal amount of the then outstanding Senior Notes. In addition, the guarantee of the Senior Notes by UCAR Carbon has been secured by a pledge of all of the AET Pledged Stock, subject to the limitation that at no time will the value of the pledged portion of the AET Pledged Stock exceed 19.99% of the principal amount of the then outstanding Senior Notes.

Rule 3-16 of Regulation S-X adopted by the SEC provides that, for each of the registrant’s affiliates whose securities constitute a “substantial” portion of the collateral for registered securities, financial statements (that would be required to be filed if the affiliate were a registrant) must be filed with an annual report on Form 10-K. Under Rule 3-16(b), securities of a person will be deemed to constitute a “substantial” portion of the collateral if the aggregate principal amount, par value, or book value of securities as carried by the registrant, or the market value of such securities, whichever is the greatest, equals 20% or more of the principal amount of the registered securities. In this case, the pledges of the AET Pledged Stock and the unsecured intercompany term notes and related guarantees have been limited such that they will never be more than 19.99% of the principal amount of the then outstanding Senior Notes. Therefore, no such financial statements are required to be included in this Report.

(19)         Discontinued Operations

As part of our ongoing asset sale program, we sold our non-strategic composite tooling business based in Irvine, California in June 2003 for approximately $15,692, including a $692 working capital adjustment. This business was previously included in “Other” for segment presentation in accordance with SFAS No. 131. As a result, under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the composite tooling business is reflected as a discontinued operation. We have reflected prior year results of the composite tooling business as a discontinued operation on the Consolidated Statements of Operations and reclassified the assets and liabilities of the business separately on the Consolidated Balance Sheets.

The following table sets forth the results of the discontinued operation.

	For the Year Ended December 31,
	2003		2004		2005
	(Dollars in thousands)
Net sales	$	9,053	$	-	$	-
Income before provision for income taxes		1,681	$	-	$	-

There were no assets or liabilities of the discontinued operation at December 31, 2004 or December 31, 2005.

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(20)          Subsequent Events

Since December 31, 2005, and prior to the issuance of this Report, we have initiated the following actions in an effort to reduce overhead costs and improve the cash flow of our global organization:

• On January 24, 2006, we announced plans to shut down all production operations at our Vyazma, Russia graphite electrode manufacturing facility. This plan is expected to be completed by the end of the third quarter of 2006.

• On March 9, 2006, we announced plans to shut down carbon electrode production operations at our Columbia, Tennessee manufacturing facility. This plan is expected to be completed by the end of the first quarter of 2007.

On March 1, 2006, the Company was served with a complaint commencing a securities class action in the United States District Court for the District of Delaware (Civil Action No. 06-133). The complaint, entitled Edmund Spinney v. GrafTech International Ltd., et al., alleges that GrafTech, Craig S. Shular, the Chief Executive Officer, President and Interim Chief Financial Officer, Petrus J. Barnard, a Vice President and President, Graphite Electrodes, John J. Wetula, a Vice President and President, Natural Graphite, and Corrado De Gasperis, our former Chief Financial Officer, Chief Information Officer and Vice President,violated federal securities law by making false statements or failing to disclose adverse facts, in or in relation to press releases issued by us on November 3, 2005, about our graphite electrode pricing power, our cost-cutting measures, the market for our non-graphite product lines, our forecasting ability and internal controls and corporate compliance, and our restructuring activities and charges. The proposed class consists of all persons who purchased our securities during the period from November 3, 2005 until February 8, 2006. The complaint seeks, among other things, to recover damages resulting from such alleged violations. Our analysis and investigation relating to this lawsuit is in its earliest stages, and, as a result, we are not able to assess the likelihood of loss, if any, or the amount thereof. We have not yet filed a response to the complaint. We intend to vigorously defend against this lawsuit.

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Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management is responsible for establishing and maintaining adequate disclosure controls and procedures at the reasonable assurance level. Disclosure controls and procedures are designed to ensure that information required to be disclosed by a reporting company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by it in the reports that it files under the Exchange Act is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and interim Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2005, and based on that evaluation, our Chief Executive Officer and interim Chief Financial Officer has concluded that these controls and procedures are effective at the reasonable assurance level as of December 31, 2005.

Changes in Internal Controls over Financial Reporting

During the 2005 third quarter, we announced the relocation of our principal executive office from Wilmington, Delaware to Parma, Ohio, the relocation of various business transaction processing and accounting functions from our offices in Clarkesville, Tennessee to Parma, and the relocation of certain management, accounting and treasury functions from our offices in Etoy, Switzerland to Parma. A significant number of our corporate employees (including employees involved in our control environment) have elected not to relocate and will leave the employment of the Company following a period during which their functions were or are being transitioned to other employees (including new employees hired or being hired in Parma). During the 2005 fourth quarter, we announced the termination of our business process services (“BPS”) agreement with CGI. Under this agreement, CGI managed certain of our accounting and finance functions and played a role in performing certain internal control functions. We no longer rely on the provider to perform these functions. The agreement’s effective termination date was February 28, 2006.

During the 2005 fourth quarter, we also announced the resignation of our Chief Financial Officer. Our Chief Financial Officer was also our principal accounting officer and was a key component of our overall control environment. In conjunction with his resignation, we named our Chief Executive Officer as our interim Chief Financial Officer.

Beginning in the 2005 fourth quarter, we have engaged in activities designed to ensure a smooth transition in connection with, and mitigate any material disruption to our business or our

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control environment resulting from these events. As of December 31, 2005 and for the year-end closing and reporting processes, we believe that these events have not had a material adverse effect on our business and have not had a material adverse effect on our control environment.

Except as described above, there has been no change in our internal controls over financial reporting that occurred during the 2005 fourth quarter that materially affected or is reasonably likely to materially affect our internal controls over financial reporting.

Management’s Report on Internal Control over Financial Reporting

See Item 8 of this Report for “Management’s Report on Internal Control Over Financial Reporting.”

Limitations on Control Systems

A control system (including both disclosure controls and procedures and internal controls over financial reporting) is subject to inherent limitations. As a result, a control system can provide only reasonable, not absolute, assurance that the system’s objectives will be achieved. In the first instance, the design of a control system must reflect the fact that there are resource constraints and that the benefits of controls must be considered relative to their costs. Further, decision-making in connection with system design or operation can be faulty, and breakdowns can occur because of simple error or mistake as well as fraud. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls become inadequate because of change in conditions or because the level of compliance with the policies and procedures may deteriorate.

Item 9B.  Other Information

Not Applicable.

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PART III

Items 10 to 14 (inclusive).

Except as set forth below, the information required by Items 10, 11, 12, 13 and 14 will appear in the GrafTech International Ltd. Proxy Statement for the Annual Meeting of Stockholders to be held on May 24, 2006, which will be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 and is incorporated by reference in this Report pursuant to General Instruction G(3) of Form 10-K (other than the portions thereof not deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934).

Executive Officers and Directors

The information set forth below is provided as required by Item 10 and the listing standards of the NYSE.

The following table sets forth information with respect to our current executive officers and directors, including their ages, as of March 1, 2006. There are no family relationships between any of our executive officers.

Name	Age		Position
Craig S. Shular		53	Chief Executive Officer, President, Interim Chief Financial Officer and Director
John J. Wetula		47	Vice President and President, Natural Graphite
Petrus J. Barnard		56	Vice President and President, Graphite Electrodes
Luiz A. Freitas		55	General Manager, Advanced Graphite Material
Hermanus L. Pretorius		55	General Manager, Cathodes
Karen G. Narwold		46	Vice President, General Counsel, Human Resources and Secretary
R. Eugene Cartledge		76	Chairman of the Board
Mary B. Cranston		58	Director
John R. Hall		73	Director
Harold E. Layman		59	Director
Ferrell P. McClean		59	Director
Michael C. Nahl		63	Director
Frank A. Riddick, III		49	Director

Executive Officers

Craig S. Shular became Chief Executive Officer and a director in January 2003 and has served as President since May 2002. From May 2002 through December 2002, he also served as Chief Operating Officer. From August 2001 to May 2002, he served as Executive Vice President of our former Graphite Power Systems Division. He served as Vice President and Chief Financial Officer from January 1999, with the additional duties of Executive Vice President, Electrode Sales and Marketing from February 2000, to August 2001. From 1976 through 1998, he held various financial, production and business management positions at Union Carbide, including the Carbon Products Division, from 1976 to 1979. We are the successor to the Carbon Products Division of Union Carbide. With the resignation of our Chief Financial Officer effective

165

December 12, 2005, Mr. Shular was also appointed as our interim Chief Financial Officer and Principal Accounting Officer.

Petrus J. Barnard became Vice President and President, Graphite Electrodes, in April 2005. From April 2003 to March 2005 he served as President, Advanced Carbon Materials. He served as Executive Vice President, Graphite Power Systems, from March 2000 to March 2003. He began his career with us in 1972 when he joined our South Africa subsidiary. He is a graduate of University of Potchefstroom - South Africa with a B.S. Sciences degree and an MBA.

Luiz A. Freitas became General Manager, Advanced Graphite Materials, in September 2005. He was Director, Operations – AET, from January 2002 to September 2005. He served as Director of Operations, Advanced Graphite Materials, from March 2000 to December 2001. He was Director of Worldwide Engineering from February 1999 to March 2000. He joined our Brazilian subsidiary in 1975 after graduating from Federal University of the State of Bahia, Brazil with a B.S. degree in Mechanical Engineering.

Hermanus L. Pretorius became General Manager, Cathodes, in September 2005. He served as Director Worldwide Operations and Engineering, Graphite Electrodes, from January 2003 to September 2005. From August 2001 to January 2003, he held various operations and supply chain positions for Europe, Asia and Africa. He began his career with us in Meyerton, South Africa in August 1977 before transferring to UCAR S.A. in Switzerland in March 1998. He is a graduate of University of Potchefstroom - South Africa with a B.S. Sciences degree and an MBA.

John J. Wetula became President of our natural graphite business, AET, in January 2003. From July 1999 to December 2002, he served as President of GrafTech Inc. From July 1998 to June 1999, he served as our Director of Export Sales. From October 1996 to June 1998, he was General Manager of our GRAFOIL® product line. He is a chemical engineer and MBA graduate of Cleveland State University.

Karen G. Narwold became Vice President, General Counsel and Secretary in September 1999 and also assumed responsibility for the human resources department effective January 2002. She joined our Law Department in July 1990 and served as Assistant General Counsel from June 1995 to January 1999 and Deputy General Counsel from January 1999 to September 1999. She was an associate with Cummings & Lockwood from 1986 to 1990.

Directors

R. Eugene Cartledge has been a director since 1996 and has served as Chairman of the Board since February 2005. From 1986 until his retirement in 1994, Mr. Cartledge was the Chairman of the Board and Chief Executive Officer of Union Camp Corporation. Mr. Cartledge retired as Chairman of the Board of Savannah Foods & Industries Inc. in December 1997; retired as a director of Chase Industries, Inc. in 2001; retired as a director of Delta Airlines, Inc. and Sun Company, Inc. in May 2002; and retired as a director of Formica Corporation in April 2005. He is currently a director of Blount International, Inc.

166

Mary B. Cranston has been a director since 2000. Ms. Cranston is a partner and has served since 1999 as Chair of Pillsbury Winthrop Shaw Pittman LLP, an international law firm. Ms. Cranston is based in San Francisco, California. Ms. Cranston has been practicing complex litigation, including antitrust, telecommunications and securities litigation, with Pillsbury Winthrop Shaw Pittman LLP since 1975. She is a trustee of Stanford University and the San Francisco Ballet and a director of the Bay Area Council, the Commonwealth Club of California, the Episcopal Charities, and the San Francisco Museum of Women.

                John R. Hall has been a director since 1995. Mr. Hall was Chairman of the Board and Chief Executive Officer of Ashland Inc. from 1981 until his retirement in January 1997 and September 1996, respectively. Mr. Hall had served in various engineering and managerial capacities at Ashland Inc. since 1957. He served as a director of Reynolds Metals Company from 1985 to 2000. He retired as Chairman of Arch Coal Inc. in 1998; retired as a director of CSX Corp. in May 2003; retired as a director of Canada Life in June 2003; and retired as a director of Bank One Corporation in May 2004. Mr. Hall currently serves as a member of the Boards of Humana Inc. and USEC Inc. Mr. Hall graduated from Vanderbilt University in 1955 with a degree in Chemical Engineering and later served as Vanderbilt’s Board Chairman from 1995 to 1999. Mr. Hall also serves as Chairman of the Blue Grass Community Foundation and the Commonwealth Fund for Kentucky Educational Television, and as President of the Markey Cancer Center Foundation.

Harold E. Layman has been a director since 2003. From 2001 until his retirement in 2002, Mr. Layman was President and Chief Executive Officer of Blount International, Inc. Prior thereto, Mr. Layman served in other capacities with Blount International, including President and Chief Operating Officer from 1999 to 2001, Executive Vice President and Chief Financial Officer from 1997 to 2000, and Senior Vice President and Chief Financial Officer from 1993 to 1997. From 1981 through 1992, he held various financial management positions with VME Group/Volvo AB. From 1970 to 1980, Mr. Layman held various operations and financial management positions with Ford Motor Company. He is currently a director of Blount International, Grant Prideco, Inc. and Infinity Property and Casualty Corporation.

Ferrell P. McClean has been a director since 2002. Ms. McClean was a Managing Director and Senior Advisor to the head of the Global Oil & Gas Group in Investment Banking at J.P. Morgan Chase & Co. from 2000 through the end of 2001. She joined J.P. Morgan & Co. Incorporated in 1969 and founded the Leveraged Buyout and Restructuring Group within the Mergers & Acquisitions Group in 1986. From 1991 until 2000, Ms. McClean was a Managing Director and co-headed the Global Energy Group within the Investment Banking Group at J.P. Morgan & Co. Ms. McClean is currently a director of El Paso Corporation. She retired as a director of Unocal Corporation in 2005.

Michael C. Nahl has been a director since 1999. Mr. Nahl has been Executive Vice President and Chief Financial Officer of Albany International Corp., a manufacturer of paper machine clothing, which are the belts of fabric that carry paper stock through the paper production process, since April 2005. Mr. Nahl joined Albany International Corp. in 1981 as Group Vice President, Corporate, and, prior to appointment to his present position, he was Senior Vice President and Chief Financial Officer. Mr. Nahl is currently a director of Lindsay Manufacturing Co. and a member of JPMorgan Chase & Company's Regional Advisory Board.

Frank A. Riddick, III became a director in September 2004. Mr. Riddick has served as President and Chief Executive Officer of Formica Corporation, a manufacturer of surfacing

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materials used in countertops, cabinets, and flooring, since January 2002. Mr. Riddick was instrumental in assisting Formica to emerge from Chapter 11 bankruptcy proceedings in June 2004. He served as President and Chief Operating Officer of Armstrong Holdings, Inc. from August 2000 to December 2001 and in various other executive capacities at Armstrong and its subsidiaries from 1995 to 2000. In December 2000, Armstrong's principal operating subsidiary, Armstrong World Industries, Inc., filed for Chapter 11 bankruptcy protection as a result of Armstrong’s legacy asbestos liabilities. Prior to joining Armstrong, he held a number of financial managerial positions with FMC Corporation, General Motors Corporation and Merrill Lynch & Co., Inc.

NYSE Certification

Mr. Shular, Chief Executive Officer and President, has certified to the NYSE, pursuant to Section 303A.12 of the NYSE’s listing standards, that he is unaware of any violation by us of the NYSE’s corporate governance listing standards.

PART IV

Item 15.  Exhibits and Financial Statement Schedules

		(a)(1)      Financial Statements
			See Index to Consolidated Financial Statements at page 97 of this Report.
	(2)          Financial Statement Schedules
			None.
(b)           Exhibits
			The exhibits listed in the following table have been filed with this Report.

Exhibit Number Description of Exhibit

2.1.0(1) Recapitalization and Stock Purchase and Sale Agreement dated as of November 14, 1994 among Union Carbide Corporation, Mitsubishi Corporation, GrafTech International Ltd. and GrafTech International Acquisition Inc. and Guaranty made by Blackstone Capital Partners II Merchant Banking Fund L.P. and Blackstone Offshore Capital Partners II L.P.

2.2.0 Intentionally Omitted.

2.3.0 Intentionally Omitted.

2.4.0(1) Stock Purchase and Sale Agreement dated as of November 9, 1990 among Mitsubishi Corporation, Union Carbide Corporation and UCAR Carbon Company Inc.

2.5.0 Intentionally Omitted.

2.6.0 Intentionally Omitted.

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Exhibit Number Description of Exhibit

2.7.0(1) Transfer Agreement dated January 1, 1989 between Union Carbide Corporation and UCAR Carbon Company Inc.

2.7.1(1) Amendment No. 1 to Transfer Agreement dated December 31, 1989.

2.7.2(1) Amendment No. 2 to Transfer Agreement dated July 2, 1990.

2.7.3(1) Amendment No. 3 to Transfer Agreement dated as of February 25, 1991.

2.8.0(1) Amended and Restated Realignment Indemnification Agreement dated as of June 4, 1992 among Union Carbide Corporation, Union Carbide Chemicals and Plastics Company Inc., Union Carbide Industrial Gases Inc., UCAR Carbon Company Inc. and Union Carbide Coatings Service Corporation.

2.9.0(1) Environmental Management Services and Liabilities Allocation Agreement dated as of January 1, 1990 among Union Carbide Corporation, Union Carbide Chemicals and Plastics Company Inc., UCAR Carbon Company Inc., Union Carbide Industrial Gases Inc. and Union Carbide Coatings Service Corporation.

2.9.1(1) Amendment No. 1 to Environmental Management Services and Liabilities Allocation Agreement dated as of June 4, 1992.

2.10.0(4) Trade Name and Trademark License Agreement dated March 1, 1996 between Union Carbide Corporation and UCAR Carbon Technology Corporation.

2.11.0(1) Employee Benefit Services and Liabilities Agreement dated January 1, 1990 between Union Carbide Corporation and UCAR Carbon Company Inc.

2.11.1(1) Amendment to Employee Benefit Services and Liabilities Agreement dated January 15, 1991.

2.11.2(1) Supplemental Agreement to Employee Benefit Services and Liabilities Agreement dated February 25, 1991.

2.12.0(1) Letter Agreement dated December 31, 1990 among Union Carbide Chemicals and Plastics Company Inc., UCAR Carbon Company Inc., Union Carbide Grafito, Inc. and Union Carbide Corporation.

3.1.0(3) Amended and Restated Certificate of Incorporation of GrafTech International Ltd.

3.1.1(9) Certificate of Designations of Series A Junior Participating Preferred Stock of GrafTech International Ltd.

3.1.2(15) Certificate of Amendment to the Amended and Restated Certificate of Incorporation of GrafTech International Ltd.

3.1.3(19) Certificate of Amendment to the Amended and Restated Certificate of Incorporation of GrafTech International Ltd.

3.2.0(17) Amended and Restated By-Laws of GrafTech International Ltd. dated December 13, 2002.

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Exhibit Number Description of Exhibit

4.1.0(14) Indenture dated as of February 15, 2002 among GrafTech Finance Inc., GrafTech International Ltd., GrafTech Global Enterprises Inc., UCAR Carbon Company Inc., and the Subsidiary Guarantors from time to time party thereto and State Street Bank and Trust Company, as Trustee.

4.1.1(19) First Supplemental Indenture, dated as of April 30, 2002, among GrafTech Finance Inc., GrafTech International Ltd., GrafTech Global Enterprises Inc., UCAR Carbon Company Inc., UCAR Holdings V. Inc., UCAR Carbon Technology LLC, UCAR Holdings III Inc. and UCAR International Trading Inc. and State Street Bank and Trust Company.

4.2.0 Intentionally Omitted.

4.2.1 Intentionally Omitted.

4.3.0(20) Indenture dated as of January 22, 2004 among GrafTech International Ltd., GrafTech Finance Inc., GrafTech Global Enterprises Inc., UCAR Carbon Company Inc., UCAR International Trading Inc. and UCAR Carbon Technology LLC and U.S. Bank National Association.

4.3.1(2) Supplemental Indenture, dated as of February 7, 2005, among UCAR Holdings V Inc., GrafTech International Ltd., GrafTech Finance Inc., Graftech Global Enterprises Inc., UCAR Carbon Company Inc., UCAR International Trading Inc. and UCAR Carbon Technology LLC and U.S. Bank National Association.

4.4.0(9) Rights Agreement dated as of August 7, 1998 between GrafTech International Ltd. and The Bank of New York, as Rights Agent.

4.4.1(14) Amendment No. 1 to Rights Agreement dated as of November 1, 2000.

4.4.2(20) Amendment No. 2 to Rights Agreement dated as of May 21, 2002.

4.5.0 Intentionally Omitted.

10.1.0(2) Amended and Restated Credit Agreement dated as of February 8, 2005 among GrafTech International Ltd. GrafTech Global Enterprises Inc., GrafTech Finance Inc., the LC Subsidiaries from time to time party thereto, the Lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.

10.1.1(2) Amendment and Restatement Agreement dated as of February 8, 2005 among GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc., the LC Subsidiaries from time to time party thereto; the Lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agents.

10.1.2(2) Amended and Restated Guarantee Agreement dated as of February 8, 2005 made by GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc. and each Domestic Subsidiary party thereto in favor of JPMorgan Chase Bank, N.A., as Collateral Agent for the Secured Parties.

170

Exhibit Number Description of Exhibit

10.1.3(2) Amended and Restated Security Agreement dated as of February 8, 2005 made by GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc. and the subsidiaries of GrafTech from time to time party thereto, in favor of JP Morgan Chase Bank, N.A., as Collateral Agent for the Secured Parties.

10.1.4(2) Amended and Restated Indemnity, Subrogation and Contribution Agreement dated as of February 8, 2005 among GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc., each of the Domestic Subsidiaries party thereto and JP Morgan Chase Bank, N.A., as Collateral Agent for the Secured Parties.

10.1.5(2) Amended and Restated Domestic Pledge Agreement dated as of February 8, 2005 by GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc. and the direct and indirect subsidiaries of GrafTech that are signatories thereto in favor of JPMorgan Chase Bank, N.A., as Collateral Agent for the Secured Parties.

10.1.6(2) Amended and Restated Intellectual Property Security Agreement dated as of February 8, 2005 made by GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc. and the subsidiaries of GrafTech from time to time party thereto in favor of JPMorgan Chase Bank, N.A., as Collateral Agent for the Secured Parties (schedules omitted).

10.1.7 (11) First Amendment, dated as of May 25, 2005, to the Amended and Restated Credit Agreement, dated as of February 8, 2005, among GrafTech International, Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc., the LC Subsidiaries from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

10.2.0 Intentionally Omitted.

10.2.1 Intentionally Omitted.

10.2.2 Intentionally Omitted.

10.2.3 Intentionally Omitted.

10.2.4 Intentionally Omitted.

10.2.5 Intentionally Omitted.

10.2.6 Intentionally Omitted.

10.2.7 Intentionally Omitted.

10.2.8 Intentionally Omitted.

10.2.9 Intentionally Omitted.

10.2.10* Form of Restricted Stock Unit Agreement.

10.8.0(18) GrafTech International Ltd. Management Stock Incentive Plan (Original Version) as amended and restated through July 31, 2003.

10.9.0* Form of Restricted Stock Agreement (2005 LTIP Version).

10.10.0(18) GrafTech International Ltd. Management Stock Incentive Plan (Senior Version) as amended and restated through July 31, 2003.

10.11.0(8) Form of Restricted Stock Agreement (Standard Form).

171

Exhibit Number Description of Exhibit

10.12.0(18) GrafTech International Ltd. Management Stock Incentive Plan (Mid-Management Version) as amended and restated through July 31, 2003.

10.13.0(18) GrafTech International Ltd. 1995 Equity Incentive Plan as amended and restated through July 31, 2003.

10.14.0(18) GrafTech International Ltd. 1996 Mid-Management Equity Incentive Plan as amended and restated through July 31, 2003.

10.15.0(20) UCAR Carbon Company Inc. Compensation Deferral Program effective March 31, 2003.

10.15.1(2) First Amendment to the UCAR Carbon Compensation Deferral Plan dated as of October 7, 2004.

10.15.2(2) Second Amendment to the UCAR Carbon Compensation Deferral Plan effective as of January 1, 2005.

10.15.3* Third Amendment to the UCAR Carbon Compensation Deferral Plan effective as of November 1, 2005.

10.16.0(8) GrafTech International Ltd. 2005 Equity Incentive Plan.

10.17.0* Form of Severance Compensation Agreement for senior management (U.S. 2.0 Version).

10.17.1* Form of Severance Compensation Agreement for senior management (International 2.0 Version).

10.17.2* Form of Severance Compensation Agreement for senior management (U.S. 2.99 Version).

