-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pk4gDxW3OgglOhsRsZo/EYov6VispKxBgnjuqgi1f6Lo0t1Doq+LTVPM17Q+pkFO 31QqBjAzSBi2j5D0BQOAwA== 0000932440-99-000081.txt : 19990329 0000932440-99-000081.hdr.sgml : 19990329 ACCESSION NUMBER: 0000932440-99-000081 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 33 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UCAR INTERNATIONAL INC CENTRAL INDEX KEY: 0000931148 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 061385548 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-13888 FILM NUMBER: 99574782 BUSINESS ADDRESS: STREET 1: 39 OLD RIDGEBURY ROAD STREET 2: J-4 CITY: DANBURY STATE: CT ZIP: 06817 BUSINESS PHONE: 2032077700 MAIL ADDRESS: STREET 1: 39 OLD RIDGEBURY ROAD STREET 2: J-4 CITY: DANBURY STATE: CT ZIP: 06817-0001 10-K405 1 REPORT ON FORM 10K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (MARK ONE) |X|ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 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) UCAR INTERNATIONAL INC. (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) Suite 1100, 3102 West End Avenue 37203 Nashville, Tennessee (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 760-8227 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED: Common stock, par value $.01 per share New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| 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. |X| As of March 1, 1999, 45,312,334 shares of common stock were outstanding. The aggregate market value of the outstanding common stock as of March 1, 1999 (based upon the closing sale price of the common stock on the New York Stock Exchange on such date) held by non-affiliates of the registrant was $496 million. DOCUMENTS INCORPORATED BY REFERENCE The information required under Part III is incorporated by reference from the UCAR International Inc. Proxy Statement for the Annual Meeting of Stockholders to be held on May 11, 1999, which will be filed on or about March 26, 1999. ================================================================================ TABLE OF CONTENTS PAGE PRELIMINARY NOTES............................................................1 Important Terms...........................................................1 Presentation of Financial, Market and Legal Data..........................1 PART I.......................................................................3 Item 1. Business..........................................................3 Introduction..............................................................3 Risk Factors..............................................................6 Corporate History........................................................11 Markets and Industry Overview............................................14 Manufacturing Processes..................................................18 Products.................................................................21 Raw Materials and Suppliers..............................................22 Sales and Customer Service; Research and Development.....................22 Distribution.............................................................23 Patents and Trademarks...................................................24 Competition..............................................................24 Environmental Matters....................................................26 Insurance................................................................27 Employees................................................................28 Item 2. Properties.......................................................28 Item 3. Legal Proceedings................................................29 Item 4. Submission of Matters to a Vote of Security Holders..............35 PART II.....................................................................36 Item 5. Market for Registrant's Common Stock and Related Stockholder Matters..................................................................36 Market Information.......................................................36 Dividend and Stock Repurchase Policies and Restrictions..................37 Recent Sales of Unregistered Securities..................................38 Item 6. Selected Financial Data..........................................38 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................41 General..................................................................41 Results of Operations....................................................45 Effects of Inflation....................................................51 Effects of Changes in Currency Exchange Rates............................52 Liquidity and Capital Resources..........................................53 Restrictions on Dividends and Stock Repurchases..........................61 PAGE Accounting Changes.......................................................62 Year 2000 Issue..........................................................63 Assessment of the Euro...................................................64 Costs Relating to Protection