10.17.3* Form of Severance Compensation Agreement for senior management (International 2.99 Version).

10.18.0(20) UCAR Carbon Company Inc. Equalization Benefit Plan amended and restated as of March 31, 2003.

10.19.0(20) UCAR Carbon Company Inc. Supplemental Retirement Income Plan amended and restated as of March 31, 2003.

10.20.0(20) UCAR Carbon Company Inc. Enhanced Retirement Income Plan amended and restated as of March 31, 2003.

10.21.0(20) UCAR Carbon Company Inc. Benefits Protection Trust amended and restated as of August 1, 2003.

10.22.0(12) Separation Agreement between GrafTech International Ltd. and Scott C. Mason, dated November 15, 2005.

10.22.1 Intentionally Omitted.

10.22.2 Intentionally Omitted.

10.22.3 Intentionally Omitted.

10.23.0(7) Plea Agreement between the United States of America and GrafTech International Ltd. executed April 7, 1998.

10.24.0(13) Outsourcing Services Agreement, dated as of March 30, 2001, effective April 2001, between CGI Information Systems and Management Consultants, Inc. and GrafTech International Ltd. (Confidential treatment requested as to certain portions.)

172

Exhibit Number Description of Exhibit

10.24.1* Memorandum of Agreement, dated as of November 14, 2005, between CGI Information Systems and Management Consultants, Inc. and GrafTech International Ltd.

10.25.0(13) Joint Development and Collaboration Agreement, effective June 5, 2001, among UCAR Carbon Company Inc., Advanced Energy Technology Inc., and Ballard Power Systems Inc. (Confidential treatment requested as to certain portions.)

10.26.0(13) Master Supply Agreement, effective June 5, 2001 between UCAR Carbon Company Inc. and Ballard Power Systems Inc. (Confidential treatment requested as to certain portions.)

10.27.0(13) Agreement, effective as of January 1, 2001, between ConocoPhillips (U.K.) Limited f/k/a Conoco (U.K.) Limited and UCAR S.A. (confidential treatment requested as to certain portions.)

10.27.1(2) Amendment to Agreement, effective as of January 1, 2005, between ConocoPhillips (U.K.) Limited and UCAR S.A. (confidential treatment requested as to certain portions)

10.27.2* Amendment No. 3 to Agreement, effective as of January 1, 2006, between ConocoPhillips (U.K.) Limited and UCAR S.A. (confidential treatment requested as to certain portions)

10.28.0(13) Agreement, effective as of January 1, 2001, between ConocoPhillips Company, UCAR Carbon Company Inc. and UCAR S.A. (Confidential treatment requested as to certain portions.)

10.28.1(2) Amendment to Agreement, effective as of January 1, 2005, among ConocoPhillips Company, UCAR Carbon Company Inc. and UCAR S.A. (confidential treatment requested as to certain portions.)

10.28.2* Amendment No. 3 to Agreement, effective as of January 1, 2006, among ConocoPhillips Company, UCAR Carbon Company Inc. and UCAR S.A. (confidential treatment requested as to certain portions.)

10.29.0* Form of Terms and Conditions of Sale to standard graphite electrode contract of sale (revision of September 8, 2004)

21.1.0* List of subsidiaries of GrafTech International Ltd.

23.1.0* Consent of PricewaterhouseCoopers LLP.

23.2.0* Consent of Deloitte & Touche LLP.

24.1.0* Powers of Attorney (included on signature pages).

31.1.0* Certification pursuant to Rule 13a-14(a) under the Exchange Act by Craig S. Shular, Chief Executive Officer and President.

31.2.0* Certification pursuant to Rule 13a-14(a) under the Exchange Act by Craig S. Shular, Interim Chief Financial Officer.

32.1.0* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Craig S. Shular, Chief Executive Officer and President.

32.2.0* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Craig S. Shular, Interim Chief Financial Officer.

*    Filed herewith.

173

(1) Incorporated by reference to the Registration Statement of GrafTech International Ltd. and GrafTech Global Enterprises Inc. on Form S-1 (Registration No. 33-84850).

(2) Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 2004 (File No. 1-13888).

(3) Incorporated by reference to the Registration Statement of the registrant on Form S-1 (Registration No. 33-94698).

(4) Incorporated by reference to the Quarterly Report of the registrant on Form l0-Q for the quarter ended March 31, 1996 (File No. 1-13888).

(5) Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended June 30, 1996 (File No. 1-13888).

(6) Incorporated by reference to the Quarterly Report of the registrant on Form l0-Q for the quarter ended September 30, 1997 (File No. 1-13888).

(7) Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-13888).

(8) Incorporated by reference to the Current Report of the registrant on Form 8-K filed on September 6, 2005 (File No. 1-13888).

(9) Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 1998 (File No. 1-13888).

(10) Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended September 30, 1999 (File No. 1-13888).

(11) Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended September 30, 2005 (File No. 1-13888).

(12) Incorporated by reference to the Current Report of the registrant on Form 8-K filed on November 15, 2005 (File No. 1-13888).

(13) Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended June 30, 2001 (File No. 1-13888).

(14) Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 2001 (File No. 1-3888).

(15) Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended March 31, 2002 (File No. 1-13888).

(16) Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended June 30, 2002 (File No. 1-13888).

(17) Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 2002 (File No. 1-13888).

(18) Incorporated by reference to the Registration Statement of the registrant on Form S-3 (Registration No. 333-108039).

(19) Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-13888).

(20) Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 2003 (File No. 1-13888).

174

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GRAFTECH INTERNATIONAL LTD.

March 15, 2006 By:            /s/ Craig S. Shular          

Craig S. Shular
Title:  Chief Executive Officer, President,
            Interim Chief Financial Officer
            and Director

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below hereby constitutes and appoints Craig S. Shular and Karen G. Narwold, and each of them individually, his or her true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments to this Report together with all schedules and exhibits thereto, (ii) act on, sign and file with the Securities and Exchange Commission any and all exhibits to this Report and any and all exhibits and schedules thereto, (iii) act on, sign and file any and all such certificates, notices, communications, reports, instruments, agreements and other documents as may be necessary or appropriate in connection therewith and (iv) take any and all such actions which may be necessary or appropriate in connection therewith, granting unto such agents, proxies and attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing necessary or appropriate to be done, as fully for all intents and purposes as he or she might or could do in person, and hereby approving, ratifying and confirming all that such agents, proxies and attorneys-in-fact, any of them or any of his, her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

175

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ Craig S. Shular Craig S. Shular	Chief Executive Officer, President, Interim Chief Financial Officer and Director (Principal Executive Officer and Principal Accounting Officer)	March 15, 2006
/s/ R. Eugene Cartledge	Director	March 15, 2006
R. Eugene Cartledge
/s/ Mary B. Cranston Mary B. Cranston	Director	March 15, 2006
/s/ John R. Hall John R. Hall	Director	March 15, 2006
/s/ Harold E. Layman Harold E. Layman	Director	March 15, 2006
/s/ Ferrell P. McClean Ferrell P. McClean	Director	March 15, 2006
/s/ Michael C. Nahl Michael C. Nahl	Director	March 15, 2006
/s/ Frank A. Riddick, III Frank A. Riddick, III	Director	March 15, 2006

176

EXHIBIT INDEX

Exhibit Number Description of Exhibit

10.2.10 Form of Restricted Stock Unit Agreement.

10.9.0 Form of Restricted Stock Agreement (2005 LTIP Version).

10.15.3 Third Amendment to the UCAR Carbon Compensation Deferral Plan effective as of November 1, 2005.

10.17.0 Form of Severance Compensation Agreement for senior management (U.S. 2.0 Version).

10.17.1 Form of Severance Compensation Agreement for senior management (International 2.0 Version).

10.17.2 Form of Severance Compensation Agreement for senior management (U.S. 2.99 Version).

10.17.3 Form of Severance Compensation Agreement for senior management (International 2.99 Version).

10.24.1 Memorandum of Agreement, dated as of November 14, 2005, between CGI Information Systems and Management Consultants, Inc. and GrafTech International Ltd.

10.27.2 Amendment No. 3 to Agreement, effective as of January 1, 2006, between ConocoPhillips (U.K.) Limited and UCAR S.A. (confidential treatment requested as to certain portions)

10.28.2 Amendment No. 3 to Agreement, effective as of January 1, 2006, among ConocoPhillips Company, UCAR Carbon Company Inc. and UCAR S.A. (confidential treatment requested as to certain portions.)

10.29.0 Form of Terms and Conditions of Sale to standard graphite electrode contract of sale (revision of September 8, 2004)

21.1.0 List of subsidiaries of GrafTech International Ltd.

23.1.0 Consent of PricewaterhouseCoopers LLP.

23.2.0 Consent of Deloitte & Touche LLP.

24.1.0 Powers of Attorney (included on signature pages).

31.1.0 Certification pursuant to Rule 13a-14(a) under the Exchange Act by Craig S. Shular, Chief Executive Officer and President.

31.2.0 Certification pursuant to Rule 13a-14(a) under the Exchange Act by Craig S. Shular, Interim Chief Financial Officer.

32.1.0 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Craig S. Shular, Chief Executive Officer and President.

32.2.0 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Craig S. Shular, Interim Chief Financial Officer.

177

EX-10

Exhibit 10.2.10

December __, 2005

FORM OF

RESTRICTED STOCK UNIT AGREEMENT

Restricted Stock Unit Agreement (this “Agreement”), dated as of December __, 2005 (the “Effective Date”), between GrafTech International Ltd. (the “Corporation”) and (the “Participant”).

BACKGROUND

Reference is made to the GrafTech International Ltd. 2005 Equity Incentive Plan (the “Plan”). A copy of the Plan has been made available to the Participant and the terms of the Plan are incorporated herein by reference.

The Corporation has determined that it would be in the best interests of the Corporation and its stockholders for the Corporation to compensate elected non-employee directors of the Corporation by crediting them Restricted Stock Units in lieu of receiving any award of Restricted Stock that may be made to them in 2006. The Plan allows such awards and the Committee has authorized them. The Participant has elected to defer receipt of the Restricted Stock and be credited with Restricted Stock Units. The Corporation has accepted such election. Each Restricted Stock Unit initially corresponds to one share of Common Stock.

In consideration of the covenants contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as follows:

ARTICLE I

DEFINITIONS

Whenever capitalized terms are used in this Agreement, they shall have the meanings set forth in this Agreement or, if not defined in this Agreement, as set forth in the Plan.

“Beneficiary” shall mean one or more Persons designated in accordance with Article IV to receive distribution hereunder upon the death of the Participant.

A “Change of Control” shall be deemed to occur if any of the following events or circumstances shall occur:

(i) Any one person, or more than one person acting as a group, acquires ownership of stock (as determined under Section 318(a) of the Code) of the Corporation that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Corporation; provided, however, that if any one person, or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of

the stock of the Corporation, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Control. This paragraph applies only when there is a transfer of stock of the Corporation (or issuance of stock of the Corporation) and stock in the Corporation remains outstanding after the transaction.

(ii) Any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock (as determined under Section 318(a) of the Code) of the Corporation possessing 35 percent or more of the total voting power of the stock of the Corporation; provided, however, that if any one person, or more than one person acting as a group, is considered to own 35 percent or more of the total voting power of the stock of the Corporation, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Control.

(iii) A majority of members of the Board (the “Incumbent Directors”) is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the Incumbent Directors; provided, that no other Corporation is a majority shareholder of the Corporation.

(iv) Any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Corporation that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Corporation immediately prior to such acquisition; provided, however, that a transfer of assets by the Corporation is not treated as a Change in Control if the assets are transferred to: (A) a shareholder of the Corporation (immediately before the asset transfer) in exchange for or with respect to its stock; (B) an entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by the Corporation; (C) a person, or more than one person acting as a group, that owns, directly or indirectly, 50 percent of more of the total value or voting power of all outstanding stock of the Corporation; or (D) an entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person described in the previous subsection (C). For purposes of this paragraph, (1) gross fair market value means the value of the assets of the Corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with

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such assets and (2) a person’s status is determined immediately after the transfer of the assets.

For purposes of this definition:

(a) A “person” shall be as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act.

(b) Persons will be considered to be acting as a group if they are owners of a Corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar transaction, with or involving the Corporation. If a person, including an entity, owns stock in both companies that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in the Corporation prior to the transaction giving rise to the Change in Control and not with respect to the ownership interest in the other Corporation. Persons will not be considered to be acting as a group solely because they purchase or own stock of the Corporation at the same time or as a result of the same public offering.

Notwithstanding the foregoing, solely for purposes of vesting of Restricted Stock Units under this Agreement, “Change of Control” shall have the same meaning as is set forth in the Plan.

“Election Form” shall mean the form established from time to time by the Corporation that must be completed, signed and returned to and accepted by the Corporation to make an election to forego an award of Restricted Stock in exchange for an award of the Restricted Stock Units and to designate or change Beneficiaries.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended (including any successor statute), and the rules and regulations thereunder.

“Restricted Stock” shall mean shares of Common Stock covered by a Restricted Stock Award which would be granted to the Participant by the Corporation under the Plan in 2006.

“Restricted Stock Units” shall mean, subject to Section 2.4, restricted stock units credited to the Participant pursuant to this Agreement.

“Termination Date” shall mean the date on which the Participant ceases to be a director for any reason, including his or her failure to be reelected as a director or his or her resignation or death.

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ARTICLE II

CREDITING OF RESTRICTED STOCK UNITS

2.1  Crediting of Restricted Stock Units. Restricted Stock Units are hereby credited to the Participant subject to the restrictions and conditions set forth in this Agreement. The number of Restricted Stock Units credited shall be equal to the number of shares of Restricted Stock awarded to the Participant (but for deferral pursuant to the Election Form and this Agreement) on any date in 2006.

2.2    Value of Restricted Stock Units. The fair market value of each Restricted Stock Unit on any date shall be the same as the Fair Market Value of a share of Common Stock on that date.

2.3    Vesting of Restricted Stock Units.

(i)         The Restricted Stock Units shall vest (a) in accordance with the vesting schedule for the corresponding Restricted Stock and (b) to the extent not previously vested, immediately upon the occurrence of a Change of Control or the Participant’s death, if earlier.

(ii)         The Committee or the Board may accelerate the vesting of any or all Restricted Stock Units at any time and for any reason.

(iii)        Restricted Stock Units that are not vested as of the Termination Date shall be forfeited and cancelled.

2.4    Dividends and Other Corporate Events.

(i)         Subject to Sections 2.4(ii) and 2.4(iii), if a dividend or distribution of any kind is declared on shares of Common Stock and such dividend or distribution is payable in whole or in part in cash, then the number of Restricted Stock Units shall be increased by that number of Restricted Stock Units equal to the division of the amount of such cash by the Fair Market Value of a share of Common Stock for the payment date for such dividend or distribution. References herein to “Restricted Stock Units” shall include such additional Restricted Stock Units.

(ii)         If a dividend or distribution of any kind is declared on shares of Common Stock payable in securities or other property, then the Corporation shall cause adequate provision to be made so that, upon distribution of shares of Common Stock with respect to the Restricted Stock Units, distribution shall also be made, as nearly as practicable, of the same kind and amount of securities and other property which would have been received thereon if such shares had been distributed immediately prior to the record date for determining stockholders entitled to receive such payment (together with all interest, dividends, distributions and other rights which would have been received in respect of such securities and other property from the issuer or other obligor thereof (and, to the extent that cash would have been so received, interest on such cash at the annual rate of 6%)). References herein to “Restricted Stock Units” shall

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include such securities and other property, with such adjustments as may be necessary or appropriate.

(iii)        If a merger, consolidation, tender or exchange offer, recapitalization, reorganization or other business combination or corporate event occurs which results in a change in the Common Stock but does not constitute a Change of Control, then the Corporation shall cause adequate provision to be made so that, upon distribution of shares of Common Stock with respect to the Restricted Stock Units, distribution shall also be made, as nearly as practicable, of the same kind and amount of securities and other property which would have been received thereon if such shares had been distributed immediately prior to the record date for determining stockholders entitled to participate therein (together with all interest, dividends, distributions and other rights which would have been received in respect of such securities and other property from the issuer or other obligor thereof (and, to the extent that cash would have been so received, interest on such cash at the annual rate of 6%)). References herein to “Restricted Stock Units” shall include such securities and other property, with such adjustments as may be necessary or appropriate.

(iv)        Additional Restricted Stock Units, securities and other property described in Sections 2.4(i), 2.4(ii) and 2.4(iii) shall be (a) vested or (b) unvested (and subject to forfeiture) and thereafter become vested, to the same extent as the Restricted Stock Units to which they relate.

(v)        If, in connection with any transaction described in Section 2.4(ii) or 2.4(iii), shares of Common Stock are required to be transferred, exchanged, cancelled or otherwise modified to receive payment thereunder or participate therein, adjustments shall be made to the Restricted Stock Units and the shares of Common Stock distributable in respect thereof as necessary or appropriate to give effect to such requirement.

(vi)        The provisions of this Section 2.4 shall satisfy any requirements under Section 3.3 of the Plan, unless otherwise expressly determined by the Compensation Committee.

2.5    Rights as Stockholder. Neither the Participant nor any Beneficiary shall have any rights as a stockholder (or security holder or property owner) with respect to the Restricted Stock Units (or shares of Common Stock, securities or other property) until shares of Common Stock (or securities or other property, if any) are distributed in respect thereof.

2.6    Reversion. All Restricted Stock Units and shares of Common Stock (and securities and other property, if any) which are forfeited pursuant to Section 2.3(iii) shall automatically (and without further action by the Corporation or the Participant) revert back to the Corporation. Such shares shall thereupon again constitute shares subject to (and available for future grant or award under) the Plan.

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ARTICLE III

DISTRIBUTION OF RESTRICTED STOCK UNITS

3.1    Distribution of Restricted Stock Units.

(i)         Except as otherwise provided in Sections 3.1(ii) and 3.1(iii), the Restricted Stock Units shall be distributed to the Participant (or, if the Participant shall have died, to the Beneficiaries) on the earliest to occur of:

(a)        the date designated by the Participant on his or her Election Form that shall have been duly completed, signed and accepted (the “Distribution Date”); or

(b)        the date that is five years after the Termination Date;

but in any event as promptly as practicable following the Participant’s death or the occurrence of a Change of Control. The date on which a Change of Control occurs is called the “Change of Control Date.” The earliest of the dates described in the prior sentences of this Section 3.1(i) is called the “Payment Date.”

(ii)         The Participant may change his or her Distribution Date by completing, signing and returning to the Corporation a new Election Form so long as: (i) such Election Form is accepted by the Corporation not later than one year prior to the Distribution Date then in effect; (ii) for distributions other than on account of death, the new Distribution Date is at least five years later than the then current Distribution Date, and (iii) the change in Distribution Date does not constitute an acceleration of payment except to the extent such acceleration is permitted under Section 409A.

(iii)        The Board or the Committee may at any time accelerate the distribution of the Restricted Stock Units; provided that no acceleration shall be permitted to the extent it would not be permitted under the provisions of Section 409A.

(iv)        The distribution of the Restricted Stock Units shall be effected by (and only by) the distribution of the shares of Common Stock (and securities and other property, if any) represented by such Restricted Stock Units. The shares of Common Stock (and securities and other property, if any) distributed with respect to such Restricted Stock Units shall be distributed in a single distribution; provided, however, that any fractional shares (or securities or other property) may, at the election of the Corporation, be distributed by payment of cash in an amount that approximates the fair value thereof as determined by the Corporation. For this purpose, the fair value of a Restricted Stock Unit shall equal the Fair Market Value of the shares of Common Stock, if any, represented thereby plus the fair value of the securities and other property, if any, represented thereby as determined by the Corporation.

3.2    Withholding of Taxes. The Corporation shall either, at its election, withhold or deduct from payments (or, if the Corporation so elects, from shares, securities or other property) due to or held for the Participant or require the Participant or the Beneficiaries to pay to the Corporation an amount equal to all taxes and other governmental charges of any kind

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required to be withheld or deducted with respect to any and all taxable income and amounts attributable to distributions hereunder.

3.3    Discharge of Obligation. The completion of the distributions provided herein to the Participant or the Beneficiaries shall fully and completely discharge the Corporation from any and all further obligations under the Plan and this Agreement with respect to the Restricted Stock Units and the Restricted Stock.

ARTICLE IV

BENEFICIARY DESIGNATION

4.1    Beneficiary.

(i)         The Participant has designated the Beneficiaries set forth on the Final Election Form (as defined in Section 4.1 (iii)). The Beneficiaries shall share in distributions hereunder on an equal basis.

(ii)         The Participant may change his or her Beneficiaries at any time by completing, signing and returning to the Corporation a new Election Form so long as such new Election Form is accepted by the Corporation not later than the earliest of the Distribution Date, the Termination Date or the Change of Control Date. Notwithstanding anything in a prior Election Form or Agreement to the contrary, such new Election Form shall supercede the Beneficiary designations in all prior Election Forms and Agreements.

(iii)        Upon the acceptance by the Corporation of a new Election Form, all previous Beneficiary designations shall be cancelled. The Corporation shall be entitled to rely on the last Election Form designating a Beneficiary, filed by the Participant and accepted by the Corporation prior to his or her death (the “Final Election Form”).

4.2    No Beneficiary Designation. If the Participant fails to designate a Beneficiary as provided in this Article IV or if all designated Beneficiaries predecease the Participant or die prior to all distributions hereunder being completed, then the Participant’s surviving spouse, if any, shall be deemed to be the designated Beneficiary or, if the Participant has no surviving spouse, the Participant’s estate shall be deemed to be the designated Beneficiary.

ARTICLE V

REGISTRATION OF SHARES

5.1      Registration.

(i)         Neither issuance nor the resale of the Restricted Stock Units or the shares of Common Stock distributable with respect thereto have been registered under any securities law. The Participant represents and warrants that he or she is acquiring the Restricted Stock Units and such shares of Common Stock for investment solely for his or her own account and not with a view to distribution thereof. The Participant agrees that:

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(a)        the Restricted Stock Units shall not be transferred, pledged or otherwise disposed;

(b)        such shares of Common Stock shall not be sold, transferred, pledged or otherwise disposed except pursuant to an effective registration under applicable securities laws or an exemption therefrom;

(c)        if any of such shares are to be sold, transferred, pledged or otherwise disposed pursuant to such an exemption, the transferor shall first deliver to the Corporation an opinion of counsel satisfactory to the Corporation as to the availability of such exemption; and

(d)        unless registration thereof is then in effect, all certificates representing any of such shares shall bear restrictive legends, and the transfer agent for the Common Stock shall be given stop transfer instructions, as necessary or appropriate to ensure compliance with this Section 5.1.

(ii)         The Corporation may (but is not obligated to), at its own expense, register under applicable securities laws the issuance or resale of the shares of Common Stock (or securities, if any) distributable hereunder. The Corporation may (but is not obligated to), at its own expense, maintain such registration for such period of time as it may determine and terminate such registration at any time.

5.2    Limitations on Resale Any resale of the shares of Common Stock distributed hereunder shall be subject to (i) the continued effectiveness of registration thereof, unless such resale shall be effected pursuant to an exemption therefrom, and (ii) such blackout, insider trading, short-swing profit or other restrictions on trading activity as the Corporation may impose or to which the Participant may be subject, by law, under Corporation policies or otherwise.

5.3    Indemnification. If the resale of shares of Common Stock distributed hereunder is registered, the Participant and the Beneficiaries will indemnify the Corporation, each of its directors and officers and each Person who Controls the Corporation against all claims, losses, damages, expenses and liabilities (or actions in respect thereof) arising out of or based upon any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement or statements, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Corporation, each of its directors and officers and each Person Controlling the Corporation for all legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged statement) or omission (or alleged omission) is made in a registration statement or a prospectus in reliance upon and in conformity with written information furnished to the Corporation by the Participant or the Beneficiaries with respect to them and expressly for use therein; provided, however, that the liability of the Participant and the Beneficiaries under this Section 5.3 shall be limited to the amount of proceeds received by the Participant and the Beneficiaries in the resale giving rise to such liability.

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5.4    Corresponding Provisions. Provisions corresponding to those under Sections 5.1, 5.2 and 5.3 shall apply to all other securities distributable with respect to the Restricted Stock Units.

ARTICLE VI

MISCELLANEOUS

6.1    Unsecured General Creditor. The Participant, the Beneficiaries and his, her or its heirs, successors and assigns have no legal or equitable rights, interests or claims in any properties or assets of the Corporation by reason of this Agreement. The Corporation’s obligations under this Agreement are merely that of an unfunded and unsecured promise to make the distributions required hereby.

6.2    Nonassignability. Neither the Participant nor any other Person shall have any right to commute, sell, assign, transfer, pledge, anticipate or otherwise encumber or alienate in advance of actual receipt, the shares of Common Stock (or securities or other property, if any) distributable hereunder. Subject to Section 6.7, no part thereof shall, prior to actual distribution, be: (i) subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by the Participant or any other Person; (ii) transferable by operation of law in the event of the Participant’s or any other Person’s bankruptcy or insolvency; or (iii) transferable to a spouse as a result of a property settlement or otherwise.

6.3    No Retention. Nothing contained in this Agreement shall be deemed to give the Participant the right to continue in the service of the Corporation as a director or to restrict the termination of such service.

6.4    Successors. This Agreement shall bind and inure to the benefit of the Corporation and its successors and assigns and the Participant, the Beneficiaries and his, her or its heirs, successors and assigns.

6.5    Validity. If any provision of this Agreement is held to be illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions hereof and this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

6.6    Incompetent. If the Corporation determines that Restricted Stock Units are to be distributed to a minor, a Person declared incompetent or a Person incapable of handling the disposition of his or her property, the Corporation may direct distribution of such Restricted Stock Units to the guardian, legal representative or Person having the case and custody of such minor, incompetent or incapable person. The Corporation may require proof of minority, incompetence, incapacity or guardianship prior to distribution of such Restricted Stock Units.

6.7    Court Order. To the extent permitted under relevant law including, but not limited to, Section 409A, the Corporation is authorized to make distributions as directed by court order in any action in which the Corporation has been named as a party; in addition, if a court determines that a spouse or former spouse of the Participant has an interest in this Agreement in

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connection with a property settlement or otherwise, the Corporation shall have the right, notwithstanding any election made by the Participant, to immediately distribute the spouse’s or former spouse’s interest in this Agreement to that spouse or former spouse.

6.8    Notices. All notices to a party must be given in writing and shall be deemed to have been duly given when delivered by hand or three days after deposited in the mail, postage prepaid or, in the case of telecopy or email notice, when received, addressed as follows or to such other address as to which the intended receiving party shall have duly given notice to the notifying party hereunder:

(i)	If to the Corporation, to the following address:
	GrafTech International Ltd.
	Brandywine West Bldg., Suite 301
	1521 Concord Pike
	Wilmington, Delaware 19803
	Attn: General Counsel
	Telecopy: (302) 778-8238
	Email: karen.narwold@graftech.com
	with a copy to:
	UCAR Carbon Corporation Inc.
	12900 Snow Road
	Parma, Ohio 44130
	Attn: Human Resources
	Telecopy: (216) 676-2143
	Email: brian.blowes@graftech.com
(ii)	If to the Participant, to his or her most recent primary residential address or business telecopy or email address as shown on the records of the Corporation.

6.9    Amendment. This Agreement may be amended only by a writing executed by the parties which specifically states that it is amending this Agreement, except that this Agreement may be amended by a writing executed by the Corporation which so states if such amendment is not adverse to the Participant or relates to administrative matters.

6.10  Governing Law and Interpretation. Subject to ERISA, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed therein without regard to the conflicts of law principles thereof. Whenever the word “including” is used herein, it shall be deemed to be followed by the phrase “without limitation”. Unless otherwise specified herein, all determinations, consents, elections and other decisions by the Corporation, the Board or the Committee may be made, withheld or delayed in its sole and absolute discretion. Notwithstanding the foregoing, or any other provision of this Agreement or the Plan, it is intended that all deferrals under this Agreement satisfy the provisions of Section 409A, and this Agreement shall be interpreted and administered, as necessary, to comply with such provisions.

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6.11  Titles. Titles are provided herein for convenience of reference only and are not to serve as a basis for interpretation or construction of this Agreement.

6.12  Counterparts. This Agreement may be executed in counterparts, which together shall constitute one and the same instrument and which will be deemed effective whether received in original form or by telecopy or other electronic means.

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties.

	PARTICIPANT	GRAFTECH INTERNATIONAL LTD.
___________________________________  Signed Name:_________________________ Home Address:__________________			By: ____________________________ Name: _________________________ Title: ___________________________

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EX-10

Exhibit 10.9.0

FORM OF

RESTRICTED STOCK AGREEMENT

(2005 LTIP Version)

Restricted Stock Agreement (this “Agreement”), dated as of August 31, 2005 (the “Grant Date”), between GrafTech International Ltd. (the “Corporation”) and (the “Participant”).

BACKGROUND

Reference is made to the GrafTech International Ltd. 2005 Equity Incentive Plan (the “Plan”). A copy of the Plan has been made available to the Participant and the terms of the Plan are incorporated herein by reference.

The Plan allows the Corporation to provide rewards and incentives to, among others, employees of the Company by, among other things, granting them shares of Common Stock. The Board or the Compensation Committee has determined that it would be in the best interest of the Corporation and its stockholders to grant the Restricted Shares to the Participant under the Plan.

In consideration of the covenants contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as follows:

ARTICLE I

DEFINITIONS

Whenever capitalized terms are used in this Agreement, they shall have the meanings set forth in this Agreement or, if not defined in this Agreement, as set forth in the written employment agreement between the Participant and the Corporation or a Subsidiary or, if not defined in this Agreement and if not defined in such an employment agreement or there is no such employment agreement, as set forth in the Plan.

“Cause” shall mean:

(i)         gross neglect or willful and continuing refusal by the Participant to substantially perform his or her duties or responsibilities for or owed to the Company (other than due to death, Disability or Retirement);

(ii)         breach by the Participant of his or her confidentiality obligations owed to the Company;

(iii)        willful engagement by the Participant in conduct which is demonstrably injurious to the Company (including a breach by the Participant of his or her confidentiality, non-competition or non-solicitation obligations owed to the Company); or

(iv)        conviction or plea of nolocontendere by the Participant to a felony or a misdemeanor involving dishonesty or financial or economic wrongdoing (such as fraud,

embezzlement, insider trading, bribery, theft, price fixing, graft or corrupt payments, perjury or false certification).

ARTICLE II

GRANT OF RESTRICTED SHARES

2.1    Grant of Restricted Shares. The Participant is hereby granted ________ shares of Common Stock subject to the restrictions and conditions set forth in this Agreement. References in this Agreement to “Restricted Shares” mean the shares of Common Stock granted hereby and any cash, securities, rights or property distributed in respect thereof or issued in exchange therefor (which shall be subject to the same restrictions and provisions as such shares).

2.2    Value of Restricted Shares. The Fair Market Value of the Restricted Shares at the close of trading on the Grant Date was $_____ per share.

2.3    Grant Information. The Restricted Shares have been granted under the Plan. The Board or the Compensation Committee authorized the grant of the Restricted Shares on August 31, 2005.

ARTICLE III

VESTINGOF RESTRICTED SHARES

All of the Restricted Shares are unvested. Subject to Section 6.2, Restricted Shares shall vest upon, but only upon, the earliest to occur of the events described in Section 3.1, 3.2 or 3.3, in each case subject to the limitations set forth in Section 3.4. Subject to Section 6.2, all unvested Restricted Shares shall be forfeitable as set forth in Section 3.4 and shall be non-transferable as set forth in Section 4.3. All vested Restricted Shares shall become non-forfeitable and transferable at the time they first vest, although:

(i)         transferability may be subject to pre-clearance, blackout, registration and other restrictions under the Company’s insider trading and other compliance policies and procedures;

(ii)         transferability may be restricted under Section 4.4 until all Withholding Requirements (as defined herein) are satisfied; and

(iii)        transfers by executive officers should be reviewed in advance to determine if there would be any potential liability for short-swing profits under Section 16(b) of the Exchange Act.

3.1    Time Vesting. If not sooner vested and unless previously forfeited pursuant to Section 3.4, one-third of the Restricted Shares shall vest at the close of trading on August 31 of each of 2006, 2007 and 2008 if, and only if, the Participant’s employment by the Company continues through such August 31, respectively.

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3.2    Accelerated Vesting. If not sooner vested and unless previously forfeited pursuant to Section 3.4, all of the Restricted Shares shall vest upon the occurrence of a Change in Control.

3.3    Discretionary Vesting. The Compensation Committee or the Board may accelerate the vesting of any or all of the Restricted Shares at any time and for any reason.

3.4    Effect of Termination of Employment and Other Events on Vesting; Forfeiture of Unvested Restricted Shares. Unless otherwise determined by the Board or the Compensation Committee and subject to Section 6.2, all unvested Restricted Shares shall cease to vest and shall be forfeited upon the earliest to occur of:

(i)         the time of notification of the termination of the Participant’s employment by the Company for Cause or Detrimental Conduct;

(ii)         the date of the termination of the Participant’s employment by the Company for any reason other than Cause or Detrimental Conduct or the date of the Participant’s resignation from employment with the Company for any reason; or

(iii)        the date on which the Board or the Compensation Committee takes such action pursuant to Article V (or such later date as may be specified by the Board or the Compensation Committee).

3.5    Effective Date of Termination of Employment or Retirement. For purposes hereof, except as otherwise set forth in Section 3.4(i), the date of resignation or termination of employment means the last date of actual employment, even if a different date is used for administrative convenience in connection with employee retirement, benefit or welfare plans.

ARTICLE IV

PROCEDURES AFFECTING RESTRICTED SHARES

4.1    Reversion to Treasury. All Restricted Shares which are forfeited shall automatically (and without need for further action by the Corporation, the Participant or any other person) revert to the Corporation and shall thereupon constitute treasury shares subject to the Plan or some other plan of the Corporation, as may be provided in the Plan or such other plan.

4.2    Delivery of Restricted Shares.

(i)         The Restricted Shares will be delivered to the Participant in book entry form by causing the Restricted Shares to be credited to the Participant’s account at such brokerage firm as may be designated from time to time by the Corporation to assist in the administration of the Plan (the “Broker”).

(ii)         Restricted Shares will be delivered on or before the date on which they are scheduled to vest; provided, however, that, if any Restricted Shares vest before such

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date, such Restricted Shares shall be delivered reasonably promptly (as determined by the Corporation) thereafter.

(iii)        When Restricted Shares are delivered in book entry form, such delivery as well as all subsequent transfers and other matters relating to such Restricted Shares will be subject, in addition to all other provisions hereof, to the rules and requirements imposed by the Broker and such administrative rules and requirements as may be imposed by the Corporation. Prior to vesting, Restricted Shares will be subject to stop transfer instructions given by the Corporation to the Broker and the transfer agent for the Common Stock. Upon vesting of any Restricted Shares, such stop transfer instructions will be terminated (except as otherwise provided in connection with the Company’s insider trading and other compliance policies and procedures and except to the extent that any Restricted Shares may be sold pursuant to Section 4.4 to satisfy Withholding Requirements (as defined in Section 4.4)). Upon forfeiture of any Restricted Shares, the Broker and such transfer agent will be instructed to debit such Restricted Shares from such account and return them to the Corporation.

(iv)        Each book entry relating to Restricted Shares may include such restrictive instructions in such forms as the Corporation may deem convenient, expedient, necessary or appropriate relating to the restrictions under this Agreement, applicable securities, tax or other laws or applicable rules of any securities exchange or market.

4.3       Transfer of Restricted Shares.

(i)         Unvested Restricted Shares cannot be Transferred to any Person or entity or for any purpose without the prior written consent of the Corporation. Any attempt to effect a Transfer of unvested Restricted Shares without such consent shall be null and void.

(ii)         To the extent necessary (as determined by the Corporation) to permit resale by the Participant of vested Restricted Shares, the Corporation will use reasonable efforts to register the resale of such Restricted Shares under the Securities Act, so long as the Corporation is permitted to do so on Form S-3 or S-8 or a similar abbreviated form and subject to the terms and conditions set forth in the Plan and such other reasonable or customary terms and conditions as be may be imposed by the Corporation (including those relating to indemnification by the Participant for errors or omissions from information provided by the Participant).

4.4       Withholding of Taxes.

(i)         The Company shall withhold or deduct from any or all payments or amounts due to or held for the Participant, whether due from the Company or held in the Participant’s account at the Broker, an amount (the “Withholding Amount”) equal to all taxes (including unemployment (including FUTA), social security and medical (including FICA), and other governmental charges of any kind as well as income and other taxes) required to be withheld or deducted with respect to any and all taxable income and other amounts attributable to the Restricted Shares (the “Withholding Requirement”).

(ii)        The Withholding Amount shall be determined by the Company.

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(iii)         The timing of withholding or deduction from such payments or amounts shall be determined by the Company; provided, however, that, if such taxes are required to be paid to a tax or other governmental authority before such withholding or deduction is made, then the Company shall pay such taxes when due as agent for the Participant and shall be entitled to reimbursement therefor from such payments or amounts, or otherwise.

(iv)        The Corporation may restrict transfer of any or all vested Restricted Shares until all Withholding Requirements are satisfied.

(v)        Unless the Participant has made or makes a timely election pursuant to Section 83(b) of the Code, the Participant authorizes the Corporation and the Broker to:

(A)       sell, on his or her behalf and for his or her account, from time to time and at any time as the Corporation or the Broker may deem necessary, appropriate, convenient or expedient to satisfy each Withholding Requirement or to reimburse the Company in respect thereof, a sufficient number of Restricted Shares (as determined by the Corporation or the Broker) so that the net proceeds from such sale equal or exceed the applicable Withholding Amount; and

(B)        use the net proceeds to satisfy such Withholding Requirement (with any excess net proceeds to be paid to or deposited in an account of the Participant).

(vi)        If the Participant has made or makes an election pursuant to Section 83(b) of the Code, he or she shall immediately file a copy thereof with the Company and upon demand by the Company make a cash payment to the Company equal to any Withholding Amount in respect thereof.

(vii)       In connection with any sale of Restricted Shares pursuant to this Section 4.4, the Participant agrees that:

(A)      such sale may be aggregated with sales of restricted stock granted to other participants under the Plan or other plans of the Company;

(B)       such aggregated sales may be made from time to time in one or more installments at any time;

(C)      such aggregated sales may be made over time as the Corporation or the Broker may deem necessary, appropriate, convenient or expedient with a view toward avoidance or minimization of disruption of the market for the Common Stock, administrative convenience, minimization of costs and expenses or other factors; and

(D)      the net proceeds from such aggregated sales and the sale prices of the shares sold may be allocated among such Restricted Shares and other shares of restricted stock and the Participant and such other participants as the Corporation or the Broker may deem reasonable.

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(viii)       The Participant understands that:

(A)       different Withholding Requirements may arise at different times based on time of delivery or vesting of Restricted Shares, tax elections or other factors;

(B)        different Withholding Requirements may be based on different values attributable to the Restricted Shares at such times or otherwise based on applicable tax laws, changes in the financial performance or prospects of the Company, changes in market or economic conditions or other factors;

(C)       it may not be practicable or permissible to sell Restricted Shares to satisfy each Withholding Requirement at the time due because of rules and requirements of the Broker, administrative rules and requirements of the Company, restrictions under the Company’s insider trading and other compliance policies and procedures, potential liability for short-swing profits under Section 16(b) of the Exchange Act, applicable securities, tax or other laws, applicable rules of any securities exchange or market, or other factors; and

(D)       as a result, Restricted Shares may be sold at times and values that differ, potentially significantly, from those applicable to such Withholding Requirement and that such differences can result in gains or losses, potentially significant, relative to those values and capital gains and losses for tax purposes in addition to the taxes described in Section 4.4(i).

(ix)        The Participant hereby appoints each officer and assistant officer of the Corporation to be the Participant’s true and lawful agent, proxy and attorney-in-fact, with full power of substitution and re-substitution (each, an “attorney-in-fact” and, together, the “attorneys-in-fact”), to take, cause to be taken and authorize the taking of any and all actions (including the giving of instructions to sell and the approval of confirmations), to incur, cause to be incurred and authorize the incurrence of any and all costs and expenses (including brokerage commissions), to undertake, cause to be undertaken and authorize the undertaking of any and all obligations and to execute, acknowledge, file, publish and deliver, cause to be executed, acknowledged, filed, published and delivered and authorize the execution, acknowledgement, filing, publication and delivery of any and all agreements, instruments and documents (including stock powers, account agreements and related documents, and wire transfer instructions) which any such attorney-in-fact may deem necessary, appropriate, convenient or expedient to sell Restricted Shares, on behalf and for the account of the Participant, to generate net proceeds to satisfy any and all Withholding Requirements, to use net proceeds in satisfaction thereof and to otherwise give effect to the intent and purposes of this Section 4.4, all in the name of the Participant, any such attorney-in-fact, the Corporation or any Subsidiary and all at such times, in such manners, in such amounts, on such exchanges or markets, on such terms, through such brokers, dealers and accounts and otherwise as any such attorney-in-fact may determine in his or her sole and absolute discretion, and hereby grants to each attorney-in-fact the full power and authority to do any and all things necessary, convenient, expedient or appropriate in connection therewith. This power of attorney shall not be affected in any manner by reason of the execution, at any time, of other powers of attorney by the Participant in favor of persons other than the attorneys-in-fact named herein and shall not be affected by the subsequent death, disability or incompetence of the Participant. This power of attorney is irrevocable and coupled

6

with an interest and shall remain in effect until all Withholding Requirements have been fully and unconditionally satisfied. All persons dealing with any of the attorneys-in-fact may assume that this power of attorney has not been revoked and may be relied upon.

(x)        The Participant acknowledges and agrees that neither the Company, the Broker nor any of their respective affiliates, control persons, directors, officers, employees, representatives or agents shall have any liability or obligation for any losses, damages, costs or expenses of any kind or under any theory arising out of or in connection with any action taken or omitted to be taken or any delay in taking any action pursuant to or contemplated by this Section 4.4 (including the determination of any Withholding Amount or the time when any Withholding Requirement is required to be satisfied or any sale of or delay in selling or failure to sell or the price, terms or conditions of sale of any or all of the Restricted Shares), including any liability for any claim that the Participant could have made more or lost less in connection therewith or for any capital gain or loss due to the difference in time between the triggering of a Withholding Requirement and the resale of Restricted Shares in respect thereof or for violations of insider trading or other laws or for incurrence of liability for short-swing profits under Section 16(b) of the Exchange Act, except to the extent that a court of competent jurisdiction determines by final and nonappealable judgment that any such losses, damages, costs or expenses resulted from actions taken or omitted to be taken by them in bad faith or from their gross negligence or willful misconduct. References in this Section 4.4 to “selling” and correlative terms include all activities related thereto, including placement and execution of sell orders, selection of brokers and dealers, delivery of share certificates, receipt of proceeds and payment of fees and commissions.

(xi)        The provisions hereof regarding sale of Restricted Shares to satisfy Withholding Requirements are also intended to constitute a trading plan within the meaning of Rule 10b5-1 under Securities Act.

(xii)       The Participant accepts this Agreement and the Restricted Shares subject to, and agrees to assume, the limitations, risks and responsibilities inherent with respect to the Restricted Shares, including those mentioned in this Agreement.

ARTICLE V

FORFEITURE

Notwithstanding anything contained herein to the contrary, if the Participant engages in Detrimental Conduct, then the Compensation Committee or the Board shall have the right, in its sole and good faith judgment, to suspend (temporarily or permanently) the vesting of any or all of the Restricted Shares, extend the date for such vesting, suspend (temporarily or permanently) the Transferability of any or all of the Restricted Shares, require the forfeiture of any or all of the Restricted Shares then held by the Participant or his affiliates or related parties, or take any other actions in respect of any or all of the Restricted Shares or this Agreement.

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ARTICLE VI

MISCELLANEOUS

6.1    Notices. All notices to a party must be given in writing and shall be deemed to have been duly given when delivered by hand or three days after deposited in the mail, postage prepaid or, in the case of telecopy or email notice, when received, addressed as follows or to such other address as to which the intended receiving party shall have duly given notice to the notifying party hereunder:

(i)	If to the Company, to the following address:
	GrafTech International Ltd.
	Brandywine West Building, Suite 301
	1521 Concord Pike
	Wilmington, Delaware 19803
	Attn: General Counsel
	Telecopy: (302) 778-8238
	Email: karen.narwold@graftech.com
	with a copy to:
	UCAR Carbon Company Inc.
	12900 Snow Road
	Parma, Ohio 44130
	Attn: Human Resources
	Telecopy: (216) 676-2143
	Email: james.pegram @graftech.com
(ii)	If to the Participant, to his or her most recent primary residential address or business telecopy or email address as shown on the records of the Company.

6.2    Amendments and Conflicting Agreements. This Agreement may be amended by a written instrument executed by the parties which specifically states that it is amending this Agreement or by a written instrument executed by the Corporation which so states if such amendment is not adverse to the Participant or relates to administrative matters. Subject to the next sentence, if there is a conflict or inconsistency between this Agreement and the Plan, the Plan shall govern. Notwithstanding anything contained herein or in the Plan to the contrary, to the extent that any severance agreement (including any agreement related to a change in control of the Corporation, however defined) provides rights, terms or conditions that are more favorable to the Participant than those provided in this Agreement or the Plan, such more favorable rights, terms and conditions shall govern.

6.3    Governing Law and Interpretation. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed therein without regard to the conflicts of law principles thereof. Whenever the word “including” is used herein, it shall be deemed to be followed by the

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phrase “without limitation”. Unless otherwise specified herein, all determinations, consents, elections and other decisions by the Company, the Board, the Compensation Committee or the Broker may be made, withheld or delayed in its sole and absolute discretion.

6.4    Internal Revenue Code Section 409A. The parties recognize that certain provisions of this Agreement may be affected by Section 409A and agree to negotiate in good faith to amend this Agreement with respect to any changes necessary or advisable to comply with Section 409A. To the extent that the Participant incurs any penalty for violations of Section 490A, the Company shall indemnify the Participant therefor.

6.5    Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

6.6    Counterparts. This Agreement may be executed in counterparts, which together shall constitute one and the same instrument and which will be deemed effective whether received in original form or by telecopy or other electronic means.

IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties.

	PARTICIPANT	GRAFTECH INTERNATIONAL LTD.
___________________________________  Signed			By: ____________________________ Name: _________________________ Title: ___________________________

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EX-10

Exhibit 10.15.3

THIRD AMENDMENT TO THE
UCAR CARBON
COMPENSATION DEFERRAL PLAN

        The UCAR Carbon Compensation Deferral Plan (as amended and restated effective March 31, 2003) (“Plan”), is hereby amended as follows:

1. A new paragraph (i) is added to Section 6.1 of the Plan to read as follows: “(i) Notwithstanding any other provision of this Section 6.1, effective November 1, 2005, for Participants designated by the Company or Administrative Committee, such Participants’ participation under the Plan shall be terminated and their benefits under the Plan distributed no later than December 31, 2005. This paragraph (i) is intended to comply with and shall be administered in accordance with Q&A-20 of IRS Notice 2005-1 and other applicable provisions of the rules and regulations issued under Section 409A.”

2. The provisions of this Third Amendment to the Plan are effective as of November 1, 2005.

                                                              UCAR CARBON COMPANY INC.

                                                               By:/s/Karen G. Narwold                                                                                            Dated:November 3, 2005                              

EX-10

Exhibit 10.17.0

FORM OF SEVERANCE COMPENSATION FOR SENIOR MANAGEMENT (U.S. 2.0 VERSION)

DATE

NAME

LOCATION

Dear NAME:

The Board of Directors (the “Board”) of GrafTech International Ltd.. (the “Corporation”) has authorized the grant to you of this Severance Compensation Agreement (this “Agreement”). The Board recognizes that the possibility of a Change in Control of the Corporation exists, as is the case with many publicly held corporations, and that the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders.

The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from a possible Change in Control of the Corporation. The Board has also determined that it is in the best interests of the Corporation and its stockholders to ensure your continued availability to the Company in the event of a potential Change in Control of the Corporation. References herein to the “Company” mean the Corporation and its subsidiaries.

In order to induce you to remain in the employ of the Company and in consideration of your continued service to the Company, the Corporation and its subsidiary or subsidiaries signing the signature page of this Agreement jointly and severally agree that you shall receive the severance benefits set forth in this Agreement in the event your employment with the Company is terminated subsequent to a Change in Control of the Corporation under the circumstances described below.