of the Environment..........................64 Item 7A. Quantitative and Qualitative Disclosures About Market Risks....65 Item 8. Financial Statements and Supplementary Data.....................66 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................................................114 PART III...................................................................114 Items 10 to 13 (inclusive)..............................................114 Executive Officers and Directors........................................114 PART IV....................................................................118 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................................................118 SIGNATURE..................................................................125 EXHIBIT INDEX..............................................................127 PRELIMINARY NOTES IMPORTANT TERMS We use the following terms to identify various companies or groups of companies, markets or other matters. These terms help to simplify the presentation of information in this Report. UCAR refers to UCAR International Inc. only. UCAR is the issuer of the publicly traded common stock covered by this Report. UCAR GLOBAL refers to UCAR Global Enterprises Inc. only. UCAR Global is a holding company and a direct wholly owned subsidiary of UCAR. UCAR Global is the only subsidiary directly owned by UCAR. UCAR Global is the issuer of our outstanding 12% senior subordinated notes due 2005 (the "SUBORDINATED NOTES") and is the primary borrower under our senior secured bank credit facilities (the "SENIOR BANK FACILITIES"). UCAR GROUP, WE, US or OUR refers collectively to UCAR, its subsidiaries and its and their predecessors to the extent that those predecessor's activities related to the carbon and graphite business. SUBSIDIARIES refers to those companies which, at the relevant time, were majority-owned or wholly owned directly or indirectly by UCAR or its predecessors described above. All of UCAR's subsidiaries have been wholly owned (with de minimis exceptions in the case of certain foreign subsidiaries) since January 1, 1996, except for our German subsidiary and Carbone Savoie S.A.S. ("CARBONE SAVOIE"), both of which have been 70%-owned since we acquired them in early 1997, and except for our South African subsidiary, which was 50% owned until April 1997. HOME MARKETS refer to North America, Western Europe, Brazil and South Africa. We have major manufacturing facilities located in each of these markets, and these are our largest markets. FREE TRADING MARKETS refer to the entire world, excluding China, the former Soviet Union, India and Eastern Europe. We sometimes use this term when describing markets for various products because information about excluded markets is believed to be unreliable or not readily available. PRESENTATION OF FINANCIAL, MARKET AND LEGAL DATA Separate consolidated financial statements of UCAR Global are not presented in this Report because they would be substantially the same as those of UCAR. We present financial information for the UCAR Group on a consolidated basis. We use the equity method to account for 50% or less-owned interests and we do not restate financial information for periods prior to the acquisition of subsidiaries. This means that, prior to April 1997, financial information of our South African subsidiary is only reflected on the single line in the consolidated financial statements entitled "UCAR share of net income from company carried at equity." For the same reason, financial information for our German subsidiary and Carbone Savoie is consolidated on each line of the Consolidated Financial Statements and the equity of the other 30% owners in those subsidiaries is reflected on the single line entitled "minority stockholders' share of income." References to cost in the context of our low-cost producer strategy do not include the unusual or non-recurring charges identified in the Consolidated Financial Statements on the lines entitled "antitrust investigations and related lawsuits and claims," "restructuring charge" or "impairment loss on Russian assets" or the impact of accounting changes. Unless otherwise noted, all cost savings and reductions described in this Report are estimates based on a comparison to costs in 1998 and on the assumption that net sales and other operating conditions are the same in 1999 as they were in 1998. Neither any statements in this Report nor any charge taken by the UCAR Group relating to any legal proceedings constitute an admission as to any wrongdoing or liability. 