1. Definitions.

a.         “Change in Control of the Corporation” shall be deemed to occur if any of the following circumstances shall occur:

(i)any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Act”) becomes the beneficial owner of 15% or more of the then outstanding Common Stock or 15% or more of the then outstanding voting securities of the Corporation;

(ii)any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act acquires by proxy or otherwise the right to vote on any matter or question with respect to 15% or more of the then

outstanding Common Stock or 15% or more of the combined voting power of the then outstanding voting securities of the Corporation;

(iii)Present Directors and New Directors cease for any reason to constitute a majority of the Board (and, for purposes of this clause (iii), “Present Directors” shall mean individuals who at the beginning of any consecutive twenty-four month period were members of the Board and “New Directors” shall mean individuals whose election by the Board or whose nomination for election as directors by the Corporation’s stockholders was approved by a vote of at least two-thirds of the directors then in office who were Present Directors or New Directors);

(iv)the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation; or

(v)consummation of: (x) a reorganization, restructuring, recapitalization, reincorporation, merger or consolidation of the Corporation (a “Business Combination”) unless, following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock and the voting securities of the Corporation outstanding immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the common equity securities and the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination (including, without limitation, a corporation or other entity which as a result of such Business Combination owns the Corporation or all or substantially all of the assets of the Corporation or the Company either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of outstanding Common Stock and the combined voting power of the outstanding voting securities of the Corporation, respectively, (b) no “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act (excluding (1) any corporation or other entity resulting from such Business Combination and (2) any employee benefit plan (or related trust) of the Company or any corporation or other entity resulting from such Business Combination) beneficially owns 15% or more of the common equity securities or 15% or more of the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination, except to the extent that such beneficial ownership existed prior to such Business Combination with respect to the Common Stock and the voting securities of the Corporation, and (c) at least a majority of the members of the board of directors (or similar governing body) of the corporation or other entity resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement providing for such Business Combination or at the time of the action of the Board approving such

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Business Combination, whichever is earlier; or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation or the Company, whether held directly or indirectly through one or more subsidiaries (excluding any pledge, mortgage, grant of security interest, sale-leaseback or similar transaction, but including any foreclosure sale), provided, that, for purposes of clauses (v)(x) and (v)(y) above, the divestiture of less than substantially all of the assets of the Corporation or the Company in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spin-off, sale of stock of or merger or consolidation of a subsidiary, transfer or otherwise, shall not constitute a Change in Control of the Corporation.

Notwithstanding the foregoing, (A) a Change in Control of the Corporation shall not be deemed to occur:

(I) pursuant to clause (i) or (ii) above, solely because 15% or more of the then outstanding Common Stock or the then outstanding voting securities of the Corporation is or becomes beneficially owned or is directly or indirectly held or acquired by one or more employee benefit plans (or related trusts) maintained by the Company; or    

(II) pursuant to clause (v)(y) above, (1) if the Board determines that any sale, lease, exchange or other transfer does not involve all or substantially all of the assets of the Corporation or the Company or (2) unless the Board determines otherwise, solely because of the consummation of a transaction or a series of transactions pursuant to which the Company sells, distributes to the Corporation’s stockholders, or otherwise transfers or disposes of any or all of its ownership of its natural, acid-treated and flexible graphite business, however owned (including ownership through one or more dedicated subsidiaries and holding companies therefor and successors thereto); and

(B) to the extent that a “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act is the beneficial owner of 15% or more of the Common Stock or the voting securities of the Corporation on May 9, 2000, then the references therein to 15% shall be deemed to be references to 22.5% as (but only as) to such “person” or “group.”

For purposes of this Agreement, references to “beneficial owner” and correlative phrases shall have the same definition as set forth in Rule 13d-3 under the Act (except that ownership by underwriters for purposes of a distribution or offering shall not be deemed to be “beneficial ownership”), references to the Act or rules and regulations thereunder shall mean those in effect on May 9, 2000 and references to “Common Stock” shall mean the common stock of the Corporation.

b.          “Code” shall mean the Internal Revenue Code of 1986, as amended.

c.          “Date of Termination” shall mean:

(i)in case employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period); and

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(ii)in all other cases, the date specified in the Notice of Termination (which shall not be less than thirty (30) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).

d.         “Disability” shall mean total physical or mental disability rendering you unable to perform the duties of your employment for a continuous period of six (6) months. Any question as to the existence of your Disability upon which you and the Company cannot agree shall be determined by a qualified physician (not employed by the Company) selected by you (or, if you are unable to make such selection, made by any adult member of your immediate family) and approved by the Company. The determination of such physician made in writing to the Company and to you shall be final and conclusive for all purposes of this Agreement.

e.         “Good Reason for Resignation” shall mean the occurrence of any of the following:

(i)(A) a change in your status or position with the Company, which in your reasonable judgment does not represent a status or position comparable to your status or position immediately prior a Change in Control of the Corporation or a promotion from your status or position immediately prior to a Change in Control of the Corporation; or

(B) a reduction in the level of your reporting responsibility as it existed immediately prior to a Change in Control of the Corporation; or

(C) the assignment to you of any duties or responsibilities or a diminution of duties or responsibilities, which in your reasonable judgment are inconsistent with your status or position with the Company in effect immediately prior to a Change in Control of the Corporation;

it being understood that any of the foregoing in connection with a termination of your employment for Retirement, Disability or Termination for Cause shall not constitute Good Reason for Resignation;

(ii)a reduction by the Company in the annual rate of your base salary as in effect immediately prior to the date of a Change in Control of the Corporation or as the same may be increased from time to time thereafter, or the Company’s failure to increase the annual rate of your base salary for a calendar year in an amount at least equal to the average percentage increase in base salary for all employees of the Company with Severance Compensation Agreements in the preceding calendar year (and the Company agrees that, within three (3) days after your request, the Company shall notify you of the average percentage increase in base salary for all such employees in the calendar year preceding your request);

(iii)the failure by the Company to continue in effect any compensation plan in which you participate as in effect immediately prior to a Change in Control of the Corporation, including but not limited to

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the Retirement Program, the Savings Program, any of the Incentive Compensation Plans or any substitute plans adopted prior to a Change in Control of the Corporation, unless an arrangement satisfactory to you (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein on at least as favorable a basis, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed immediately prior to a Change in Control of the Corporation;

(iv)the Company requiring you to be based outside of a thirty-five (35) mile radius from where your office is located immediately prior to a Change in Control of the Corporation, except for required travel on the Company’s business to an extent substantially consistent with your business travel obligations immediately prior to a Change in Control of the Corporation;

(v)the failure by the Company to continue to provide you with benefits at least as favorable as those enjoyed by you (and your dependents, if applicable) under any of the Company’s pre-retirement and post-retirement life insurance, medical, health and accident, and disability plans or any other plan, program or policy of the Company intended to benefit employees in which you (or your dependents) were participating immediately prior to a Change in Control of the Corporation, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you (or your dependents) of any material fringe benefit enjoyed by you (or your dependents) immediately prior to a Change in Control of the Corporation, or the failure by the Company to provide you with the number of annual paid vacation days to which you were annually entitled immediately prior to a Change in Control of the Corporation;

(vi)the failure of the Company to obtain a satisfactory agreement from any Successor (as defined in Paragraph 4a hereof) to assume and agree to perform this Agreement, as contemplated in Paragraph 4a hereof; or

(vii)the failure of the Company to pay to you an Incentive Compensation Award, deferred compensation or other compensation award earned, but not paid, prior to a Change in Control of the Corporation.

f.          “Incentive Compensation” means any compensation, variable compensation, bonus, benefit or award paid or payable in cash under an Incentive Compensation Plan.

g.         “Incentive Compensation Award” shall mean a cash payment or payments awarded to you under any Incentive Compensation Plan.

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h.         “Incentive Compensation Plan(s)” shall mean any variable compensation or incentive compensation plan maintained by the Company in which you were a participant immediately prior to a Change in Control of the Corporation, including but not limited to the UCAR International Inc. Management Incentive Plan.

i.          “Notice of Termination” shall mean a written notice as provided in Paragraph 8 hereof.

j.          “Retirement” shall mean a voluntary termination of employment in accordance with the Retirement Program, or in accordance with any other retirement arrangement which is established with your consent with respect to you.

k.         “Retirement Program” shall mean the UCAR Carbon Retirement Plan and any excess or supplemental pension plans maintained by the Company.

l.         “Savings Program” shall mean the UCAR Carbon Savings Plan.

m.        “Termination for Cause” shall mean termination of your employment upon your willfully engaging in conduct demonstrably and materially injurious to the Company, monetarily or otherwise, provided that there shall have been delivered to you a copy of a resolution, duly adopted by the unanimous affirmative vote of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth and specifying the particulars thereof in detail.

For purposes of this clause (m), no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interest of the Company. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done or omitted to be done by you in good faith and in the best interests of the Company.

n.         “Variable Compensation Year” means a calendar year of an Incentive Compensation Plan.

2.         Compensation Upon Termination or While Disabled. Following a Change in Control of the Corporation, you shall be entitled to the following benefits:

a.         Termination Other Than for Retirement, Death, Disability or Termination for Cause; Termination By Your Resignation with Good Reason for Resignation. If your employment by the Company shall be terminated subsequent to a Change in Control of the Corporation and during the term of this Agreement (a) by the Company other than for Retirement, Death, Disability or Termination for Cause or (b) by you for Good Reason for Resignation, then you shall be entitled to the benefits provided below, without regard to any contrary provision of any plan:

(i)Accrued Salary. The Company shall pay you, not later than the fifth day following the Date of Termination, your base salary and

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vacation pay accrued through the Date of Termination (including any banked vacation and any vested vacation for the calendar year in which the Date of Termination occurs) at the rate in effect at the time the Notice of Termination is given (or at the rate in effect immediately prior to a Change in Control of the Corporation, if such rate was higher).

(ii)Accrued Incentive Compensation. The Company shall pay you, not later than thirty (30) days following your Date of Termination, the amount of your accrued Incentive Compensation which shall be determined as follows:

(A) If the Date of Termination is after the end of a Variable Compensation Year, but before Incentive Compensation for said Variable Compensation Year has been paid, the Company shall pay to you under this Agreement for your service during such Variable Compensation Year the following:

The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for such Variable Compensation Year.

(B) In addition, if the Date of Termination is other than the first day of a Variable Compensation Year, the Company shall pay to you under this Agreement for your service during such Variable Compensation Year up to the Date of Termination, the following:

The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for such Variable Compensation Year (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year), multiplied by a fraction, the numerator of which is the total number of days which have elapsed in the current Variable Compensation Year to the Date of Termination and the denominator of which is three hundred sixty-five (365).

If there is more than one Incentive Compensation Plan, your accrued Incentive Compensation under each Incentive Compensation Plan shall be determined separately for each such Plan.

For the purpose this Paragraph 2a(ii), the amount of your target variable compensation payment shall be used, whether or not such Incentive Compensation was actually paid to you or was includible in your gross income for Federal income tax purposes.

(iii)Insurance Coverage. The Company shall arrange to provide you (and your dependents, if applicable) with life, disability, accident, dental and medical benefits substantially equivalent to those which you are receiving, or were entitled to receive, from the Company immediately

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prior to a Change in Control of the Corporation. Such benefits shall be provided to you for the longer of (x) thirty-six (36) months after such Date of Termination or (y) the period during which such benefits would have been provided to you, as a terminated employee, under the applicable life, disability, accident, dental and medical plans in effect immediately prior to a Change in Control of the Corporation (except that after a period of thirty six (36) months such benefits shall be provided to you on the same financial terms and conditions as provided for under the respective plans). Such benefits shall be provided to you in lieu of any continuation coverage you would be eligible for under COBRA.

If you are a participant in the Company’s Executive Life Insurance Plan, you shall have the same rights thereunder as a person who retires with a non-actuarially reduced pension (whether or not you are eligible for such a pension).

(iv)Severance Payment. The Company shall pay as a severance payment to you, not later than the fifth day following the Date of Termination, a lump sum severance payment (the “Severance Payment”) equal to two (2.00) times the sum of the amounts set forth in the following paragraphs (A) and (B), less the amount set forth in the following paragraph (C):

(A) the greater of your annual base salary which was payable to you by the Company immediately prior to the Date of Termination or your annual base salary which was payable to you by the Company immediately prior to a Change in Control of the Corporation; plus

(B) the greater of:

(I) The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for the year in which the Date of Termination occurs (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year); or

(II) The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for the year in which the Change in Control of the Corporation occurs (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year); minus

(C) the amount of any severance payment or the value of any severance benefit received or to be received by you from the Company pursuant to any plan or policy of the Company or pursuant to any other agreement between you and the Company.

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For purposes of calculations under this subparagraph (iv), the amounts of base salary and target variable compensation payments shall be the amounts calculated without regard to whether or not such amounts were paid or includible in your gross income for Federal, state, local, commonwealth or foreign income tax purposes.

(v)Reduction in Severance Payment. The Severance Payment shall be reduced only in the event specifically provided in this subparagraph (v). If the aggregate present value, as determined for purposes of Code Section 280G, of all amounts that are parachute payments for purposes of such Section exceeds the limitation set forth in Code Section 280G(b)(2)(A)(ii) by an amount not exceeding $50,000, then there shall be a reduction in the amount of your Severance Payment so that such limit is not exceeded.

(vi)Payment of Taxes.

(A)For purposes of this subparagraph (vi), the following terms shall have the following meanings:

(I)“Payment” shall mean any payment or distribution (or acceleration of benefits) by the Company to or for your benefit (whether paid or payable or distributed or distributable (or accelerated) pursuant to the terms of this Agreement or any termination or layoff plan referred to in clause (C) of subparagraph (iv) of this Section 2a (thus excluding among other things any payment under an employment agreement), but determined without regard to any additional payments required under this subparagraph (vi)). In addition, “Payment” shall also include the amount of income deemed to be received by you as a result of the acceleration of the exercisability of any of your options to purchase stock of the Corporation, the acceleration of the lapse of any restrictions on performance stock or restricted stock of the Corporation held by you or the acceleration of payment from any deferral plan.

(II)“Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, or any interest or penalties incurred by you with respect to such excise tax.

(III)“Income Tax” shall mean all taxes other than the Excise Tax (including any interest or penalties imposed with respect to such taxes), including, without limitation,

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any income and employment taxes imposed by any Federal (including (i) FICA and Medicare taxes and (ii) the tax resulting from the loss of any Federal deductions or exemptions which would have been available to you but for receipt of the Payment), state, local, commonwealth or foreign government.

(B)In the event it shall be determined that a Payment would be subject to an Excise Tax, then you shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by you of Income Tax and Excise Tax imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

(C)All determinations required to be made under this subparagraph (vi), including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to a Change in Control of the Corporation (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and to you within fifteen (15) business days after the receipt of notice from you that there has been a Payment, or such earlier time as is requested by the Company (collectively, the “Determination”). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting a Change in Control of the Corporation, you may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this subparagraph (vi), shall be paid by the Company to you within ten (10) days after the Determination. If the Accounting Firm determines that no Excise Tax is payable by you, you may request the Accounting Firm to furnish you with a written opinion that failure to report the Excise Tax on your applicable Federal income tax return would not result in the imposition of a negligence or similar penalty. The Determination by the Accounting Firm shall be binding upon the Company and you. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to subparagraph (vi)(D) below and you thereafter are required to make payment of any Excise Tax or Income Tax, the

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Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for your benefit.

(D)You shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment or the Underpayment. Such notification shall be given as soon as practicable but no later than ten (10) business days after you are informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. You shall not pay such claim prior to the expiration of the 30-day period following the date on which you give such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall:

(1)give the Company any information reasonably requested by the Company relating to such claim,

(2)take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

(3)cooperate with the Company in good faith in order effectively to contest such claim, and

(4)permit the Company to participate in any proceeding relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold you harmless, on an after-tax basis, for any Excise Tax or Income Tax imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this subparagraph (vi)(D), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct you to pay the tax claimed and sue for a refund

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or contest the claim in any permissible manner, and you agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided further, that if the Company directs you to pay such claim and sue for a refund, the Company shall advance the amount of such payment to you on an interest-free basis and shall indemnify and hold you harmless, on an after-tax basis, from any Excise Tax or Income Tax imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for your taxable year with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and you shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(E)If, after the receipt by you of an amount advanced by the Company pursuant to subparagraph (vi)(D) above, you become entitled to receive, and receive, any refund with respect to such claim, you shall (subject to the Company’s complying with the requirements of subparagraph (vi)(D)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by you of an amount advanced by the Company pursuant to subparagraph (vi)(D), a determination is made that you shall not be entitled to any refund with respect to such claims and the Company does not notify you in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid.

(vii)No Duty to Mitigate. You shall not be required to mitigate the amount of any payment provided for in this Paragraph 2 by seeking other employment, through use of tax deductions or credits, or otherwise, nor shall the amount of any payment or benefit hereunder be reduced by any compensation earned by you as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise; provided, however, should you become reemployed in a job which (a) offers medical plan benefits which are equal to or greater than the medical plan benefits provided to you under subparagraph 2(a)(iii) and (b) such medical plan benefits are offered to you at no cost, you shall no longer be eligible to receive medical plan benefits under this Agreement.

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b.         Payments While Disabled. During any period prior to the Date of Termination and during the term of this Agreement that you are unable to perform your full-time duties with the Company, whether as a result of your Disability or as a result of a physical or mental disability that is not total and therefore is not a Disability, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all other compensation and benefits that are payable or provided under the Company’s benefit plans, including its disability plans. After the Date of Termination for Disability, your benefits shall be determined in accordance with the Retirement Program, insurance and other applicable programs of the Company. The compensation and benefits, other than salary, payable or provided pursuant to this subparagraph b shall be the greater of (x) the amounts computed under the Retirement Program, disability benefit plans, insurance and other applicable programs in effect immediately prior to a Change in Control of the Corporation and (y) the amounts computed under the Retirement Program, disability benefit plans, insurance and other applicable programs in effect at the time the compensation and benefits are paid.

c.         Payments if Terminated for Cause, or Termination by You Other Than With Good Reason for Resignation. If your employment shall be terminated by the Company as a Termination for Cause or by you other than with Good Reason for Resignation, the Company shall pay you your full base salary and accrued vacation pay (including any banked vacation and any vested vacation for the calendar year in which the Date of Termination occurs) through the Date of Termination, at the rate in effect at the time Notice of Termination is given, plus any benefits or awards which have been earned or become payable but which have not yet been paid to you. You shall receive any payment due under this subparagraph c on your Date of Termination. Thereafter, the Company shall have no further obligation to you under this Agreement.

d.         After Retirement or Death. If your employment shall be terminated by your Retirement, or by reason of your death, your benefits shall be determined in accordance with the Company’s retirement and insurance programs then in effect.

3.         Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2003; provided, however, that commencing on January 1, 2004 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or you shall have given notice that it or you does not wish to extend this Agreement. Notwithstanding any such notice by the Company not to extend, if a Change in Control of the Corporation shall have occurred or been publicly reported, proposed or announced (regardless of whether done so by the Company or a third party) during the original or any extended term of this Agreement, or within three months thereafter, this Agreement shall continue in effect. In any event, the term of this Agreement shall expire on the second (2^nd) anniversary of the date of a Change in Control of the Corporation. This Agreement shall terminate if your employment is terminated by you or the Company prior to the occurrence of a Change in Control of the Corporation.

4.         Successors; Binding Agreement.

a.         Successors of the Company. The Company will require any Successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assent at least five business days prior to the time a person becomes a Successor (or where the Company does not have at least five business days advance notice that a

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person may become a Successor, within three business days after having notice that such person may become or has become a Successor) shall constitute Good Reason for Resignation by you and, if a Change in Control of the Corporation has occurred or thereafter occurs, shall entitle you immediately to the benefits provided in Paragraph 2a hereof upon delivery by you of a Notice of Termination. For purposes of this Agreement, “Successor” shall mean any person that obtains or succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company’s business directly, by merger or consolidation, or indirectly, by purchase of voting securities of the Company, by acquisition of rights to vote voting securities of the Company or otherwise, including but not limited to any person or group that acquires the beneficial ownership or voting rights described in Paragraph 1a(i) or (ii).

b.         Your Successor. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die following your Date of Termination while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate.

5.         Nature of Payments. All payments to you under this Agreement shall be considered severance payments in consideration of your past service to the Company.

6.         Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

7.         Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

8.         Notice. Any purported termination of your employment by the Company or by you following a Change in Control of the Corporation shall be communicated to the other party by a written Notice of Termination. A Notice of Termination by you shall indicate in reasonable detail the facts and circumstances claimed to provide a basis for a Good Reason for Resignation. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

9.         Fees and Expenses. The Company shall pay all legal fees and related expenses incurred by you as a result of your termination following a Change in Control of the Corporation or by you in seeking to obtain or enforce any right or benefit provided by this Agreement (including all fees and expenses, if any, incurred in contesting or disputing any such termination or incurred by you in seeking advice in connection therewith).

10.       Miscellaneous. No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing and

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signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

11.       Conflicting Employment Agreements. To the extent that you have or obtain after the date hereof a written employment agreement with the Company which contains provisions that conflict with this Agreement, this Agreement shall govern unless such employment agreement specifically refers to Section 11 of this Agreement and states that such employment agreement governs. To the extent that such employment agreement provides for rights or benefits which are duplicative of those set forth in this Agreement, you shall be entitled to only one such right or benefit (which shall be the one which, in your judgment if timely made, is most favorable to you). To the extent that such employment agreement provides for rights or benefits which are additional to those set forth in this Agreement, this Agreement shall not impair in any way your entitlement to those additional rights or benefits.

12.       Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (without regard to the choice of laws provisions thereof). The Company and you hereby agree to irrevocably submit to the jurisdiction of any State or Federal court sitting in the State of Delaware, and any appellate court thereof, in any action or proceeding arising out of or relating to this Agreement. The Company and you hereby irrevocably agree that all claims in respect of such action or proceeding shall only be heard and determined in a State or Federal court sitting in the State of Delaware.

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If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject.

Sincerely,

GRAFTECH INTERNATIONAL LTD.

By:       __________________

Title:    

UCAR CARBON COMPANY INC.

By:       __________________

Title:    

Agreed to as of the date

first above written

__________________________

NAME

16

EX-10

Exhibit 10.17.1

FORM OF SEVERANCE COMPENSATION AGREEMENT
FOR SENIOR MANAGEMENT (INTERNATIONAL 2.0 VERSION)

DATE

NAME
ADDRESS

Dear NAME:

The Board of Directors (the “Board”) of UCAR International Inc. (the “Corporation”) authorized your participation in the arrangements set forth between UCAR S.N.C. (the “Company”) and you in this Severance Compensation Agreement. The Board recognizes that the possibility of a Change in Control of the Corporation exists, as is the case with many publicly held corporations, and the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders.

The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from a possible Change in Control of the Corporation. The Board has also determined that it is in the best interests of the Company, the Corporation and the Corporation’s stockholders to ensure your continued availability to the Company in the event of a potential Change in Control of the Corporation.

In order to induce you to remain in the employ of the Company and in consideration of your continued service to the Company, the Company and the Corporation agree that you shall receive the severance benefits set forth in this Severance Compensation Agreement (“Agreement”) in the event your employment with the Company is terminated subsequent to a Change in Control of the Corporation under the circumstances described below. Notwithstanding anything contained herein to the contrary, the Corporation shall not be liable for any severance payments required to be made to you by the Corporation’s subsidiary which employs you under the statutes, rules, regulation, decrees or orders of the country in which you are employed or any other payments other than those specifically provided herein.

1. Definitions.

a.         “Change in Control of the Corporation” shall be deemed to occur if any of the following circumstances shall occur:

(i)any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Act”) becomes the beneficial owner of 15% or more of the then outstanding Common

Stock or 15% or more of the then outstanding voting securities of the Corporation;

(ii)any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act acquires by proxy or otherwise the right to vote on any matter or question with respect to 15% or more of the then outstanding Common Stock or 15% or more of the combined voting power of the then outstanding voting securities of the Corporation;

(iii)Present Directors and New Directors cease for any reason to constitute a majority of the Board (and, for purposes of this clause (iii), “Present Directors” shall mean individuals who at the beginning of any consecutive twenty-four month period were members of the Board and “New Directors” shall mean individuals whose election by the Board or whose nomination for election as directors by the Corporation’s stockholders was approved by a vote of at least two-thirds of the directors then in office who were Present Directors or New Directors);

(iv)the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation; or

(v)consummation of: (x) a reorganization, restructuring, recapitalization, reincorporation, merger or consolidation of the Corporation (a “Business Combination”) unless, following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock and the voting securities of the Corporation outstanding immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the common equity securities and the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination (including, without limitation, a corporation or other entity which as a result of such Business Combination owns the Corporation or all or substantially all of the assets of the Corporation or the Company either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of outstanding Common Stock and the combined voting power of the outstanding voting securities of the Corporation, respectively, (b) no “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act (excluding (1) any corporation or other entity resulting from such Business Combination and (2) any employee benefit plan (or related trust) of the Company or any corporation or other entity resulting from such Business Combination) beneficially owns 15% or more of the common equity securities or 15% or more of the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such

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Business Combination, except to the extent that such beneficial ownership existed prior to such Business Combination with respect to the Common Stock and the voting securities of the Corporation, and (c) at least a majority of the members of the board of directors (or similar governing body) of the corporation or other entity resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement providing for such Business Combination or at the time of the action of the Board approving such Business Combination, whichever is earlier; or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation or the Company, whether held directly or indirectly through one or more subsidiaries (excluding any pledge, mortgage, grant of security interest, sale-leaseback or similar transaction, but including any foreclosure sale), provided, that, for purposes of clauses (v)(x) and (v)(y) above, the divestiture of less than substantially all of the assets of the Corporation or the Company in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spin-off, sale of stock of or merger or consolidation of a subsidiary, transfer or otherwise, shall not constitute a Change in Control of the Corporation.