2 PART I ITEM 1. BUSINESS INTRODUCTION We are the largest manufacturer of graphite and carbon electrodes and cathodes in the world, with sales in over 80 countries and manufacturing facilities on four continents. Graphite electrodes, our principal product, are used primarily in the production of steel in an electric arc furnace, the steelmaking technology used by virtually all "mini-mills," as well as for refining steel in ladle furnaces and in other refining processes. Graphite electrodes accounted for about 73% of our net sales in 1996, 72% of our net sales in 1997 and 69% of our net sales in 1998. Carbon electrodes are used primarily in the production of silicon metal, which is used in the manufacture of aluminum. Carbon electrodes accounted for about 6% of our net sales in 1996, 5% of our net sales in 1997 and 5% of our net sales in 1998. Graphite and carbon cathodes are both used as lining for furnaces that smelt aluminum. Cathodes accounted for about 2% of our net sales in 1996, 8% of our net sales in 1997 and 10% of our net sales in 1998. We also manufacture other graphite and carbon products as well as flexible graphite and cooling systems and components for steelmaking furnaces and other high temperature applications. These products accounted for about 19% of our net sales in 1996, 16% of our net sales in 1997 and 16% of our net sales in 1998. BACKGROUND. Electrodes act as conductors of electricity in a furnace, generating sufficient heat to melt scrap metal or other raw materials used to produce steel, silicon metal or other materials. The electrodes are gradually consumed in the course of that production. Graphite electrodes are used primarily in the production of steel in an electric arc furnace. On average, one electrode must be replaced in an electric arc furnace every eight to ten operating hours. 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 required in an electric arc furnace. Demand for graphite electrodes is directly related to the amount of electric arc furnace steel produced. Electric arc furnace steel production has, for many years, been the growth sector of the steel industry. In 1998, it accounted for about 34% of total steel production, according to Company and industry estimates. Over the past two decades, electric arc furnace steelmaking has become more efficient. This improved efficiency has resulted in a decrease in the quantity of graphite electrodes consumed per metric ton of steel produced (known as "SPECIFIC CONSUMPTION"). During the period from the early 1990's through late 3 1997, increased levels of electric arc furnace steel production more than offset the decrease in specific consumption. This resulted in increased demand for graphite electrodes. Throughout 1998 and continuing into 1999, global economic conditions have adversely impacted steel production, including steel produced in electric arc furnaces. As a result, demand for graphite electrodes has declined. We cannot predict either the timing or extent of changes in global economic conditions. If, however, global economic conditions over the long term are similar to those of the past two decades, we believe that worldwide production of steel in electric arc furnaces will continue to grow over the long term at its historical annual trendline growth rate of 4% and that, as a result, worldwide demand for graphite electrodes will grow over the long term at an average annual rate of 1% to 2%. Presently, in the free trading markets, there is one other global manufacturer of electrodes and there are, in total, eight other manufacturers of graphite electrodes. OVERVIEW OF RECENT DEVELOPMENTS. As a result of the adoption of a global restructuring and rationalization plan and the completion of a major debt refinancing as well as other developments described in this Report, we believe that, under current conditions, we will be able to fully implement our strategies and meet our debt service, trade and other obligations, including currently known obligations for liabilities and expenses in connection with antitrust investigations and related lawsuits and claims, when due. GLOBAL RESTRUCTURING AND RATIONALIZATION PLAN. In September 1998, UCAR's Board of Directors adopted a global restructuring and rationalization plan. The plan is intended to enhance stockholder value by focusing on optimizing margins, maximizing cash flow, generating growth in earnings and strengthening competitiveness through operating and overhead cost reduction and plant rationalization. The plan is also intended, over the long term, to strengthen our position as a low cost producer supplying the steel and metals industries and, over the near term, to respond to global economic conditions that are adversely impacting our customers. We believe that, under current conditions, the plan will have a positive impact on earnings in the second half of 1999. The key elements of the plan consist of: o Rationalization of manufacturing operations, including closure of higher cost operations in Germany and Canada and downsizing of operations in Russia. o Centralization and consolidation of administrative functions, including relocation of our corporate headquarters to Nashville, Tennessee and centralization of our European administrative activities in Lausanne, Switzerland. o Implementation of more than 150 identified cost reduction projects. 