Notwithstanding the foregoing, (A) a Change in Control of the Corporation shall not be deemed to occur:

(I) pursuant to clause (i) or (ii) above, solely because 15% or more of the then outstanding Common Stock or the then outstanding voting securities of the Corporation is or becomes beneficially owned or is directly or indirectly held or acquired by one or more employee benefit plans (or related trusts) maintained by the Company; or    

(II) pursuant to clause (v)(y) above, (1) if the Board determines that any sale, lease, exchange or other transfer does not involve all or substantially all of the assets of the Corporation or the Company or (2) unless the Board determines otherwise, solely because of the consummation of a transaction or a series of transactions pursuant to which the Company sells, distributes to the Corporation’s stockholders, or otherwise transfers or disposes of any or all of its ownership of its natural, acid-treated and flexible graphite business, however owned (including ownership through one or more dedicated subsidiaries and holding companies therefor and successors thereto); and

(B) to the extent that a “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act is the beneficial owner of 15% or more of the Common Stock or the voting securities of the Corporation on May 9, 2000, then the references therein to 15% shall be deemed to be references to 22.5% as (but only as) to such “person” or “group.”

For purposes of this Agreement, references to “beneficial owner” and correlative phrases shall have the same definition as set forth in Rule 13d-3 under the Act (except that ownership by underwriters for purposes of a distribution or offering shall not be deemed to be “beneficial ownership”),

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references to the Act or rules and regulations thereunder shall mean those in effect on May 9, 2000 and references to “Common Stock” shall mean the common stock of the Corporation.

b.             “Date of Termination” shall mean:
(i)		in case employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and
(ii)	in all other cases, the date specified in the Notice of Termination (which shall not be less than thirty (30) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).

                         c.              “Disability” shall mean total physical or mental disability rendering you unable to perform the duties of your employment for a continuous period of six (6) months. Any question as to the existence of your Disability upon which you and the Company cannot agree shall be determined by a qualified physician (not employed by the Company) selected by you (or, if you are unable to make such selection, made by any adult member of your immediate family) and approved by the Company. The determination of such physician made in writing to the Company and to you shall be final and conclusive for all purposes of this Agreement.

d.             “Good Reason for Resignation” shall mean the occurrence of any of the following:

(i) (A) a change in your status or position with the Company, which in your reasonable judgment does not represent a status or position comparable to your status or position immediately prior to a Change in Control of the Corporation or a promotion from your status or position immediately prior to a Change in Control of the Corporation; or

(B) a reduction in the level of your reporting responsibility as it existed immediately prior to a Change in Control of the Corporation; or

(C) the assignment to you of any duties or responsibilities or diminution of duties or responsibilities which in your reasonable judgment are inconsistent with your status or position with the Company in effect immediately prior to a Change in Control of the Corporation;

it being understood that any of the foregoing in connection with a termination of your employment for Retirement, Disability or Termination for Cause shall not constitute Good Reason for Resignation;

(ii) a reduction by the Company in the annual rate of your base salary as in effect immediately prior to the date of a Change in Control of the Corporation or as the same may be increased from time to time thereafter, or the Company’s failure to increase the annual rate of your base salary

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for a calendar year in an amount at least equal to the average percentage increase in base salary for all employees of the Company with Severance Compensation Agreements in the preceding calendar year. (and the Company agrees that, within three (3) days after your request, the Company shall notify you of the average percentage increase in base salary for all such employees in the calendar year preceding your request);

(iii)	the failure by the Company to continue in effect any compensation plan in which you participate as in effect immediately prior to a Change in Control of the Corporation, including but not limited to any Company retirement plan, any of the Incentive Compensation Plans, or any substitute plans adopted prior to a Change in Control of the Corporation, unless an arrangement satisfactory to you (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein on at least as favorable a basis, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed immediately prior to a Change in Control of the Corporation;
(iv)	the Company requiring you to be based outside of a thirty-five (35) mile radius from where your office is located immediately prior to a Change in Control of the Corporation except for required travel on the Company’s business to an extent substantially consistent with your business travel obligations immediately prior to a Change in Control of the Corporation;
(v)	the failure by the Company to continue to provide you with benefits at least as favorable as those enjoyed by you (and your dependents, if applicable) under any of the Company’s pre-retirement and post-retirement life insurance, medical, health and accident, and disability plans or any other plan, program or policy of the Company intended to benefit employees in which you (or your dependents) were participating immediately prior to a Change in Control of the Corporation, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you (or your dependents) of any material fringe benefit enjoyed by you (or your dependents) immediately prior to a Change in Control of the Corporation, or the failure by the Company to provide you with the number of annual paid vacation days to which you were annually entitled immediately prior to a Change in Control of the Corporation;
(vi)	the failure of the Company to obtain a satisfactory agreement from any Successor (as defined in Paragraph 4a hereof) to assume and agree to perform this Agreement, as contemplated in Paragraph 4a hereof; or

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(vii) the failure of the Company to pay to you an Incentive Compensation Award, deferred compensation or other compensation award earned, but not paid, prior to a Change in Control of the Corporation.

                         e.              “Incentive Compensation” means any compensation, variable compensation, bonus, benefit or award paid or payable in cash under an Incentive Compensation Plan.

f.              “Incentive Compensation Award” shall mean a cash payment or payments awarded to you under any Incentive Compensation Plan.

g.              “Incentive Compensation Plan(s)” shall mean any variable compensation or incentive compensation plan maintained by the Company in which you were a participant immediately prior to a Change in Control of the Corporation including, but not limited to UCAR International Inc. Management Incentive Plan.

h.              “Notice of Termination” shall mean a written notice as provided in Paragraph 8 hereof.

i.               “Retirement” shall mean a voluntary termination of employment in accordance with any Company retirement plan or any retirement arrangement which is established with your consent with respect to you.

j.              “Termination for Cause” shall mean termination of your employment upon your willfully engaging in conduct demonstrably and materially injurious to the Company, monetarily or otherwise, provided that there shall have been delivered to you a copy of a resolution duly adopted by the unanimous affirmative vote of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth and specifying the particulars thereof in detail.

For purposes of this clause (j), no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interest of the Company. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done or omitted to be done by you in good faith and in the best interests of the Company.

k.             “Variable Compensation Year” means a calendar year of an Incentive Compensation Plan.

2.         Compensation Upon Termination or While Disabled. Following a Change in Control of the Corporation, you shall be entitled to the following benefits:

a.              Termination Other Than for Retirement, Death, Disability or Termination for Cause; Termination By Your Resignation with Good Reason for Resignation. If your

6

employment by the Company shall be terminated subsequent to a Change in Control of the Corporation and during the term of this Agreement (a) by the Company other than for Retirement, Death, Disability or Termination for Cause, or (b) by you for Good Reason for Resignation, then you shall be entitled to the benefits provided below, without regard to any contrary provision of any plan:

(i)

Accrued Salary. The Company shall pay you, not later than the fifth day following the Date of Termination, your base salary and vacation pay accrued through the Date of Termination (including any banked vacation and any vested vacation for the calendar year in which the Date of Termination occurs) at the rate in effect at the time the Notice of Termination is given (or at the rate in effect immediately prior to a Change in Control of the Corporation, if such rate was higher).

(ii)

Accrued Incentive Compensation. The Company shall pay you, not later than thirty (30) days following your Date of Termination, the amount of your accrued Incentive Compensation which shall be determined as follows:

(A) If the Date of Termination is after the end of a Variable Compensation Year, but before Incentive Compensation for said Variable Compensation Year has been paid, the Company shall pay to you under this Agreement for your service during such Variable Compensation Year the following:

The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for such Variable Compensation Year.

(B) In addition, if the Date of Termination is other than the first day of a Variable Compensation Year, the Company shall pay to you under this Agreement for your service during such Variable Compensation Year up to the Date of Termination, the following:

The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for such Variable Compensation Year (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year), multiplied by a fraction, the numerator of which is the total number of days which have elapsed in the current Variable Compensation Year to the Date of Termination, and the denominator of which is three hundred sixty-five (365).

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If there is more than one Incentive Compensation Plan, your accrued Incentive Compensation under each Incentive Compensation Plan shall be determined separately for each such Plan.

For the purpose this Paragraph 2a(ii), the amount of your target variable compensation payment shall be used, whether or not such Incentive Compensation was actually paid to you or was includible in your gross income for income tax purposes.

(iii) Severance Payment. The Company shall pay as a severance payment to you, not later than the fifth day following the Date of Termination, a lump sum severance payment (the “Severance Payment”) equal to two (2.00) times the sum of the amounts set forth in the following paragraphs (A) and (B):

(A) the greater of your annual base salary which was payable to you by the Company immediately prior to the Date of Termination or your annual base salary which was payable to you by the Company immediately prior to a Change in Control of the Corporation; plus

(B) the greater of:

(I) The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for the year in which the Date of Termination occurs (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year); or

(II) The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for the year in which the Change in Control of the Corporation occurs (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year).

For purposes of calculations under this subparagraph (iii), the amounts of base salary and target variable compensation payments shall be the amounts calculated without regard to whether or not such amounts were paid or includible in your gross income for income tax purposes.

(iv) Reduction in Severance Payment. The Severance Payment shall be reduced but not below zero by the amount of any other payment or the value of any benefit received or to be received by you upon your termination of employment with the Company (whether payable pursuant to the terms of this Agreement, any other plan, agreement or arrangement with the Company or an affiliate or any severance benefits required to be

8

paid by the Company pursuant to the laws of the country in which you are employed), unless you shall have effectively waived your receipt or enjoyment of such payment or benefit prior to the date of payment of the Severance Payment.

(v) No Duty to Mitigate. You shall not be required to mitigate the amount of any payment provided for in this Paragraph 2 by seeking other employment or otherwise, nor shall the amount of any payment or benefit hereunder be reduced by any compensation earned by you as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise.

                         b.             Payments While Disabled. During any period prior to the Date of Termination and during the term of this Agreement that you are unable to perform your full-time duties with the Company, whether as a result of your Disability or as a result of a physical or mental disability that is not total and therefore is not a Disability, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all other compensation and benefits that are payable or provided under the Company’s benefit plans, including its disability plans. After the Date of Termination for Disability, your benefits shall be determined in accordance with any retirement plan, insurance and other applicable programs of the Company. The compensation and benefits, other than salary, payable or provided pursuant to this subparagraph b shall be the greater of (x) the amounts computed under any retirement plan, disability benefit plans, insurance and other applicable programs in effect immediately prior to a Change in Control of the Corporation and (y) the amounts computed under any retirement plan, disability benefit plans, insurance and other applicable programs in effect at the time the compensation and benefits are paid.

c.              Payments if Terminated for Cause, or Termination by You Other Than With Good Reason for Resignation. If your employment shall be terminated by the Company as a Termination for Cause or by you other than with Good Reason for Resignation, the Company shall pay you your full base salary and accrued vacation pay (including any banked vacation and any vested vacation for the calendar year in which the Date of Termination occurs) through the Date of Termination, at the rate in effect at the time Notice of Termination is given, plus any benefits or awards which have been earned or become payable but which have not yet been paid to you. You shall receive any payment due under this subparagraph c on your Date of Termination. Thereafter, the Company shall have no further obligation to you under this Agreement.

d.             After Retirement or Death. If your employment shall be terminated by your Retirement, or by reason of your death, your benefits shall be determined in accordance with the Company’s retirement and insurance programs then in effect.

3.         Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2000; provided, however, that commencing on January 1, 2001 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or you shall have given notice that it or you does not wish to extend this Agreement. Notwithstanding any

9

such notice by the Company not to extend, if a Change in Control of the Corporation shall have occurred or been publicly reported, proposed or announced (regardless of whether done so by the Company or a third party) during the original or any extended term of this Agreement, or within three months thereafter, this Agreement shall continue in effect. In any event, the term of this Agreement shall expire on the second (2^nd) anniversary of the date of a Change in Control of the Corporation. This Agreement shall terminate if your employment is terminated by you or the Company prior to the occurrence of a Change in Control of the Corporation.

4.         Successors; Binding Agreement.
 

a.              Successors of the Company. The Company will require any Successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assent at least five business days prior to the time a person becomes a Successor (or where the Company does not have at least five business days advance notice that a person may become a Successor, within three business days after having notice that such person may become or has become a Successor) shall constitute Good Reason for Resignation by you and, if a Change in Control of the Corporation has occurred or thereafter occurs, shall entitle you immediately to the benefits provided in Paragraph 2a hereof upon delivery by you of a Notice of Termination. For purposes of this Agreement, “Successor” shall mean any person that obtains or succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company’s business directly, by merger or consolidation, or indirectly, by purchase of voting securities of the Company by acquisition of rights to vote voting securities of the Company or otherwise, including but not limited to any person or group that acquires the beneficial ownership or voting rights described in Paragraph 1a(i) or (ii).

b.             Your Successor. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die following your Date of Termination while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate.

5.         Nature of Payments. All payments to you under this Agreement shall be considered severance payments in consideration of your past service to the Company.

6.         Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

7.         Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

8.         Notice. Any purported termination of your employment by the Company or by you following a Change in Control of the Corporation shall be communicated to the other party by a

10

written Notice of Termination. A Notice of Termination by you shall indicate in reasonable detail the facts and circumstances claimed to provide a basis for a Good Reason for Resignation. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

9.         Fees and Expenses. The Company shall pay all legal fees and related expenses incurred by you as a result of your termination following a Change in Control of the Corporation or by you in seeking to obtain or enforce any right or benefit provided by this Agreement (including all fees and expenses, if any, incurred in contesting or disputing any such termination or incurred by you in seeking advice in connection therewith).

10.       Miscellaneous. No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

11.       Conflicting Employment Agreements. To the extent that you have or obtain after the date hereof a written employment agreement with the Company which contains provisions that conflict with this Agreement, this Agreement shall govern unless such employment agreement specifically refers to Section 11 of this Agreement and states that such employment agreement governs. To the extent that such employment agreement provides for rights or benefits which are duplicative of those set forth in this Agreement, you shall be entitled to only one such right or benefit (which shall be the one which, in your judgment if timely made, is most favorable to you). To the extent that such employment agreement provides for rights or benefits which are additional to those set forth in this Agreement, this Agreement shall not impair in any way your entitlement to those additional rights or benefits.

12.       Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (without regard to the choice of laws provisions thereof). The Company and you hereby agree to irrevocably submit to the jurisdiction of any State or Federal court sitting in the State of Delaware, and any appellate court thereof, in any action or proceeding arising out of or relating to this Agreement. The Company and you hereby irrevocably agree that all claims in respect of such action or proceeding shall only be heard and determined in a State or Federal court sitting in the State of Delaware.

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If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject.

Sincerely,

UCAR INTERNATIONAL COMPANY INC.

By:  ___________________

Title:     

UCAR S.N.C.

By: ___________________

Title: _______________________

Agreed to as of the date

first above written

________________________________ 

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EX-10

Exhibit 10.17.2

FORM OF SEVERANCE COMPENSATION AGREEMENT FOR SENIOR MANAGEMENT (U.S. 2.99 VERSION)

DATE

NAME
ADDRESS

LOCATION

Dear NAME:

The Board of Directors (the “Board”) of GrafTech International Ltd. (the “Corporation”) has authorized the grant to you of this Severance Compensation Agreement (this “Agreement”). The Board recognizes that the possibility of a Change in Control of the Corporation exists, as is the case with many publicly held corporations, and that the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders.

The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from a possible Change in Control of the Corporation. The Board has also determined that it is in the best interests of the Corporation and its stockholders to ensure your continued availability to the Company in the event of a potential Change in Control of the Corporation. References herein to the “Company” mean the Corporation and its subsidiaries.

In order to induce you to remain in the employ of the Company and in consideration of your continued service to the Company, the Corporation and its subsidiary or subsidiaries signing the signature page of this Agreement jointly and severally agree that you shall receive the severance benefits set forth in this Agreement in the event your employment with the Company is terminated subsequent to a Change in Control of the Corporation under the circumstances described below.

1. Definitions.

a.         “Change in Control of the Corporation” shall be deemed to occur if any of the following circumstances shall occur:

(i)any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Act”) becomes the beneficial owner of 15% or more of the then outstanding Common Stock or 15% or more of the then outstanding voting securities of the Corporation;

(ii)any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act acquires by proxy or otherwise the right to vote on any matter or question with respect to 15% or more of the then outstanding Common Stock or 15% or more of the combined voting power of the then outstanding voting securities of the Corporation;

(iii)Present Directors and New Directors cease for any reason to constitute a majority of the Board (and, for purposes of this clause (iii), “Present Directors” shall mean individuals who at the beginning of any consecutive twenty-four month period were members of the Board and “New Directors” shall mean individuals whose election by the Board or whose nomination for election as directors by the Corporation’s stockholders was approved by a vote of at least two-thirds of the directors then in office who were Present Directors or New Directors);

(iv)the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation; or

(v)consummation of: (x) a reorganization, restructuring, recapitalization, reincorporation, merger or consolidation of the Corporation (a “Business Combination”) unless, following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock and the voting securities of the Corporation outstanding immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the common equity securities and the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination (including, without limitation, a corporation or other entity which as a result of such Business Combination owns the Corporation or all or substantially all of the assets of the Corporation or the Company either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of outstanding Common Stock and the combined voting power of the outstanding voting securities of the Corporation, respectively, (b) no “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act (excluding (1) any corporation or other entity resulting from such Business Combination and (2) any employee benefit plan (or related trust) of the Company or any corporation or other entity resulting from such Business Combination) beneficially owns 15% or more of the common equity securities or 15% or more of the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination, except to the extent that such beneficial ownership existed prior to such Business Combination with respect to the Common Stock and the voting securities of the Corporation, and (c) at

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least a majority of the members of the board of directors (or similar governing body) of the corporation or other entity resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement providing for such Business Combination or at the time of the action of the Board approving such Business Combination, whichever is earlier; or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation or the Company, whether held directly or indirectly through one or more subsidiaries (excluding any pledge, mortgage, grant of security interest, sale-leaseback or similar transaction, but including any foreclosure sale), provided, that, for purposes of clauses (v)(x) and (v)(y) above, the divestiture of less than substantially all of the assets of the Corporation or the Company in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spin-off, sale of stock of or merger or consolidation of a subsidiary, transfer or otherwise, shall not constitute a Change in Control of the Corporation.

Notwithstanding the foregoing, (A) a Change in Control of the Corporation shall not be deemed to occur:

(I) pursuant to clause (i) or (ii) above, solely because 15% or more of the then outstanding Common Stock or the then outstanding voting securities of the Corporation is or becomes beneficially owned or is directly or indirectly held or acquired by one or more employee benefit plans (or related trusts) maintained by the Company; or  

(II) pursuant to clause (v)(y) above, (1) if the Board determines that any sale, lease, exchange or other transfer does not involve all or substantially all of the assets of the Corporation or the Company or (2) unless the Board determines otherwise, solely because of the consummation of a transaction or a series of transactions pursuant to which the Company sells, distributes to the Corporation’s stockholders, or otherwise transfers or disposes of any or all of its ownership of its natural, acid-treated and flexible graphite business, however owned (including ownership through one or more dedicated subsidiaries and holding companies therefor and successors thereto); and

(B) to the extent that a “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act is the beneficial owner of 15% or more of the Common Stock or the voting securities of the Corporation on May 9, 2000, then the references therein to 15% shall be deemed to be references to 22.5% as (but only as) to such “person” or “group.”

For purposes of this Agreement, references to “beneficial owner” and correlative phrases shall have the same definition as set forth in Rule 13d-3 under the Act (except that ownership by underwriters for purposes of a distribution or offering shall not be deemed to be “beneficial ownership”), references to the Act or rules and regulations thereunder shall mean those in effect on May 9, 2000 and references to “Common Stock” shall mean the common stock of the Corporation.

b.         “Code” shall mean the Internal Revenue Code of 1986, as amended.

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c.         “Date of Termination” shall mean:

(i)in case employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period); and

(ii)in all other cases, the date specified in the Notice of Termination (which shall not be less than thirty (30) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).

d.         “Disability” shall mean total physical or mental disability rendering you unable to perform the duties of your employment for a continuous period of six (6) months. Any question as to the existence of your Disability upon which you and the Company cannot agree shall be determined by a qualified physician (not employed by the Company) selected by you (or, if you are unable to make such selection, made by any adult member of your immediate family) and approved by the Company. The determination of such physician made in writing to the Company and to you shall be final and conclusive for all purposes of this Agreement.

e.         “Good Reason for Resignation” shall mean the occurrence of any of the following:

(i)(A) a change in your status or position with the Company, which in your reasonable judgment does not represent a status or position comparable to your status or position immediately prior a Change in Control of the Corporation or a promotion from your status or position immediately prior to a Change in Control of the Corporation; or

(B) a reduction in the level of your reporting responsibility as it existed immediately prior to a Change in Control of the Corporation; or

(C) the assignment to you of any duties or responsibilities or a diminution of duties or responsibilities, which in your reasonable judgment are inconsistent with your status or position with the Company in effect immediately prior to a Change in Control of the Corporation;

it being understood that any of the foregoing in connection with a termination of your employment for Retirement, Disability or Termination for Cause shall not constitute Good Reason for Resignation;

(ii)a reduction by the Company in the annual rate of your base salary as in effect immediately prior to the date of a Change in Control of the Corporation or as the same may be increased from time to time thereafter, or the Company’s failure to increase the annual rate of your base salary for a calendar year in an amount at least equal to the average percentage increase in base salary for all employees of the Company with

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Severance Compensation Agreements in the preceding calendar year (and the Company agrees that, within three (3) days after your request, the Company shall notify you of the average percentage increase in base salary for all such employees in the calendar year preceding your request);

(iii)the failure by the Company to continue in effect any compensation plan in which you participate as in effect immediately prior to a Change in Control of the Corporation, including but not limited to the Retirement Program, the Savings Program, any of the Incentive Compensation Plans or any substitute plans adopted prior to a Change in Control of the Corporation, unless an arrangement satisfactory to you (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein on at least as favorable a basis, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed immediately prior to a Change in Control of the Corporation;

(iv)the Company requiring you to be based outside of a thirty-five (35) mile radius from where your office is located immediately prior to a Change in Control of the Corporation, except for required travel on the Company’s business to an extent substantially consistent with your business travel obligations immediately prior to a Change in Control of the Corporation;

(v)the failure by the Company to continue to provide you with benefits at least as favorable as those enjoyed by you (and your dependents, if applicable) under any of the Company’s pre-retirement and post-retirement life insurance, medical, health and accident, and disability plans or any other plan, program or policy of the Company intended to benefit employees in which you (or your dependents) were participating immediately prior to a Change in Control of the Corporation, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you (or your dependents) of any material fringe benefit enjoyed by you (or your dependents) immediately prior to a Change in Control of the Corporation, or the failure by the Company to provide you with the number of annual paid vacation days to which you were annually entitled immediately prior to a Change in Control of the Corporation;

(vi)the failure of the Company to obtain a satisfactory agreement from any Successor (as defined in Paragraph 4a hereof) to assume and agree to perform this Agreement, as contemplated in Paragraph 4a hereof; or

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(vii)the failure of the Company to pay to you an Incentive Compensation Award, deferred compensation or other compensation award earned, but not paid, prior to a Change in Control of the Corporation.

f.          “Incentive Compensation” means any compensation, variable compensation, bonus, benefit or award paid or payable in cash under an Incentive Compensation Plan.

g.         “Incentive Compensation Award” shall mean a cash payment or payments awarded to you under any Incentive Compensation Plan.

h.         “Incentive Compensation Plan(s)” shall mean any variable compensation or incentive compensation plan maintained by the Company in which you were a participant immediately prior to a Change in Control of the Corporation, including but not limited to the UCAR International Inc. Management Incentive Plan.

i.          “Notice of Termination” shall mean a written notice as provided in Paragraph 8 hereof.

j.          “Retirement” shall mean a voluntary termination of employment in accordance with the Retirement Program, or in accordance with any other retirement arrangement which is established with your consent with respect to you.

k.         “Retirement Program” shall mean the UCAR Carbon Retirement Plan and any excess or supplemental pension plans maintained by the Company.

l.         “Savings Program” shall mean the UCAR Carbon Savings Plan.

m.        “Termination for Cause” shall mean termination of your employment upon your willfully engaging in conduct demonstrably and materially injurious to the Company, monetarily or otherwise, provided that there shall have been delivered to you a copy of a resolution, duly adopted by the unanimous affirmative vote of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth and specifying the particulars thereof in detail.

For purposes of this clause (m), no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interest of the Company. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done or omitted to be done by you in good faith and in the best interests of the Company.

n.         “Variable Compensation Year” means a calendar year of an Incentive Compensation Plan.

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2.         Compensation Upon Termination or While Disabled. Following a Change in Control of the Corporation, you shall be entitled to the following benefits:

a.         Termination Other Than for Retirement, Death, Disability or Termination for Cause; Termination By Your Resignation with Good Reason for Resignation. If your employment by the Company shall be terminated subsequent to a Change in Control of the Corporation and during the term of this Agreement (a) by the Company other than for Retirement, Death, Disability or Termination for Cause or (b) by you for Good Reason for Resignation, then you shall be entitled to the benefits provided below, without regard to any contrary provision of any plan:

(i)Accrued Salary. The Company shall pay you, not later than the fifth day following the Date of Termination, your base salary and vacation pay accrued through the Date of Termination (including any banked vacation and any vested vacation for the calendar year in which the Date of Termination occurs) at the rate in effect at the time the Notice of Termination is given (or at the rate in effect immediately prior to a Change in Control of the Corporation, if such rate was higher).

(ii)Accrued Incentive Compensation. The Company shall pay you, not later than thirty (30) days following your Date of Termination, the amount of your accrued Incentive Compensation which shall be determined as follows:

(A) If the Date of Termination is after the end of a Variable Compensation Year, but before Incentive Compensation for said Variable Compensation Year has been paid, the Company shall pay to you under this Agreement for your service during such Variable Compensation Year the following:

The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for such Variable Compensation Year.

(B) In addition, if the Date of Termination is other than the first day of a Variable Compensation Year, the Company shall pay to you under this Agreement for your service during such Variable Compensation Year up to the Date of Termination, the following:

The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for such Variable Compensation Year (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year), multiplied by a fraction, the numerator of which is the total number of days which have elapsed in the current

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Variable Compensation Year to the Date of Termination and the denominator of which is three hundred sixty-five (365).

If there is more than one Incentive Compensation Plan, your accrued Incentive Compensation under each Incentive Compensation Plan shall be determined separately for each such Plan.

For the purpose this Paragraph 2a(ii), the amount of your target variable compensation payment shall be used, whether or not such Incentive Compensation was actually paid to you or was includible in your gross income for Federal income tax purposes.

(iii)Insurance Coverage. The Company shall arrange to provide you (and your dependents, if applicable) with life, disability, accident, dental and medical benefits substantially equivalent to those which you are receiving, or were entitled to receive, from the Company immediately prior to a Change in Control of the Corporation. Such benefits shall be provided to you for the longer of (x) thirty-six (36) months after such Date of Termination or (y) the period during which such benefits would have been provided to you, as a terminated employee, under the applicable life, disability, accident, dental and medical plans in effect immediately prior to a Change in Control of the Corporation (except that after a period of thirty six (36) months such benefits shall be provided to you on the same financial terms and conditions as provided for under the respective plans). Such benefits shall be provided to you in lieu of any continuation coverage you would be eligible for under COBRA.

If you are a participant in the Company’s Executive Life Insurance Plan, you shall have the same rights thereunder as a person who retires with a non-actuarially reduced pension (whether or not you are eligible for such a pension).

(iv)Severance Payment. The Company shall pay as a severance payment to you, not later than the fifth day following the Date of Termination, a lump sum severance payment (the “Severance Payment”) equal to two and ninety-nine hundreths (2.99) times the sum of the amounts set forth in the following paragraphs (A) and (B), less the amount set forth in the following paragraph (C):

(A) the greater of your annual base salary which was payable to you by the Company immediately prior to the Date of Termination or your annual base salary which was payable to you by the Company immediately prior to a Change in Control of the Corporation; plus

(B) the greater of:

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(I) The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for the year in which the Date of Termination occurs (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year); or

(II) The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for the year in which the Change in Control of the Corporation occurs (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year); minus

(C) the amount of any severance payment or the value of any severance benefit received or to be received by you from the Company pursuant to any plan or policy of the Company or pursuant to any other agreement between you and the Company.

For purposes of calculations under this subparagraph (iv), the amounts of base salary and target variable compensation payments shall be the amounts calculated without regard to whether or not such amounts were paid or includible in your gross income for Federal, state, local, commonwealth or foreign income tax purposes.

(v)Reduction in Severance Payment. The Severance Payment shall be reduced only in the event specifically provided in this subparagraph (v). If the aggregate present value, as determined for purposes of Code Section 280G, of all amounts that are parachute payments for purposes of such Section exceeds the limitation set forth in Code Section 280G(b)(2)(A)(ii) by an amount not exceeding $50,000, then there shall be a reduction in the amount of your Severance Payment so that such limit is not exceeded.

(vi)Payment of Taxes.

(A)For purposes of this subparagraph (vi), the following terms shall have the following meanings:

(I)“Payment” shall mean any payment or distribution (or acceleration of benefits) by the Company to or for your benefit (whether paid or payable or distributed or distributable (or accelerated) pursuant to the terms of this Agreement or any termination or layoff plan referred to in clause (C) of subparagraph (iv) of this

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Section 2a (thus excluding among other things any payment under an employment agreement), but determined without regard to any additional payments required under this subparagraph (vi)). In addition, “Payment” shall also include the amount of income deemed to be received by you as a result of the acceleration of the exercisability of any of your options to purchase stock of the Corporation, the acceleration of the lapse of any restrictions on performance stock or restricted stock of the Corporation held by you or the acceleration of payment from any deferral plan.

(II)“Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, or any interest or penalties incurred by you with respect to such excise tax.

(III)“Income Tax” shall mean all taxes other than the Excise Tax (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes imposed by any Federal (including (i) FICA and Medicare taxes and (ii) the tax resulting from the loss of any Federal deductions or exemptions which would have been available to you but for receipt of the Payment), state, local, commonwealth or foreign government.

(B)In the event it shall be determined that a Payment would be subject to an Excise Tax, then you shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by you of Income Tax and Excise Tax imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

(C)All determinations required to be made under this subparagraph (vi), including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to a Change in Control of the Corporation (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and to you within fifteen (15) business days after the receipt of notice from you

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that there has been a Payment, or such earlier time as is requested by the Company (collectively, the “Determination”). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting a Change in Control of the Corporation, you may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this subparagraph (vi), shall be paid by the Company to you within ten (10) days after the Determination. If the Accounting Firm determines that no Excise Tax is payable by you, you may request the Accounting Firm to furnish you with a written opinion that failure to report the Excise Tax on your applicable Federal income tax return would not result in the imposition of a negligence or similar penalty. The Determination by the Accounting Firm shall be binding upon the Company and you. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to subparagraph (vi)(D) below and you thereafter are required to make payment of any Excise Tax or Income Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for your benefit.

(D)You shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment or the Underpayment. Such notification shall be given as soon as practicable but no later than ten (10) business days after you are informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. You shall not pay such claim prior to the expiration of the 30-day period following the date on which you give such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall:

(1)give the Company any information reasonably requested by the Company relating to such claim,

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(2)take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

(3)cooperate with the Company in good faith in order effectively to contest such claim, and

(4)permit the Company to participate in any proceeding relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold you harmless, on an after-tax basis, for any Excise Tax or Income Tax imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this subparagraph (vi)(D), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct you to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and you agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided further, that if the Company directs you to pay such claim and sue for a refund, the Company shall advance the amount of such payment to you on an interest-free basis and shall indemnify and hold you harmless, on an after-tax basis, from any Excise Tax or Income Tax imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for your taxable year with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and you shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

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(E)If, after the receipt by you of an amount advanced by the Company pursuant to subparagraph (vi)(D) above, you become entitled to receive, and receive, any refund with respect to such claim, you shall (subject to the Company’s complying with the requirements of subparagraph (vi)(D)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by you of an amount advanced by the Company pursuant to subparagraph (vi)(D), a determination is made that you shall not be entitled to any refund with respect to such claims and the Company does not notify you in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid.

(vii)No Duty to Mitigate. You shall not be required to mitigate the amount of any payment provided for in this Paragraph 2 by seeking other employment, through use of tax deductions or credits, or otherwise, nor shall the amount of any payment or benefit hereunder be reduced by any compensation earned by you as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise; provided, however, should you become reemployed in a job which (a) offers medical plan benefits which are equal to or greater than the medical plan benefits provided to you under subparagraph 2(a)(iii) and (b) such medical plan benefits are offered to you at no cost, you shall no longer be eligible to receive medical plan benefits under this Agreement.

b.         Payments While Disabled. During any period prior to the Date of Termination and during the term of this Agreement that you are unable to perform your full-time duties with the Company, whether as a result of your Disability or as a result of a physical or mental disability that is not total and therefore is not a Disability, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all other compensation and benefits that are payable or provided under the Company’s benefit plans, including its disability plans. After the Date of Termination for Disability, your benefits shall be determined in accordance with the Retirement Program, insurance and other applicable programs of the Company. The compensation and benefits, other than salary, payable or provided pursuant to this subparagraph b shall be the greater of (x) the amounts computed under the Retirement Program, disability benefit plans, insurance and other applicable programs in effect immediately prior to a Change in Control of the Corporation and (y) the amounts computed under the Retirement Program, disability benefit plans, insurance and other applicable programs in effect at the time the compensation and benefits are paid.

c.         Payments if Terminated for Cause, or Termination by You Other Than With Good Reason for Resignation. If your employment shall be terminated by the Company as a Termination for Cause or by you other than with Good Reason for Resignation, the Company shall

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pay you your full base salary and accrued vacation pay (including any banked vacation and any vested vacation for the calendar year in which the Date of Termination occurs) through the Date of Termination, at the rate in effect at the time Notice of Termination is given, plus any benefits or awards which have been earned or become payable but which have not yet been paid to you. You shall receive any payment due under this subparagraph c on your Date of Termination. Thereafter, the Company shall have no further obligation to you under this Agreement.

d.         After Retirement or Death. If your employment shall be terminated by your Retirement, or by reason of your death, your benefits shall be determined in accordance with the Company’s retirement and insurance programs then in effect.

3.         Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2000; provided, however, that commencing on January 1, 2001 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or you shall have given notice that it or you does not wish to extend this Agreement. Notwithstanding any such notice by the Company not to extend, if a Change in Control of the Corporation shall have occurred or been publicly reported, proposed or announced (regardless of whether done so by the Company or a third party) during the original or any extended term of this Agreement, or within three months thereafter, this Agreement shall continue in effect. In any event, the term of this Agreement shall expire on the third (3^rd) anniversary of the date of a Change in Control of the Corporation. This Agreement shall terminate if your employment is terminated by you or the Company prior to the occurrence of a Change in Control of the Corporation.

4.         Successors; Binding Agreement.

a.         Successors of the Company. The Company will require any Successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assent at least five business days prior to the time a person becomes a Successor (or where the Company does not have at least five business days advance notice that a person may become a Successor, within three business days after having notice that such person may become or has become a Successor) shall constitute Good Reason for Resignation by you and, if a Change in Control of the Corporation has occurred or thereafter occurs, shall entitle you immediately to the benefits provided in Paragraph 2a hereof upon delivery by you of a Notice of Termination. For purposes of this Agreement, “Successor” shall mean any person that obtains or succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company’s business directly, by merger or consolidation, or indirectly, by purchase of voting securities of the Company, by acquisition of rights to vote voting securities of the Company or otherwise, including but not limited to any person or group that acquires the beneficial ownership or voting rights described in Paragraph 1a(i) or (ii).

b.         Your Successor. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die following your Date of Termination while any amount would still be payable to you hereunder if you had continued to live, all such amounts,

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unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate.

5.         Nature of Payments. All payments to you under this Agreement shall be considered severance payments in consideration of your past service to the Company.

6.         Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

7.         Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

8.         Notice. Any purported termination of your employment by the Company or by you following a Change in Control of the Corporation shall be communicated to the other party by a written Notice of Termination. A Notice of Termination by you shall indicate in reasonable detail the facts and circumstances claimed to provide a basis for a Good Reason for Resignation. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

9.         Fees and Expenses. The Company shall pay all legal fees and related expenses incurred by you as a result of your termination following a Change in Control of the Corporation or by you in seeking to obtain or enforce any right or benefit provided by this Agreement (including all fees and expenses, if any, incurred in contesting or disputing any such termination or incurred by you in seeking advice in connection therewith).

10.       Miscellaneous. No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

11.       Conflicting Employment Agreements. To the extent that you have or obtain after the date hereof a written employment agreement with the Company which contains provisions that conflict with this Agreement, this Agreement shall govern unless such employment agreement specifically refers to Section 11 of this Agreement and states that such employment agreement

15

governs. To the extent that such employment agreement provides for rights or benefits which are duplicative of those set forth in this Agreement, you shall be entitled to only one such right or benefit (which shall be the one which, in your judgment if timely made, is most favorable to you). To the extent that such employment agreement provides for rights or benefits which are additional to those set forth in this Agreement, this Agreement shall not impair in any way your entitlement to those additional rights or benefits.

12.       Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (without regard to the choice of laws provisions thereof). The Company and you hereby agree to irrevocably submit to the jurisdiction of any State or Federal court sitting in the State of Delaware, and any appellate court thereof, in any action or proceeding arising out of or relating to this Agreement. The Company and you hereby irrevocably agree that all claims in respect of such action or proceeding shall only be heard and determined in a State or Federal court sitting in the State of Delaware.

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If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject.

Sincerely,

UCAR INTERNATIONAL INC.

By:  ___________________

Title:       

UCAR CARBON COMPANY INC.

By:
      ___________________

Title:       

Agreed to as of the date

first above written

________________________________ 

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EX-10

Exhibit 10.17.3

FORM OF SEVERANCE COMPENSATION AGREEMENT FOR
SENIOR MANAGEMENT (INTERNATIONAL 2.99 VERSION)

DATE

NAME

LOCATION

Dear __________________________:

The Board of Directors (the “Board”) of GrafTech International Ltd. (the “Corporation”) authorized your participation in the arrangements set forth between GrafTech (the “Company”) and you in this Severance Compensation Agreement. The Board recognizes that the possibility of a Change in Control of the Corporation exists, as is the case with many publicly held corporations, and the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders.

The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from a possible Change in Control of the Corporation. The Board has also determined that it is in the best interests of the Company, the Corporation and the Corporation’s stockholders to ensure your continued availability to the Company in the event of a potential Change in Control of the Corporation.

In order to induce you to remain in the employ of the Company and in consideration of your continued service to the Company, the Company and the Corporation agree that you shall receive the severance benefits set forth in this Severance Compensation Agreement (“Agreement”) in the event your employment with the Company is terminated subsequent to a Change in Control of the Corporation under the circumstances described below. Notwithstanding anything contained herein to the contrary, the Corporation shall not be liable for any severance payments required to be made to you by the Corporation’s subsidiary which employs you under the statutes, rules, regulation, decrees or orders of the country in which you are employed or any other payments other than those specifically provided herein.

1. Definitions.

a.         “Change in Control of the Corporation” shall be deemed to occur if any of the following circumstances shall occur:

(i)any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Act”) becomes the beneficial owner of 15% or more of the then outstanding Common Stock or 15% or more of the then outstanding voting securities of the Corporation;

(ii)any “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act acquires by proxy or otherwise the right to vote on any matter or question with respect to 15% or more of the then outstanding Common Stock or 15% or more of the combined voting power of the then outstanding voting securities of the Corporation;

(iii)Present Directors and New Directors cease for any reason to constitute a majority of the Board (and, for purposes of this clause (iii), “Present Directors” shall mean individuals who at the beginning of any consecutive twenty-four month period were members of the Board and “New Directors” shall mean individuals whose election by the Board or whose nomination for election as directors by the Corporation’s stockholders was approved by a vote of at least two-thirds of the directors then in office who were Present Directors or New Directors);

(iv)the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation; or

(v)consummation of: (x) a reorganization, restructuring, recapitalization, reincorporation, merger or consolidation of the Corporation (a “Business Combination”) unless, following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock and the voting securities of the Corporation outstanding immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the common equity securities and the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination (including, without limitation, a corporation or other entity which as a result of such Business Combination owns the Corporation or all or substantially all of the assets of the Corporation or the Company either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of outstanding Common Stock and the combined voting power of the outstanding voting securities of the Corporation, respectively, (b) no “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act (excluding (1) any corporation or other entity resulting from such Business Combination and (2) any employee benefit plan (or related trust) of the Company or any corporation or other entity resulting from such Business Combination) beneficially owns 15% or

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more of the common equity securities or 15% or more of the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination, except to the extent that such beneficial ownership existed prior to such Business Combination with respect to the Common Stock and the voting securities of the Corporation, and (c) at least a majority of the members of the board of directors (or similar governing body) of the corporation or other entity resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement providing for such Business Combination or at the time of the action of the Board approving such Business Combination, whichever is earlier; or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation or the Company, whether held directly or indirectly through one or more subsidiaries (excluding any pledge, mortgage, grant of security interest, sale-leaseback or similar transaction, but including any foreclosure sale), provided, that, for purposes of clauses (v)(x) and (v)(y) above, the divestiture of less than substantially all of the assets of the Corporation or the Company in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spin-off, sale of stock of or merger or consolidation of a subsidiary, transfer or otherwise, shall not constitute a Change in Control of the Corporation.

Notwithstanding the foregoing, (A) a Change in Control of the Corporation shall not be deemed to occur:

(I) pursuant to clause (i) or (ii) above, solely because 15% or more of the then outstanding Common Stock or the then outstanding voting securities of the Corporation is or becomes beneficially owned or is directly or indirectly held or acquired by one or more employee benefit plans (or related trusts) maintained by the Company; or    

(II) pursuant to clause (v)(y) above, (1) if the Board determines that any sale, lease, exchange or other transfer does not involve all or substantially all of the assets of the Corporation or the Company or (2) unless the Board determines otherwise, solely because of the consummation of a transaction or a series of transactions pursuant to which the Company sells, distributes to the Corporation’s stockholders, or otherwise transfers or disposes of any or all of its ownership of its natural, acid-treated and flexible graphite business, however owned (including ownership through one or more dedicated subsidiaries and holding companies therefor and successors thereto); and

(B) to the extent that a “person” or “group” within the meaning of Section 13(d) or 14(d)(2) of the Act is the beneficial owner of 15% or more of the Common Stock or the voting securities of the Corporation on May 9, 2000, then the references therein to 15% shall be deemed to be references to 22.5% as (but only as) to such “person” or “group.”

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For purposes of this Agreement, references to “beneficial owner” and correlative phrases shall have the same definition as set forth in Rule 13d-3 under the Act (except that ownership by underwriters for purposes of a distribution or offering shall not be deemed to be “beneficial ownership”), references to the Act or rules and regulations thereunder shall mean those in effect on May 9, 2000 and references to “Common Stock” shall mean the common stock of the Corporation.

b.             “Date of Termination” shall mean:
(i)		in case employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and
(ii)	in all other cases, the date specified in the Notice of Termination (which shall not be less than thirty (30) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).

                         c.              “Disability” shall mean total physical or mental disability rendering you unable to perform the duties of your employment for a continuous period of six (6) months. Any question as to the existence of your Disability upon which you and the Company cannot agree shall be determined by a qualified physician (not employed by the Company) selected by you (or, if you are unable to make such selection, made by any adult member of your immediate family) and approved by the Company. The determination of such physician made in writing to the Company and to you shall be final and conclusive for all purposes of this Agreement.

d.             “Good Reason for Resignation” shall mean the occurrence of any of the following:

(i) (A) a change in your status or position with the Company, which in your reasonable judgment does not represent a status or position comparable to your status or position immediately prior to a Change in Control of the Corporation or a promotion from your status or position immediately prior to a Change in Control of the Corporation; or

(B) a reduction in the level of your reporting responsibility as it existed immediately prior to a Change in Control of the Corporation; or

(C) the assignment to you of any duties or responsibilities or diminution of duties or responsibilities which in your reasonable judgment are inconsistent with your status or position with the Company in effect immediately prior to a Change in Control of the Corporation;

it being understood that any of the foregoing in connection with a termination of your employment for Retirement, Disability or Termination for Cause shall not constitute Good Reason for Resignation;

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(ii)	a reduction by the Company in the annual rate of your base salary as in effect immediately prior to the date of a Change in Control of the Corporation or as the same may be increased from time to time thereafter, or the Company’s failure to increase the annual rate of your base salary for a calendar year in an amount at least equal to the average percentage increase in base salary for all employees of the Company with Severance Compensation Agreements in the preceding calendar year. (and the Company agrees that, within three (3) days after your request, the Company shall notify you of the average percentage increase in base salary for all such employees in the calendar year preceding your request);
(iii)	the failure by the Company to continue in effect any compensation plan in which you participate as in effect immediately prior to a Change in Control of the Corporation, including but not limited to any Company retirement plan, any of the Incentive Compensation Plans, or any substitute plans adopted prior to a Change in Control of the Corporation, unless an arrangement satisfactory to you (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein on at least as favorable a basis, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed immediately prior to a Change in Control of the Corporation;
(iv)	the Company requiring you to be based outside of a thirty-five (35) mile radius from where your office is located immediately prior to a Change in Control of the Corporation except for required travel on the Company’s business to an extent substantially consistent with your business travel obligations immediately prior to a Change in Control of the Corporation;
(v)	the failure by the Company to continue to provide you with benefits at least as favorable as those enjoyed by you (and your dependents, if applicable) under any of the Company’s pre-retirement and post-retirement life insurance, medical, health and accident, and disability plans or any other plan, program or policy of the Company intended to benefit employees in which you (or your dependents) were participating immediately prior to a Change in Control of the Corporation, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you (or your dependents) of any material fringe benefit enjoyed by you (or your dependents) immediately prior to a Change in Control of the Corporation, or the failure by the Company to provide you with the number of annual paid vacation days to which you were annually entitled immediately prior to a Change in Control of the Corporation;

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(vi)	the failure of the Company to obtain a satisfactory agreement from any Successor (as defined in Paragraph 4a hereof) to assume and agree to perform this Agreement, as contemplated in Paragraph 4a hereof; or
(vii)	the failure of the Company to pay to you an Incentive Compensation Award, deferred compensation or other compensation award earned, but not paid, prior to a Change in Control of the Corporation.

                         e.              “Incentive Compensation” means any compensation, variable compensation, bonus, benefit or award paid or payable in cash under an Incentive Compensation Plan.

f.              “Incentive Compensation Award” shall mean a cash payment or payments awarded to you under any Incentive Compensation Plan.

g.              “Incentive Compensation Plan(s)” shall mean any variable compensation or incentive compensation plan maintained by the Company in which you were a participant immediately prior to a Change in Control of the Corporation including, but not limited to UCAR International Inc. Management Incentive Plan.

h.              “Notice of Termination” shall mean a written notice as provided in Paragraph 8 hereof.

i.               “Retirement” shall mean a voluntary termination of employment in accordance with any Company retirement plan or any retirement arrangement which is established with your consent with respect to you.

j.              “Termination for Cause” shall mean termination of your employment upon your willfully engaging in conduct demonstrably and materially injurious to the Company, monetarily or otherwise, provided that there shall have been delivered to you a copy of a resolution duly adopted by the unanimous affirmative vote of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth and specifying the particulars thereof in detail.

For purposes of this clause (j), no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interest of the Company. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done or omitted to be done by you in good faith and in the best interests of the Company.

k.             “Variable Compensation Year” means a calendar year of an Incentive Compensation Plan.

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2.         Compensation Upon Termination or While Disabled. Following a Change in Control of the Corporation, you shall be entitled to the following benefits:

a.              Termination Other Than for Retirement, Death, Disability or Termination for Cause; Termination By Your Resignation with Good Reason for Resignation. If your employment by the Company shall be terminated subsequent to a Change in Control of the Corporation and during the term of this Agreement (a) by the Company other than for Retirement, Death, Disability or Termination for Cause, or (b) by you for Good Reason for Resignation, then you shall be entitled to the benefits provided below, without regard to any contrary provision of any plan:

(i)

Accrued Salary. The Company shall pay you, not later than the fifth day following the Date of Termination, your base salary and vacation pay accrued through the Date of Termination (including any banked vacation and any vested vacation for the calendar year in which the Date of Termination occurs) at the rate in effect at the time the Notice of Termination is given (or at the rate in effect immediately prior to a Change in Control of the Corporation, if such rate was higher).