4 We estimate that the plan will generate permanent annual cost savings at a rate of about $80 million by the end of 1999, $111 million by the end of 2000 and $135 million by the end of 2001, reduce working capital needs and improve efficiencies. We anticipate achieving about $64 million of annual savings in 1999. The plan resulted in a 1998 third quarter restructuring charge of $86 million ($77 million after income tax). The plan also included the rationalization and downsizing of our Russian operations. We recorded an impairment loss on long-lived Russian assets of $60 million. As part of the plan, we are seeking to divest or joint venture part or all of our graphite and carbon specialties business (which is part of our graphite and carbon product business segment) on acceptable terms. No assurance can be given that any divestiture or joint venture will be completed or as to timing or terms of any such transaction. REFINANCING. In November 1998, the Senior Bank Facilities were refinanced and the indenture governing the Subordinated Notes (the "SUBORDINATED NOTE INDENTURE") was amended. In connection with the refinancing, we obtained additional term debt of $210 million. Following the refinancing, the covenants under the Senior Bank Facilities are more restrictive than they had been prior to the time when we recorded the $340 million charge described below. The covenants do, however, allow us to implement our global restructuring and rationalization plan. Further, the covenants do not restrict our ability to draw on our revolving credit facility unless payments and reserves with respect to the litigation matters described below exceed $400 million (adjusted for certain imputed interest expense). LITIGATION MATTERS. Since 1997, we have been served with subpoenas, search warrants and information requests by antitrust authorities in the United States and elsewhere in connection with investigations as to whether there has been any violation of antitrust laws by producers of graphite electrodes. In addition, antitrust class action and other civil lawsuits have been commenced against us and other producers of graphite electrodes in the United States and Canada. We recorded a charge against results of operations for 1997 in the amount of $340 million as a reserve for estimated potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. UCAR has also been named as a nominal defendant in a shareholder derivative lawsuit and is a defendant in a securities class action lawsuit, each of which is based, in part, on the subject matter of the antitrust investigations, lawsuits and claims. It is possible that antitrust investigations in other jurisdictions and additional civil lawsuits could be commenced. In April 1998, pursuant to a plea agreement with the Antitrust Division of the United States Department of Justice (the "DOJ"), UCAR pled guilty to a one-count charge of violating U.S. federal antitrust laws in connection with the sale of graphite electrodes and was sentenced to pay a non-interest-bearing fine in the aggregate amount of $110 million, payable in six annual installments. In March 1999, pursuant to a plea agreement with the Canadian Competition Bureau, our Canadian subsidiary pled guilty to a one-count charge of violating Canadian antitrust laws in connection with the sale of graphite electrodes and was 5 sentenced to pay a fine of Cdn.$11 million. The guilty pleas have made it more difficult to defend against other investigations, lawsuits and claims. Through March 25, 1999, we have settled virtually all of the actual and potential graphite electrode antitrust claims by steelmakers in the United States and Canada as well as antitrust claims by certain other steelmakers. In the aggregate, the above mentioned fines and settlements are within the amounts we used for purposes of evaluating the $340 million charge. Actual liabilities and expenses could be materially higher than such charge. We do not believe that the outcome of the shareholder derivative lawsuit will have a material adverse effect on us. The securities class action is still in its early stages and no evaluation of potential liability can yet be made. RISK FACTORS Investors in the common stock should consider carefully the following factors in addition to other information included in this Report. WE ARE DEPENDENT ON GLOBAL STEEL AND OTHER METALS INDUSTRIES AND ARE DIRECTLY AFFECTED BY CHANGES IN GLOBAL AND REGIONAL ECONOMIC CONDITIONS. Our principal products, graphite electrodes, are sold primarily to the electric arc furnace steel production industry. Many of our other products are sold primarily to other metals industries. All of these are global basic industries, and customers in these industries are located in virtually every industrialized country in the world. As a result, our customers are impacted by changes in global and regional economic conditions. This, in turn, impacts demand for and, to a lesser extent, prices of our products. Accordingly, we are directly affected by changes in global and regional economic conditions. The electric arc furnace steel industry has been for many years the growth sector of the steel industry. Although the steel industry as a whole is generally cyclical, the electric arc furnace