(ii)

Accrued Incentive Compensation. The Company shall pay you, not later than thirty (30) days following your Date of Termination, the amount of your accrued Incentive Compensation which shall be determined as follows:

(A) If the Date of Termination is after the end of a Variable Compensation Year, but before Incentive Compensation for said Variable Compensation Year has been paid, the Company shall pay to you under this Agreement for your service during such Variable Compensation Year the following:

The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for such Variable Compensation Year.

(B) In addition, if the Date of Termination is other than the first day of a Variable Compensation Year, the Company shall pay to you under this Agreement for your service during such Variable Compensation Year up to the Date of Termination, the following:

The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for such Variable Compensation Year (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year), multiplied by a fraction, the numerator of which is the total number of days which have elapsed in the current Variable Compensation Year to the Date of

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Termination, and the denominator of which is three hundred sixty-five (365).

If there is more than one Incentive Compensation Plan, your accrued Incentive Compensation under each Incentive Compensation Plan shall be determined separately for each such Plan.

For the purpose this Paragraph 2a(ii), the amount of your target variable compensation payment shall be used, whether or not such Incentive Compensation was actually paid to you or was includible in your gross income for income tax purposes.

(iii) Severance Payment. The Company shall pay as a severance payment to you, not later than the fifth day following the Date of Termination, a lump sum severance payment (the “Severance Payment”) equal to two and ninety-nine hundreths (2.99) times the sum of the amounts set forth in the following paragraphs (A) and (B):

(A) the greater of your annual base salary which was payable to you by the Company immediately prior to the Date of Termination or your annual base salary which was payable to you by the Company immediately prior to a Change in Control of the Corporation; plus

(B) the greater of:

(I) The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for the year in which the Date of Termination occurs (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year); or

(II) The amount of your target variable compensation payment (i.e., the percent of your salary grade midpoint at risk) for the year in which the Change in Control of the Corporation occurs (or if such target has not then been established, your target variable compensation award for the immediately preceding Variable Compensation Year).

For purposes of calculations under this subparagraph (iii), the amounts of base salary and target variable compensation payments shall be the amounts calculated without regard to whether or not such amounts were paid or includible in your gross income for income tax purposes.

(iv) Reduction in Severance Payment. The Severance Payment shall be reduced but not below zero by the amount of any other payment or the value of any benefit received or to be received by you upon your termination of employment with the Company (whether payable pursuant

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to the terms of this Agreement, any other plan, agreement or arrangement with the Company or an affiliate or any severance benefits required to be paid by the Company pursuant to the laws of the country in which you are employed), unless you shall have effectively waived your receipt or enjoyment of such payment or benefit prior to the date of payment of the Severance Payment.

(v) No Duty to Mitigate. You shall not be required to mitigate the amount of any payment provided for in this Paragraph 2 by seeking other employment or otherwise, nor shall the amount of any payment or benefit hereunder be reduced by any compensation earned by you as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise.

                         b.             Payments While Disabled. During any period prior to the Date of Termination and during the term of this Agreement that you are unable to perform your full-time duties with the Company, whether as a result of your Disability or as a result of a physical or mental disability that is not total and therefore is not a Disability, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all other compensation and benefits that are payable or provided under the Company’s benefit plans, including its disability plans. After the Date of Termination for Disability, your benefits shall be determined in accordance with any retirement plan, insurance and other applicable programs of the Company. The compensation and benefits, other than salary, payable or provided pursuant to this subparagraph b shall be the greater of (x) the amounts computed under any retirement plan, disability benefit plans, insurance and other applicable programs in effect immediately prior to a Change in Control of the Corporation and (y) the amounts computed under any retirement plan, disability benefit plans, insurance and other applicable programs in effect at the time the compensation and benefits are paid.

c.              Payments if Terminated for Cause, or Termination by You Other Than With Good Reason for Resignation. If your employment shall be terminated by the Company as a Termination for Cause or by you other than with Good Reason for Resignation, the Company shall pay you your full base salary and accrued vacation pay (including any banked vacation and any vested vacation for the calendar year in which the Date of Termination occurs) through the Date of Termination, at the rate in effect at the time Notice of Termination is given, plus any benefits or awards which have been earned or become payable but which have not yet been paid to you. You shall receive any payment due under this subparagraph c on your Date of Termination. Thereafter, the Company shall have no further obligation to you under this Agreement.

d.             After Retirement or Death. If your employment shall be terminated by your Retirement, or by reason of your death, your benefits shall be determined in accordance with the Company’s retirement and insurance programs then in effect.

3.         Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2000; provided, however, that commencing on January 1, 2001 and each January 1 thereafter, the term of this Agreement shall automatically be extended for

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one additional year unless, not later than September 30 of the preceding year, the Company or you shall have given notice that it or you does not wish to extend this Agreement. Notwithstanding any such notice by the Company not to extend, if a Change in Control of the Corporation shall have occurred or been publicly reported, proposed or announced (regardless of whether done so by the Company or a third party) during the original or any extended term of this Agreement, or within three months thereafter, this Agreement shall continue in effect. In any event, the term of this Agreement shall expire on the third (3^rd) anniversary of the date of a Change in Control of the Corporation. This Agreement shall terminate if your employment is terminated by you or the Company prior to the occurrence of a Change in Control of the Corporation.

4.        Successors; Binding Agreement.

a.              Successors of the Company. The Company will require any Successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assent at least five business days prior to the time a person becomes a Successor (or where the Company does not have at least five business days advance notice that a person may become a Successor, within three business days after having notice that such person may become or has become a Successor) shall constitute Good Reason for Resignation by you and, if a Change in Control of the Corporation has occurred or thereafter occurs, shall entitle you immediately to the benefits provided in Paragraph 2a hereof upon delivery by you of a Notice of Termination. For purposes of this Agreement, “Successor” shall mean any person that obtains or succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company’s business directly, by merger or consolidation, or indirectly, by purchase of voting securities of the Company by acquisition of rights to vote voting securities of the Company or otherwise, including but not limited to any person or group that acquires the beneficial ownership or voting rights described in Paragraph 1a(i) or (ii).

b.             Your Successor. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die following your Date of Termination while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate.

5.         Nature of Payments. All payments to you under this Agreement shall be considered severance payments in consideration of your past service to the Company.

6.         Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

7.         Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

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8.         Notice. Any purported termination of your employment by the Company or by you following a Change in Control of the Corporation shall be communicated to the other party by a written Notice of Termination. A Notice of Termination by you shall indicate in reasonable detail the facts and circumstances claimed to provide a basis for a Good Reason for Resignation. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

9.         Fees and Expenses. The Company shall pay all legal fees and related expenses incurred by you as a result of your termination following a Change in Control of the Corporation or by you in seeking to obtain or enforce any right or benefit provided by this Agreement (including all fees and expenses, if any, incurred in contesting or disputing any such termination or incurred by you in seeking advice in connection therewith).

10.       Miscellaneous. No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

11.       Conflicting Employment Agreements. To the extent that you have or obtain after the date hereof a written employment agreement with the Company which contains provisions that conflict with this Agreement, this Agreement shall govern unless such employment agreement specifically refers to Section 11 of this Agreement and states that such employment agreement governs. To the extent that such employment agreement provides for rights or benefits which are duplicative of those set forth in this Agreement, you shall be entitled to only one such right or benefit (which shall be the one which, in your judgment if timely made, is most favorable to you). To the extent that such employment agreement provides for rights or benefits which are additional to those set forth in this Agreement, this Agreement shall not impair in any way your entitlement to those additional rights or benefits.

12.       Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware (without regard to the choice of laws provisions thereof). The Company and you hereby agree to irrevocably submit to the jurisdiction of any State or Federal court sitting in the State of Delaware, and any appellate court thereof, in any action or proceeding arising out of or relating to this Agreement. The Company and you hereby irrevocably agree that all claims in respect of such action or proceeding shall only be heard and determined in a State or Federal court sitting in the State of Delaware.

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If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject.

Sincerely,

UCAR INTERNATIONAL INC.

By: __________________________

Title: _________________________

COMPANY NAME

By: __________________________

Title: _________________________

Agreed to as of the date

first above written

________________________________

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EX-10

Exhibit 10.24.1

MEMORANDUM OF AGREEMENT

BETWEEN:

GrafTech International Ltd., a duly constituted corporation having its offices at 1521 Concord Pike, Suite 301, Brandywine West, Wilmington, Delaware 19803, herein acting by its duly authorized representative, as he or she so declares (together with its subsidiaries and affiliates, hereinafter referred to as “GTI”)

AND

CGI-AMS (formerly know as CGI Information Systems and Management Consultants, Inc.,) a duly constituted corporation having its offices at 600 Federal Street, Andover, Massachusetts 01810, herein acting by its duly authorized representative, as he or she so declares (together with its subsidiaries and affiliates, hereinafter referred to as “CGI”),

WHEREAS, the parties entered into that certain Business Process Services Agreement executed on August 26, 2002 (the “Agreement”) which provides for the management and operation of certain of GTI’s finance and accounting (“F&A”) functions by CGI;

WHEREAS, the parties have decided to terminate the Agreement before the Term as defined in the Agreement;

WHEREAS, the parties have agreed to enter into this Memorandum of Agreement (“MOA”) to set forth the terms and conditions of the termination herein provided.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Preamble. The preamble forms an integral part of this MOA; all capitalized terms herein refer to defined terms in the Agreement, unless otherwise stated herein.

2. Termination of the Agreement. Notwithstanding the date and the termination conditions set forth in the Agreement, the parties hereby mutually agree to terminate the Agreement upon the terms and conditions of this MOA. As a result of this MOA, the Services to be rendered by CGI will come to an end as of the date agreed upon in this MOA. The parties agree that the terms of this MOA will replace and cancel for all intents and purposes the provisions in the Agreement concerning termination. Without limiting the generality of the foregoing, this MOA has the effect of canceling Section 13 (Termination) of the Agreement, except for paragraph 13.4 which shall remain in effect, including for greater certainty the Transition assistance described in the Agreement.

3. Date. The parties agree that the date of termination of the Agreement is the last day of February 2006 at 11.59PM (the “Termination Date”) at which time CGI will thereafter completely stop rendering to GTI any Services as defined in the Agreement. GTI acknowledges that from the Termination Date and thereafter, any of the services rendered by CGI under the Agreement will be and become the sole and entire responsibility of GTI.

The parties agree to effect the transition from CGI to GTI for France SSC and Mexico SSC no later than December 31^st, 2005.

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4. Services up to Termination Date. CGI agrees to fulfill its obligations to GTI and to render the Services up to and including the Termination Date in accordance with the terms and conditions of the Agreement as modified by this MOA. GTI agrees to comply with all of its obligations up to and including the Termination Date under the Agreement as modified by this MOA.

5. Service Fees payable up to Termination Date. During the period from the date hereof to the Termination Date, GTI agrees to pay to CGI, for the Services to be rendered during such period, fees more fully detailed in Schedule A of this MOA.

6. Contribution to termination costs-by CGI. As a contribution to the costs incurred by the parties by the termination of the Agreement, CGI agrees to be responsible, to the complete exoneration of GTI, for all and any obligations and liabilities relating to the relocation and/or dismissal of CGI employees currently rendering Services under the Agreement from the CGI Montreal (Canada) location. Without limiting the generality of the foregoing, CGI shall assume any liability towards those Montreal employees and pay all and any amounts legally or otherwise payable resulting therefrom, be it to retain them as CGI employees after the Termination Date or terminate their employment with CGI.

7. Contribution to termination costs-by GTI. As a contribution to the costs incurred by the parties by the termination of the Agreement, GTI shall pay cash to CGI on or before January 31st 2006 the sum of one hundred thousand US dollars ($100,000.US) and an additional sum of one hundred thousand US dollars ($100,000.US) on or before February 28th 2006. As a further contribution, GTI agrees to be responsible, to the complete exoneration of CGI, for all and any obligations and liabilities relating to the transfer to GTI or dismissal of CGI employees currently rendering Services under the Agreement from the CGI BPS-F&A Shared Service Centre in France and Mexico, including those individuals located in Mexico that are not employees of CGI but who are performing Services for and on behalf of CGI. Without limiting the generality of the foregoing, GTI shall assume all and any liability towards those employees and pay all and any amounts legally or otherwise payable resulting therefrom, be it to hire them as GTI employees or terminate their employment with CGI or, in the case of Mexico, their current employer. In the case of the employees in Mexico, the recognition, for any calculation of legal benefits, shall include the seniority rights of each such Mexican employee for the period of time such employee was an employee of its current employer and/or of CGI. Schedule B attached hereto contains the list of employees and their respective recognized hiring date.

8. Publicity. Neither party nor any of its affiliates, subsidiaries, employees, officers, directors or agents will make any public statement with regard to this MOA, including the fact of its existence, the subject matter hereof or the termination of the Agreement contemplated hereby, without the prior written consent and agreement of the other party; provided, however, that each party shall fully cooperate and shall not delay in providing its reasonable consent in the event that the other party must make a public announcement or disclosure in order to comply with the disclosure requirements of U.S. securities laws or any other law. Furthermore, the parties agree to withhold disclosing the terms of the MOA to its respective employees or contractors until after November 29, 2005.

9. Full release. In consideration of the payment of $200,000 by GTI to CGI pursuant to paragraph 7 above, the other obligations of GTI set forth in paragraph 7 above, as well as the other mutual covenants contained in the MOA, CGI hereby irrevocably and unconditionally releases, acquits and forever discharges GTI, its direct and indirect shareholders and each of GTI’s subsidiaries, affiliates and such shareholders’directors, officers, employees, representatives and attorneys, and all persons acting by, through, under or in concert with any of them (collectively, the “GTI Releasees”), from any and all charges, complaints, claims, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs actually incurred), of any nature whatsoever, known or unknown, which CGI now has, owns, holds, or claims to have, own or hold, from the beginning of time until the date hereof, arising out of or in any manner relating to the Agreement against each of the GTI Releasees. Notwithstanding anything herein to the contrary, CGI does not waive or release any claims with respect to the right to enforce this MOA nor

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with respect to the monthly base fees for November 2005.

In consideration of the obligations of CGI set forth in the paragraph 6 above, as well as the other mutual covenants contained in the MOA, GTI hereby irrevocably and unconditionally releases, acquits and forever discharges CGI, its direct and indirect shareholders and each of CGI’s subsidiaries, affiliates and such shareholders’ directors, officers, employees, representatives and attorneys, and all persons acting by, through, under or in concert with any of them (collectively, the “CGI Releasees”), from any and all charges, complaints, claims, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs actually incurred), of any nature whatsoever, known or unknown, which GTI now has, owns, holds, or claims to have, own or hold, from the beginning of time until the date hereof, arising out of or in any manner relating to the Agreement against each of the CGI Releasees. Notwithstanding anything herein to the contrary, GTI does not waive or release any claims with respect to the right to enforce this MOA.

10. Expenses. Each party will be responsible for its own legal, accounting and other expenses incurred in connection with the negotiation, execution and implementation of this MOA.

11. Binding. The parties agree that this MOA has received all necessary corporate authorizations and approvals and is therefore binding on each party from the date signed by both parties.

12. Entire Agreement; Headings; Counterparts. This MOA contains the entire agreement between the parties with respect to the subject matter of this MOA and supersedes all prior agreements, whether written or oral, between the parties with respect to the subject matter of this MOA. The parties acknowledge that the terms of the Agreement shall remain in full force and effect until the Termination Date, except to the extent amended by the terms of the MOA. The headings in this MOA are inserted for convenience of reference only and will not be used to interpret or construe any provision of this MOA. This MOA may be executed in counterparts, each of which will be deemed an original and all of which will constitute one and the same instrument.

13. Governing Law. This MOA will be governed by and construed in accordance with the laws of the State of New York.

If this MOA is acceptable to you, please so indicate by signing the enclosed copy of this MOA in the appropriate space set forth below and returning it to the undersigned.

GrafTech International Ltd.

By:          /s/ Corrado De Gasperis                            

Name:    Corrado De Gasperis

Title:      Vice President, CFO & CIO

Date:      November 14^th 2005 CGI-AMS Inc

By:          /s/ Michael Denham                            

Name:    Michael Denham

Title:      President BPS

Date:      November 14^th, 2005

3

Schedule A

Monthly Fees and Invoicing

The monthly base fee will be $314,416.67.

This fee could be reduced by the amounts listed in the following table:

Transitioned Activities	Amount of Credit
Monterrey SSC	$80,000
France SSC (Swissco)	$40,333
Montreal SSC
Mexico	$10,333
Spain	$10,917
France Sites	$51,667
Columbia, Lawrenceburg and AET	$24,250
Clarksburg and Canada	$12,833
US_ Other Locations & performance reporting	$31,167
Treasury Warf Activities	$  3,500
Other direct costs	$49,416

Once a complete transition has occurred, the fee reduction for any particular item described above will be applied to the following monthly invoice of that item.

The criteria to obtain the fee reduction credit are the following:

1. The settlement amount of $200,000 has been received by CGI (Note: This does not apply to the fee reduction credit associated with the Monterrey SSC, the France SSC (Swissco), or Mexico or Spain (Montreal SSC).

2. Support from CGI is no longer required for the transitioned activities

3. The activities and responsibilities have been fully transitioned to GTI

CGI will cease invoicing GTI for a monthly base fee including for ‘‘other direct costs”, when all activities have been completely transitioned to GTI and with proper sign-off by Corrado DeGasperis for GTI and Pierre Brochu for CGI.

CGI will terminate supporting and performing BPS F&A activities for GrafTech by February 28^th, 2006.

4

Schedule B

#	CGI SSC Monterrey Employee	CGI Start-    up Date
1	Bautista Soto Karina	01/10/05
2	Diaz Rodriguez Osvaldo	07/07/05
3	Emiliano Velazquez Pedro	10/01/04
4	Garza Garza Luis Lauro	07/14/03
5	Hernandez Macias Beatriz	02/10/03
6	Jaime Nieto Juan Manuel	10/26/05
7	Juarez Mireles Alejandro	12/17/04
8	Laguna Castellanos Cesar	06/09/03
9	Looez Romero Esoeranza del Carmen	10/25/04
10	Lopez Romero Nelson	01/13/05
11	Michel Lopez Adriana	10/26/05
12	Muro Rojas Maria Angelica	07/01/04
13	Ovalle Peiia Maria Crsitina	10/15/04
14	Quintero Diaz Karla Ivoone	07/01/04
15	Rodriguez Castillo Evangelina	05/26/05
16	Rodriguez Gutierrez Gerard	01/03/05
17	Ruiz Almonte Rocio del Carmen	10/11/04
18	Sanchez Mendoza Cynthia Judith	02/10/03
19	Suarez Tapia Santos Federico	12/08/04
20	Trevitio Martinez Blanca Lili	03/17/03
21	Vazquez Martinez Briseida	08/04/03
22	Vidales Mendoza Blanca Rosa	04/08/03

#	CGI SSC France Employee	CGI Start-    up Date
664	LEBLANC Vincent	03/06/95
665	PACINI Fabienne	06/24/02
666	MARTIN Stephanie	08/27/02
695	ZENDRI Beatrice	12/01/03
715	DAVID Karen	01/03/05
720	FOURNIER Stephanie	03/07/05

5

EX-10

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL
TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH
RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

Exhibit 10.27.2

[Humber Agreement - Amendment]

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A
REQUEST FOR CONFIDENTIAL TREATMENT

OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION

AMENDMENT NO. 3

THIS AMENDMENT is made effective as of January 1, 2006 (“ The Effective Date”) by and among (1) CONOCOPHILLIPS (U.K.) LIMITED (“Seller”), formerly known as Conoco (U.K.) Limited, of Park House, 116 Park Street, London W1K 6NN and (2) UCAR S.A. (“Buyer”) of 17 Route de Pallatex CH-1163, Etoy Switzerland (each a “Party” and together “the Parties”) and amends an Agreement (the “Agreement”) among the Parties entered as of January 1, 2001, as amended by Amendment No. 1 dated as of January 1, 2004 and Amendment No. 2 dated as of January 1, 2005 in the following particulars:

1. Section 5.3.1 A of the Agreement is amended to read as follows:

“A. For the year * the prices to be used for invoicing and payment for Coke supplied under this Agreement will be fixed at the following:

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“For the year * the prices to be used for invoicing and payment for Coke supplied under this Agreement will be fixed at the following:

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“For the year * the prices to be used for invoicing and payment for Coke supplied under this Agreement will be fixed at the following:

“Grade * - $ * per metric ton

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL
TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH
RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“For the year * the prices to be used for invoicing and payment for Coke supplied under this Agreement will be fixed at the following:

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

2. Section 5.3.1B of the Agreement is amended to read as follows:

“B. For the quarters beginning * and ending *, and from and after the quarter beginning on *, the prices to be used for invoicing for Coke supplied during each quarter will be adjusted on a quarterly basis as described in Sections 5.3.3 and 5.3.4 hereof”

3. Section 5.4 of the Agreement is amended to read as follows:

5.4 Additional Procedures. The * shall accumulate on a net basis from quarter to quarter (except during *, * and *, when no * shall be made or accrue) and, for ease of administration, the * applicable under this Agreement shall be aggregated with the * applicable under the concurrent Agreement of even date herewith made between ConocoPhillips Company as seller and UCARINC as buyer for the sale and purchase of Coke produced at ConocoPhillips Company’s Lake Charles Refinery (“the Lake Charles Agreement”) and shall be administered for the purposes of this present Agreement as if the aggregated * accumulated under the Lake Charles Agreement. Whenever the net accumulated amount of the aggregated * exceeds $ * then, within * business days after such excess is determined, an amount equal to the excess over $ * shall be paid by the advantaged entity (meaning here ConocoPhillips or UCARINC as the case may require) to the other and receipt of such payment by the entity receiving the same shall be a good and sufficient discharge of the liability of Seller or Buyer (as the case may be) for payment of so much of the amount so paid as may have become due and payable pursuant to this present Agreement alone.

4. Section 12. A of the Agreement is amended by adding the following paragraph D:

2

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL
TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH
RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

“D.in the event that on or before *, the parties have not agreed upon a pricing structure and revised pricing structure to become effective *.”

5. Section 12.2 of the Agreement is amended by added the following section 12.2.4:

“12.2.4 In the case of notices given pursuant to section 12.1.D, 30 days after such notice is given or at such later date as may be specified in that notice by the Party given it, but no earlier than *.”

6. The introductory clause of Section 12.3 of the Agreement is amended to read as follows:

“12.3 In the event of termination pursuant to Section 12.1.A, 12.l.B, or 12.1.D (but not Section 12.1.C), Seller and Buyer shall enter into a replacement agreement providing for the supply and purchase of Coke on terms corresponding with the terms and provisions of this present Agreement mutatis mutandis save that.”

Except as provided above, the Agreement remains in full force and effect according to its terms.

CONOCOPHILLIPS (U.K.) LIMITED


By:        /s/ Phil Higgins                             

Date:              4/11/05                                  UCAR S.A.


By:        /s/ Maans Pretorius             

Date:     Nov. 07, 2005                       

/s/ Matthew G. Spier
Nov. 07, 2005

3

EX-10

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL
TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH
RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

Exhibit 10.28.2

[Lake Charles Agreement - Amendment]

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A
REQUEST FOR CONFIDENTIAL TREATMENT

OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION

AMENDMENT NO. 3

THIS AMENDMENT is made effective as of January 1, 2006 (“ The Effective Date”) by and among (1) CONOCOPHILLIPS COMPANY (“Seller”), successor by merger to Conoco Inc, of 600 North Dairy Ashford Road, Houston, Texas 77079; and (2) UCAR CARBON COMPANY INC. (“UCARINC”), AND UCAR S.A. (together with UCARINC, “Buyer”) of 17 Route de Pallatex CH-1163, Etoy Switzerland (each a “Party” and together “the Parties”) and amends an Agreement (the “Agreement”) among the Parties entered as of January 1, 2001, as amended by Amendment No. 1 dated as of January 1, 2004 and Amendment No. 2 dated as of January 1, 2005 in the following particulars:

1. Section 5.3.1 A of the Agreement is amended to read as follows:

“A. For the year * the prices to be used for invoicing and payment for Coke supplied under this Agreement will be fixed at the following:

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“For the year * the prices to be used for invoicing and payment for Coke supplied under this Agreement will be fixed at the following:

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“For the year * the prices to be used for invoicing and payment for Coke supplied under this Agreement will be fixed at the following:

“Grade * - $ * per metric ton

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL
TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH
RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“For the year * the prices to be used for invoicing and payment for Coke supplied under this Agreement will be fixed at the following:

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

“Grade * - $ * per metric ton

2. Section 5.3.1B of the Agreement is amended to read as follows:

“B. For the quarters beginning * and ending *, and from and after the quarter beginning on *, the prices to be used for invoicing for Coke supplied during each quarter will be adjusted on a quarterly basis as described in Sections 5.3.3 and 5.3.4 hereof”

3. Section 5.4 of the Agreement is amended to read as follows:

5.4 Additional Procedures. The * shall accumulate on a net basis from quarter to quarter (except during *, * and *, when no * shall be made or accrue) and, for ease of administration, the * applicable under this Agreement shall be aggregated with * applicable under the concurrent Agreement of even date herewith made between ConocoPhillips (UK) Limited as seller and UCAR S.A. as buyer for the sale and purchase of Coke produced at ConocoPhillips (UK) Limited’s Humber refinery (“the Humber Agreement”) and shall be administered for the purposes of this present Agreement as if the aggregated * accumulated under the Humber Agreement. Whenever the net accumulated amount of the aggregated * exceeds $ * then, within * business days after such excess is determined, an amount equal to the excess over $ * shall be paid by the advantaged entity (meaning here ConocoPhillips or UCARINC as the case may require) to the other and receipt of such payment by the entity receiving the same shall be a good and sufficient discharge of the liability of Seller or Buyer (as the case may be) for payment of so much of the amount so paid as may have become due and payable pursuant to this present Agreement alone.