steel sector has been less so. While we believe that the electric arc furnace steel industry will continue to be the growth sector of the steel industry, no assurance can be given that this will be the case. In addition, even if there is growth in the electric arc furnace steel industry, no assurance can be given that there will be growth in demand for graphite electrodes. As a result of global economic conditions, demand for graphite electrodes and some of our other products declined in 1998. No assurance can be given as to the timing or extent of any change in those conditions which could affect demand for our products in the future. WE ARE SUBJECT TO RISKS ASSOCIATED WITH INVESTIGATIONS, LAWSUITS AND CLAIMS WHICH MAY ADVERSELY IMPACT US. Since 1997, we have been subject to antitrust investigations, lawsuits and claims, a shareholder derivative lawsuit and securities class action lawsuits. We recorded a charge of $340 million against results of operations for 1997 as a reserve for estimated potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. No reserves have been established for the shareholder derivative or securities class action lawsuits. 6 We have resolved the antitrust investigations in the United States and Canada and settled virtually all of the antitrust claims by steelmakers in the United States and Canada in connection with the sale of graphite electrodes. These have been within the amounts used by us to evaluate the $340 million charge. No assurance can be given, however, that remaining liabilities and expenses in connection with antitrust investigations and related lawsuits and claims will not exceed the remaining balance of such reserve. In addition, while we do not believe that the shareholder derivative lawsuit will have a material adverse effect on us, no assurances can be given that the securities class action lawsuit will not have a material adverse effect on us. WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR SUBSTANTIAL LEVERAGE AND OTHER OBLIGATIONS. We are highly leveraged and we have substantial obligations in connection with antitrust, shareholder derivative and securities investigations, lawsuits and claims. We had an aggregate of $804 million of outstanding indebtedness, a majority of which had variable interest rates, and a stockholders' deficit of $287 million at December 31, 1998. Our indebtedness and these obligations could have important consequences, including the following: o our ability to restructure our existing debt or obtain additional debt financing for working capital, capital expenditures, payment of these obligations or general corporate or other purposes may be impaired in the future; o a substantial portion of our cash flow from operations must be dedicated to debt service and payment of these obligations, thereby reducing the funds available to us for other purposes; o we may have substantially more leverage and obligations in connection with these investigations, lawsuits and claims than certain of our competitors, which may place us at a competitive disadvantage; o our leverage and these obligations may hinder our ability to adjust rapidly to changing market conditions or other events; and o our substantial leverage and these obligations makes us more vulnerable in the event of a downturn in general economic conditions or our business or in the event that these obligations are greater than expected. Our ability to service our debt and meet these and other obligations as they come due will depend on our future financial and operating performance. This in turn, is subject to, among other things, changes in the graphite and carbon products industry, prevailing economic conditions and certain financial, business and other factors beyond our control, including interest rates. These obligations have in the past and may have in the future a material adverse impact on our working capital, cash flow and liquidity. In this regard, the plea agreement with the DOJ will assist us in our efforts to meet our obligations as they become due since the plea agreement permits us to pay the balance of $110 million non-interest-bearing fine in five annual installments. If our cash flow and capital resources are insufficient to enable us to meet our debt service, trade credit and other obligations as they become due, the failure to meet such obligations could have a material adverse effect on us. 7 WE HAVE RESTRICTIVE DEBT COVENANTS WHICH COULD SIGNIFICANTLY AFFECT THE WAY IN WHICH WE CONDUCT OUR BUSINESS. The Senior Bank Facilities contain a number of covenants that, among other things, significantly restrict our ability to dispose of assets, incur additional indebtedness, repay or refinance other indebtedness or amend other debt instruments, create liens on assets, enter into leases, make investments or acquisitions, engage in mergers or consolidations, make capital expenditures or engage in certain transactions with subsidiaries and affiliates and that otherwise restrict corporate activities. In addition, under the Senior Bank Facilities, we are required