4. Section 12. A of the Agreement is amended by adding the following paragraph D:

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL
TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH
RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

“D.in the event that on or before *, the parties have not agreed upon a pricing structure and revised pricing structure to become effective *.”

5. Section 12.2 of the Agreement is amended by added the following section 12.2.4:

“12.2.4 In the case of notices given pursuant to section 12.1.D, 30 days after such notice is given or at such later date as may be specified in that notice by the Party given it, but no earlier than *.”

6. The introductory clause of Section 12.3 of the Agreement is amended to read as follows:

“12.3 In the event of termination pursuant to Section 12.1.A, 12.l.B, or 12.1.D (but not Section 12.1.C), Seller and Buyer shall enter into a replacement agreement providing for the supply and purchase of Coke on terms corresponding with the terms and provisions of this present Agreement mutatis mutandis save that.”

Except as provided above, the Agreement remains in full force and effect according to its terms.

CONOCOPHILLIPS COMPANY


By:        /s/Michael S. Johns 11/3/05       UCAR CARBON COMPANY INC.


By:        /s/ Maans Pretorius                            

UCAR S.A.


/s/ Matthew G. Spier                                         
Nov. 07, 2005

EX-10

Exhibit 10.29.0

FORM OF STANDARD TERMS AND CONDITIONS OF SALE TO GRAPHITE ELECTRODE CONTRACT OF SALE

Seller hereby offers to sell such products and/or services to Buyer and Buyer may accept this offer only upon the terms and conditions set forth herein.

1.	Prices are subject to Seller’s standard prices in effect on the date of shipment of the products described herein, the date of performance of services described herein or, in either case, in any purchase order referred to herein.
2.	In addition to the purchase price, Buyer shall pay Seller the amount of all taxes, excises or other governmental charges (except taxes on or measured by net income) that Seller may be required to pay with respect to the production, sale or transportation of any product delivered to Buyer or service provided to Buyer hereunder, except where the law otherwise provides. All bank collection charges are for the account of Buyer.
3.	The purchase price is based upon production and delivery costs in effect on the date of the quote. If Seller is required to pay increased material and/or energy costs, transportation and/or labor rates for the manufacture or delivery of the goods sold hereunder, the price may be adjusted at the option of Seller by adding the net increase in Seller’s cost due to such increased material and/or energy costs, transportation and/or labor rates applicable to the goods sold hereunder; provided that, in the event that the total adjustment exceeds 20% of the price quoted, then the Buyer shall have the right to cancel the undelivered portion of the goods to which such increase applies by giving Seller written notice prior to the date when such increase in price is to become effective.
4.	In the case of products manufactured to Buyer’s specifications, Seller may deliver up to 10% above or 10% below any quantity ordered by Buyer, unless otherwise specified herein. It is also understood and agreed that delivery of arc furnace electrodes may include up to 15% short electrodes (IEC norm 239) and that the weights and dimensions of a product will be judged within specification in terms of average and not specific figures in order to take account of manufacturing tolerances. At the request of the Purchaser, the Vendor shall determine under what conditions these tolerances can be modified.
5.	Buyer must supply the material safety data sheet and any other documentation reasonably requested by Seller related to the product to be tested or toll processed.
6.	Goods supplied by Buyer to Seller for testing or toll processing shall remain, at all times, the property of the Buyer, and Buyer shall bear the risk of loss/damage of such goods. Seller shall cause all of Buyer’s goods so supplied to be segregated from other similar goods not belonging to Buyer, and in such a manner as to make them readily identifiable by a third party as the property of Buyer. In the event Buyer’s goods are exported from the United States following the provision of testing or toll processing by Seller, the Buyer shall be the exporter of record and shall be listed as such in the Shipper’s Export Declaration.
7.	If Buyer wishes its goods to be returned upon completion of testing services, Buyer shall indicate that desire at the time services are ordered. Notwithstanding the foregoing, upon completion of testing or toll processing services, Seller has in its possession goods supplied by Buyer not otherwise required to be returned to Buyer, and Seller cannot dispose of such goods through its ordinary disposal channels, such goods shall be returned to Buyer. All goods returned to Buyer shall be at Buyer’s sole expense.
8.	Testing Data: The testing data resulting from Seller’s provision of testing services shall be the property of Buyer; provided, however, that Seller shall have non-exclusive rights to use such data for statistical and data analysis purposes. Seller and any of its affiliates or subcontractors shall have rights to use such data to assess and, where appropriate, develop proposals for optimizing Buyer’s operating efficiency. Nothing in this Paragraph 7 shall permit Seller nor any of its affiliates or subcontractors to sell such data.
9.	Buyer shall supply Seller with a copy of its current applicable site safety procedures prior to Seller performing customer technical services on Buyer’s property.
10.	Warranty: (a) Seller warrants that products delivered hereunder will be of Seller’s standard quality for the type and grade of material involved (unless otherwise specified herein), will conform to the description on the face of this document, will meet any applicable specifications, subject to the conditions of clause (b) below, set forth or incorporated by reference herein, and will be adequately contained, packaged and labeled and conform to any promises and affirmations of fact made on the container and label.

(b) Unless otherwise specified herein any dimensions referred to herein are nominal and Seller will furnish products within its standard tolerances.

(c) Seller warrants that equipment delivered hereunder will be in good working order. Seller shall not be responsible for errors caused by Buyer’s personnel in installing and/or operating such equipment.

(d) Patents and Intellectual Property: (i) Subject to the provisions of this paragraph 9, Seller warrants that products, services, or products and services in combination, furnished under this contract shall be delivered free of any rightful claim of any third party for infringement of any United States patent. If notified promptly in writing and given authority, information and assistance, and contingent upon Buyer not taking any position adverse to Seller in connection with such claim, Seller shall defend, or may settle at its expense, any suit or proceeding against Buyer so far as based on a claimed infringement which would result in a breach of this warranty and Seller shall pay all damages and costs awarded therein against Buyer due to such breach. In the event that any product, service or combination thereof, is in such suit or proceeding, held to constitute such an infringement and the use of said product or service is enjoined, Seller shall, at its expense and option, either procure for Buyer the right to continue using product or service is enjoined, Seller shall, at its expense and option, either (i) procure for Buyer the right to continue using said product or service, (ii) replace same with a non-infringing product or service, (iii) modify same so it becomes non-infringing or (iv) remove the product or halt the service and refund the purchase price (less reasonable depreciation for any period of use). The foregoing states the entire liability of Seller for patent infringement relating to products, services or any combination thereof. This warranty shall not apply to any product or service specified by Buyer or manufactured to Buyer’s design, or to the use of any product in combination with products not provided by Seller.

(ii) Any intellectual property developed as a result of services performed by Seller shall remain the sole property of Seller; provided, however, that Buyer shall have a non-exclusive license to use such intellectual property in relation to the Buyer’s product or process at the Buyer’s site at which the services are performed.

(e) Software Development Warranty: Seller warrants that any software developed by Seller and provided to Buyer under this contract shall conform to the Seller-provided specification pertaining thereto at the time of its shipment. For a period of ninety (90) days following shipment of software, Seller will provide amendments or alterations to the software that may be required to correct significant errors present at the time of shipment. Seller’s obligation shall be limited, however, to assembling such amendments and/or alterations into a package, which includes code on the appropriate medium to enable Buyer, at its expense, to implement said corrections. This warranty is contingent upon Buyer advising Seller, in writing, of such errors within such period.

Seller does not warrant that operation of the software shall be uninterrupted or error-free or that it shall meet Buyer’s needs. Seller shall not be responsible for any portions of the software that have been modified by Buyer, unless such changes are approved in writing by Seller. Buyer assumes the responsibility to take adequate precautions against damages to its operations that could be caused by defects, interruptions or malfunctions in the services performed by Seller. Any work performed by Seller due to difficulties or defects traceable to Buyer errors or software changes shall be billed to Buyer at Seller’s or its representatives’ then-prevailing standard rates for such services.

(f) Software Warranty: Unless subject to a separate license or agreement, any software furnished by Seller to Buyer whether separate or incorporated with supplied hardware, including any subsequent updates, is furnished under the following terms and conditions:

(i) The software, and any part thereof, is designed for use only on the type unit on which the software is first installed.

(ii) No exclusivity of use of the software is transferred to Buyer.

CONTINUED ON NEXT PAGE

Revised 9-8-04

(iii) Software and documentation copyrighted by Seller or any third party shall not be copied in whole or in part, but additional copies of software and documentation in printed form may be obtained from Seller or its representatives at Seller’s or such representatives’ then-standard charges, subject to applicable import and export laws and regulations. Buyer agrees that any copyright, proprietary, trade secret or similar notices appearing on and in software will be reproduced and included on and in any modifications and copies, in whole or in part, of software.

(iv) The source code for software is not included unless specifically listed as an item in the Seller specification.

(v) On occasion, third party licensed software is provided. It will be identified as such and Buyer will be required to complete any sublicense specified by the software licensor.

(vi) If a separate software license agreement is required by Seller, Buyer shall execute the software license agreement on or before installation, and the provisions of the separate software license agreement shall supersede the foregoing paragraphs to the extent they are inconsistent with such license.

(g) THERE ARE NO EXPRESS WARRANTIES BY SELLER OTHER THAN THOSE SPECIFIED IN THIS PARAGRAPH 9. NO WARRANTIES BY SELLER (OTHER THAN WARRANTY OF TITLE AS PROVIDED BY THE UNIFORM COMMERCIAL CODE) SHALL BE IMPLIED OR OTHERWISE CREATED AT LAW OR IN EQUITY, INCLUDING, BUT NOT LIMITED TO, WARRANTY OF MERCHANTABILITY AND WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. Without limiting the generality of the foregoing, Buyer assumes all risk and liability for the results obtained by the use of any products delivered hereunder in combination with other articles or materials or in the practice of any process.

(h) Buyer’s receipt of any products delivered hereunder shall be an unqualified acceptance of, and a waiver by Buyer of any and all claims (including claims arising under the warranties specified in this Paragraph 9) with respect to, such products unless Buyer gives Seller notice of claim within thirty (30) days after receipt of such product (or within ten days after Buyer shall have received written notice of any claim of infringement covered by clause (d) above). Seller’s liability under the warranties specified in this Paragraph 9 shall be limited to the repair or (at Seller’s option) the replacement, or the refund of the purchase price, of any product delivered hereunder which is in breach of warranty. Seller shall bear the cost of shipping any allegedly defective product to and from Seller’s plant only if Seller directs its return. In the event that, upon return, the product is determined to be in conformity with the warranty, Buyer shall reimburse Seller for all costs of shipment. No claims of any kind with respect to any product or service covered by this document, whether as to product delivered or for delayed delivery or non-delivery of product or non-performance of services and whether or not based on negligence or warranty, shall be greater in aggregate amount than the purchase price of the product and/or services in respect of which such claims are made. In no event shall either party be liable for special, indirect or consequential damages, whether or not caused by or resulting from the negligence of such party.

(i) It is expressly understood that any technical advice furnished by Seller provided to Buyer, whether provided for a fee or gratis, shall be provided in accordance with applicable laws, rules, regulations and orders of governmental authorities with jurisdiction. Seller assumes no obligation or liability for the advice given or results obtained, all such advice being given and accepted at Buyer’s risk.

(j) If the provision of services by Seller is defective as a result of Seller’s negligence or intentional misconduct, then Seller shall, in its sole discretion, either (i) reperform the services (in the case of testing, on additional material supplied by Buyer) or (ii) reimburse Buyer for the cost of the services. In no event shall Seller’s liability under this paragraph 9 exceed the purchase price for the services performed, and Seller shall not be responsible for special, indirect or consequential damages, whether or not caused by or resulting from the negligence of Seller.

11.	Unless otherwise agreed by Seller, payment terms are net thirty days after date of invoice; provided that orders placed over Seller’s website by credit card will be charged at the time of order fulfillment or, in the case of credit card orders for testing services, at the time the order is placed. Seller reserves the right to suspend shipments of product or performance of services to Buyer hereunder (a) as long as Buyer is in default in payment for any prior invoice or (b) if in Seller’s opinion any conditions of foreign exchange or any measure of foreign exchange control may affect Seller’s receipt of prompt payment for shipments of products to be made or services to be performed hereunder, it being understood that, if such suspension shall continue for more than six (6) months, Seller shall not be obligated thereafter to ship the quantity of products or perform services with respect to which such suspension was made and Buyer’s order shall be deemed canceled.
12.	Any damage to Seller’s property or equipment or injury to Seller’s personnel resulting from Buyer’s product or equipment, whether occurring on Buyer’s or Seller’s property and whether as a result of Buyer’s failure to follow lockout and other applicable health and safety procedures of Seller (in the event that such procedures are provided) or otherwise (other than damage or injury directly attributable to the negligence or intentional misconduct of Seller’s personnel), is the responsibility of Buyer, and Buyer shall indemnify Seller for any such damages or injuries.
13.	Where the transportation of the products delivered hereunder is at Seller’s expense, Seller reserves the right to select the means of transportation.
14.	Neither party shall be liable for its delay or failure in performing hereunder due to contingencies beyond its reasonable control, including, without limitation, acts of God, fires, floods, war, sabotage, accidents, labor disputes or shortages, governmental laws, ordinances, rules and regulations, whether valid or invalid (and including, but not limited to, import or export prohibitions or limitations, priorities, requisitions, allocations and price adjustment restrictions) and inability to obtain material, equipment or transportation, and any other similar or dissimilar contingency. The party whose performance is prevented by any such contingency shall have the right to omit, during the period of such contingency, all or any portion of the quantity deliverable during such period, whereupon the total quantity delivered to Buyer hereunder shall be reduced by the quantity so omitted. In the event of any such contingency, the Seller has the right to allocate its available supply among its customers and its departments, divisions, subsidiaries and affiliates in such manner as the Seller deems fair and equitable. In no event shall Seller be obligated to purchase material from other than its regular sources of supply in order to enable Seller to supply products to Buyer.
15.	Compliance with Laws: Buyer has complied and shall comply with all applicable laws, rules and regulations of the United States of America and of any other country concerned pertaining to the purchase and movement of, and the payment for, the products and services to be delivered hereunder, including, but not limited to, copyright duplication laws and export control laws. Buyer represents and warrants that no technical data furnished to it by Seller or developed by Buyer directly from such data will be disclosed to any foreign national, firm or country, including foreign nationals employed by or associated with the United States, without complying with requirements of U.S. export control laws, regulations and directives.
16.	All drawbacks of duties paid on items or materials entering into the manufacture of the product delivered hereunder shall accrue to Seller, and Buyer agrees to furnish Seller with all documents necessary to obtain payment of such drawbacks and to cooperate with Seller in obtaining such payment.
17.	Title: (a) Any delivery terms appearing herein or in any purchase order, order acknowledgement or other document related hereto, such as FOB, CIF, CFR, CIP and DDU shall be interpreted in accordance with INCOTERMS 2000 published by the International Chamber of Commerce. Legal title shall be deemed to pass with risk of loss unless an intention otherwise is expressly set forth in this document or an order acknowledgment sent by Seller

(b) Title to the Monitoring System shall remain with Seller. Title to the Information obtained and processed by Seller shall remain with the Buyer, provided however that the Information may be used by Seller only to (i) generate reports and analysis for Buyer; and (ii) to develop benchmarking data for the industry, provided that such benchmarking data will be aggregated with sufficient data from other industry participants so that specific company information may not be discerned or identified. Except as described in this section, Seller shall have no rights to use the Information for any other purpose. Upon expiration or termination of this Proposal or any Analysis Contract, Seller shall have no rights to receive, process or use Information other than to the extent previously captured data already has been aggregated as described in (ii) above.

18. Seller’s relationship to Buyer shall be that of an independent contractor. Neither party shall be deemed to be nor shall either represent itself to be an agent of the other. All services provided by Seller shall be performed by such employees, representatives or agents of Seller as Seller determines, in its sole discretion, are necessary to complete its obligations under the contract for services described herein.

Revised 9-8-04 2

19.	The validity, interpretation and performance of the terms hereof with respect to any product delivered (or to be delivered) hereunder shall be governed by the laws of the State of New York, United States of America. Except as set forth in paragraph 16 hereof with respect to the interpretation of delivery terms, the United Nations Convention for the International Sale of Goods shall have no application to this transaction. Each party agrees to submit to the exclusive jurisdiction of the federal courts of New York, United States of America with regard to any proceeding arising out of or relating to this transaction.
20.	No modification or waiver of the terms and conditions hereof shall be binding upon Seller unless approved in writing by an authorized representative of Seller, nor shall any modification or waiver be effected merely by the acknowledgment or acceptance of purchase order forms containing other or different terms, whether or not signed by an authorized representative of Seller. No purchase order submitted to Seller shall be deemed to modify, amend or supplement the provisions of these Terms and Conditions unless such purchase order (i) is signed by an authorized representative of both Buyer and Seller and (ii) specifically references these Terms and Conditions and the Paragraphs and provisions hereof being amended.
21.	Seller shall have the right to use Buyer’s name in Seller’s marketing materials. Any other confidential proprietary information concerning Buyer’s operations shall be used by Seller solely for statistical data gathering purposes and may be used in Seller’s marketing materials as well, provided that such information shall be aggregated with sufficient data from other industry participants so that specific Buyer information may not be discerned or identified.

Revised 9-8-04 3

EX-21

EXHIBIT 21.1.0

Subsidiaries of GrafTech International Ltd. as of March 1, 2006(b)

Name of Subsidiary	Jurisdiction of Incorporation	Ownership by GrafTech International Ltd.
GrafTech Finance Inc.	Delaware	100%
GrafTech Global Enterprises Inc.	Delaware	100%

Name of Subsidiary	Jurisdiction of Incorporation	Ownership by UCAR Global Enterprises Inc.
UCAR Carbon Company Inc.	Delaware	100%

Name of Subsidiary	Jurisdiction of Incorporation	Ownership by UCAR Carbon Company Inc
UCAR Inc.	Canada	100%
Advanced Energy Technology Inc.	Delaware	97.5%
UCAR International Trading Inc.	Delaware	100%
UCAR S.A.	Switzerland	100%
UCAR Holding GmbH	Austria	66.67%(c)
UCAR Carbon (Malaysia) Sdn. Bhd.(a)	Malaysia	100%
UCAR Carbon Technology LLC	Delaware	100%
Union Carbide Grafito, Inc.	New York	100%
Graphite Electrode Network LLC	Delaware	100%

Name of Subsidiary	Jurisdiction of Incorporation	Ownership by UCAR S.A.
UCAR Limited	United Kingdom	100%
UCAR Electrodos Iberica, S.L	Spain	99.9%(d)
UCAR Carbon Mexicana, S.A. de C.V	Mexico	99.92%(e)
GrafTech S.p.A	Italy	100%
UCAR Carbon S.A	Brazil	97.90%
UCAR Holding GmbH	Austria	33.33%(c)
UCAR Holdings S.A.S	France	100%
UCAR South Africa (Pty.) Ltd.	South Africa	100%

Name of Subsidiary	Jurisdiction of Incorporation	Ownership by UCAR Holding GmbH
UCAR Grafit OAO	Russia	99.68%

Name of Subsidiary	Jurisdiction of Incorporation	Ownership by UCAR Holdings S.A.S.
UCAR SNC	France	100%(f)
Carbone Savoie S.A.S.	France	70%

Name of Subsidiary	Jurisdiction of Incorporation	Ownership by UCAR Carbon S.A.
UCAR Produtos de Carbono S.A.	Brazil	99.98%

Name of Subsidiary	Jurisdiction of Incorporation	Ownership by Carbone Savoie S.A.S.
Carbone Savoie Brasil Holdings Brasil S.A. (a)	Brazil	97.95%

Name of Subsidiary	Jurisdiction of Incorporation	Ownership by Carbone Savoie Brasil S.A.
Carbone Savoie Brasil S.A.	Brazil	99.98%

(a) In process of dissolution.

(b) Directors Qualifying Shares of subsidiaries are deemed to be owned by their immediate parent entity.

(c) 66.67% owned by UCAR Carbon Company Inc. and 33.33% owned by UCAR S.A.

(d) One share held by UCAR Carbon Company Inc.

(e) 0.05% (27,231 shares) owned by UCAR Carbon Company Inc., 1 share owned by a director of UCAR Carbon Mexicana, S.A. de C.V., in trust for UCAR S.A. and 99.92% (55,885,249 shares) owned by UCAR S.A.

(f) One share held by UCAR S.A.

EX-23

Exhibit 23.1.0

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (Nos. 333-115407, 333-114652 and 333-114653) and Form S-8 (Nos. 33-95546, 33-95548, 33-95550, 333-02560, 333-82393, 333-82411, 333-46680 and 333-75774) of GrafTech International Ltd. of our report dated March 15, 2006 relating to the consolidated financial statements, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Philadelphia, PA
March 15, 2006

EX-23

Exhibit 23.2.0

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-115407, No. 333-114652 and No. 333-114653 on Form S-3, and No. 33-95546, No. 33-95548, No. 33-95550, No. 333-2560, No. 333-82393, No. 333-82411, No. 333-46680 and No. 333-75774 on Form S-8 of our report dated March 12, 2004, appearing in this Annual Report on Form 10-K of GrafTech International Ltd. and subsidiaries for the year ended December 31, 2005.

/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania
March 15, 2006

EX-31

EXHIBIT 31.1.0

CERTIFICATION

I, Craig S. Shular, certify that:

1.          I have reviewed this Annual Report on Form 10-K of GrafTech International Ltd. (the “Registrant”);

2.          Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3.          Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4.          The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

(b)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d)        Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.          The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the 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.

By: /s/ Craig S. Shular                                        
      Craig S. Shular
      Chief Executive Officer and President
      (Principal Executive Officer)
      March 15, 2006

EX-31

Exhibit 31.2.0

CERTIFICATION

I, Craig S. Shular, certify that:

1.          I have reviewed this Annual Report on Form 10-K of GrafTech International Ltd. (the “Registrant”);

2.          Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3.          Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4.          The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

(b)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d)        Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.          The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the 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.

By: /s/ Craig S. Shular                                        
      Craig S. Shular
      Interim Chief Financial Officer
      (Principal Accounting Officer)
      March 15, 2006

EX-32

Exhibit 32.1.0

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In accordance with the rulesand regulations of the Securities and Exchange Commission, the following Certification shall not be deemed to be filed with the Commission under the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, notwithstanding any general incorporation by reference of the Annual Report of GrafTech International Ltd. (the “Corporation”) on Form 10-K for the fiscal year ended December 31, 2005, as filed with the Commission on the date hereof (the “Report”), into any other document filed with the Commission.

In connection with the Report, I, Craig S. Shular, Chief Executive Officer and President of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)        The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

(2)        The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation.

A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished to the Commission or its staff upon request.

By: /s/ Craig S. Shular                                        
      Craig S. Shular
      Chief Executive Officer and President
      (Principal Executive Officer)
      March 15, 2006

EX-32

Exhibit 32.2.0

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In accordance with the rulesand regulations of the Securities and Exchange Commission, the following Certification shall not be deemed to be filed with the Commission under the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, notwithstanding any general incorporation by reference of the Annual Report of GrafTech International Ltd. (the “Corporation”) on Form 10-K for the fiscal year ended December 31, 2005, as filed with the Commission on the date hereof (the “Report”), into any other document filed with the Commission.

In connection with the Report, I, Craig S. Shular, Interim Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)        The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

(2)        The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation.

A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished to the Commission or its staff upon request.

By: /s/ Craig S. Shular                                        
      Craig S. Shular
      Interim Chief Financial Officer
      (Principal Accounting Officer)
      March 15, 2006