to comply with specified financial ratios and tests, including minimum interest coverage and maximum leverage ratios. The Subordinated Note Indenture also contains restrictive covenants regarding similar matters. We are currently in compliance with the covenants contained in the Senior Bank Facilities and the Subordinated Note Indenture. However, our ability to continue to comply may be affected by events beyond our control. These include prevailing economic, financial and industry conditions and establishment of reserves or payment of liabilities and expenses in connection with antitrust, shareholder derivative and securities investigations, lawsuits and claims which result in total reserves and payments exceeding $400 million. The breach of any of these covenants could result in a default under the Senior Bank Facilities or the Subordinated Note Indenture, which would permit the senior lenders or the holders of the Subordinated Notes to declare all amounts thereunder immediately due and would permit the senior lenders to terminate their commitments to extend credit under our revolving credit facility. If we were unable to repay our indebtedness to the senior lenders, the senior lenders could proceed against the collateral securing the Senior Bank Facilities. WE ARE SUBJECT TO RISKS ASSOCIATED WITH OPERATIONS IN MULTIPLE COUNTRIES WHICH COULD ADVERSELY AFFECT US. As a result of our international operations, we are subject to risks associated with operating in multiple countries, including: o devaluations and fluctuations in currency exchange rates; o imposition of limitations on conversion of non-U.S. currencies into U.S. dollars or remittance of dividends and other payments by subsidiaries; o imposition or increase of withholding and other taxes on remittances and other payments by subsidiaries, hyperinflation in certain countries and imposition or increase of investment and other restrictions or requirements by non-U.S. governments; and o in the case of operations in Russia, nationalization and other risks which could result from a change in government. 8 Although such risks have not had a material adverse effect on us within the past decade, no assurance can be given that such risks will not have a material adverse effect on us in the future. DUE TO THE SEASONALITY AND OTHER FLUCTUATIONS IN OUR QUARTERLY RESULTS OF OPERATIONS, OUR RESULTS OF OPERATIONS FOR ANY QUARTER ARE NOT NECESSARILY INDICATIVE OF OUR RESULTS OF OPERATIONS FOR A FULL YEAR OR OTHERWISE. Our sales of graphite electrodes and other products fluctuate from quarter to quarter due to such factors as scheduled 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. We have experienced, and expect to continue to experience, volatility with respect to demand for graphite electrodes in various geographic areas as regional economic conditions fluctuate. These factors tend to affect our quarterly as well as annual results of operations. In addition, during the period prior to the effective date of a price increase, customers tend to buy additional quantities of graphite electrodes at the then lower pricing (known as "CUSTOMER BUY-INS"), which add to our net sales during that period. During the period following the effective date of a price increase, customers tend to use those additional quantities before placing further orders, which reduces our net sales during that period. Accordingly, results of operations for any quarter are not necessarily indicative of the results of operations for a full year or otherwise. WE COULD BE ADVERSELY AFFECTED BY VIGOROUS PRICE AND OTHER TYPES OF COMPETITION. Competition in the graphite and carbon products industry is based primarily on price, product quality and customer service. Graphite electrodes, in particular, are subject to rigorous price competition. Price increases by us or price reductions by our competitors, decisions by us with respect to maintaining profit margins rather than market share, or other competitive or market factors or strategies could adversely affect our market share or results of operations. Competition could prevent implementation of price increases or could require price reductions or increased spending on research and development, marketing and sales which could adversely affect our results of operations. THERE ARE PROVISIONS IN SOME OF OUR IMPORTANT DOCUMENTS WHICH COULD HAVE THE EFFECT OF PREVENTING A CHANGE IN CONTROL OF UCAR. UCAR's Certificate of Incorporation and By-Laws contain provisions concerning voting, issuance of preferred stock, removal of officers and directors and other matters which may have the effect of discouraging, delaying or preventing a change in control of UCAR. In addition, UCAR's Board of Directors has adopted a stockholder rights plan which may have the same effect. Further, UCAR Global is required, in the event of a change in control where it has not elected to redeem the Subordinated Notes, to repurchase any Subordinated Notes that holders desire to have repurchased at 101% of the principal amount repurchased, plus accrued interest. The Senior Bank Facilities restrict certain events which would constitute a change in control and provide that certain events which would constitute a change in control would constitute an event of default. The exercise by holders of the Subordinated Notes of their right to require UCAR Global to purchase the Subordinated Notes may cause a default under the Senior Bank Facilities or other indebtedness, even if the change in control does not. Finally, there can be no assurance that UCAR Global will have the financial resources necessary to repurchase the Subordinated Notes upon a change of control or repay amounts due under the Senior Bank Facilities upon such an event of default. 9 THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WHICH COULD VARY SIGNIFICANTLY FROM ACTUAL EVENTS OR CIRCUMSTANCES DUE TO VARIOUS FACTORS. This Report contains forward-looking statements. These include statements about future production of steel in electric arc furnaces, future prices and sales of and demand for graphite electrodes and other products, future operational and financial performance of various businesses, plans and programs relating to strategies and divestiture, joint venture, operating global integration and capital projects, legal matters and related fees and costs, consulting fees and related projects, and future costs, cost savings and reductions, margins and earnings. 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. Actual future events and circumstances (including future performance, results and trends) could differ materially from those set forth in these statements due to various factors. These factors include: o the possibility that announced additions to capacity for producing steel in electric arc furnaces or announced reductions in graphite electrode manufacturing capacity may not occur; o the possibility that increased production of steel in electric arc furnaces may not result in increased demand for or prices or sales of graphite electrodes; o the occurrence of unanticipated events or circumstances relating to pending antitrust investigations or pending antitrust, shareholder derivative or securities lawsuits; o the commencement of investigations or lawsuits relating to the same subject matter of these pending investigations or lawsuits; o the occurrence of unanticipated events or circumstances relating to businesses acquired within the past three years; o the occurrence of unanticipated events or circumstances relating to strategic plans or divestiture, joint venture, operating, capital, global integration or other projects; o changes in currency exchange rates, changes in economic or competitive conditions, technological developments, and other risks and uncertainties, including those described in this Report. 10 CORPORATE HISTORY GENERAL. Our business was founded in 1886 by National Carbon Company. In 1917, National Carbon Company, along with Union Carbide Company and three other companies, combined to form a new corporation named Union Carbide and Carbon Company, now known as Union Carbide Corporation ("UNION CARBIDE"). National Carbon Company became the Carbon Products Division of Union Carbide. In 1989, Union Carbide realigned each of its worldwide businesses into separate subsidiaries. As part of the realignment, the business of the Carbon Products Division was separated from Union Carbide's other businesses and became owned by the UCAR Group, which was then wholly owned by Union Carbide. In 1991, Union Carbide sold to Mitsubishi Corporation ("Mitsubishi") 50% of the common equity of the UCAR Group. In January 1995, we consummated a leveraged recapitalization (the "RECAPITALIZATION") pursuant to an agreement among Union Carbide, Mitsubishi, UCAR and a corporation affiliated with Blackstone Capital Partners II Merchant Banking Fund L.P. and its affiliates (collectively, "BLACKSTONE"). Under the Recapitalization: o UCAR issued common stock representing about 75% of the then outstanding common stock to Blackstone, an affiliate of Chase Manhattan Bank and certain members of management for $203 million. o UCAR Global and certain of its foreign subsidiaries borrowed $585 million under senior secured bank credit facilities arranged through Chase Manhattan Bank. o UCAR Global issued $375 million of Subordinated Notes. o We repaid about $250 million of then existing indebtedness. o UCAR repurchased and cancelled all of the common equity then held by Mitsubishi for $406 million. o UCAR paid to Union Carbide a cash dividend of $347 million on the common equity then held by Union Carbide, which common equity represented about 25% of the then outstanding common stock. o Certain members of management received restricted stock matching a portion of the common stock purchased by them and options to purchase up to an aggregate of 12% of the then outstanding common stock on a fully diluted basis, subject to certain vesting requirements. In connection with the Recapitalization, we transferred all of our operating subsidiaries to UCAR Global or subsidiaries of UCAR Global. UCAR currently holds no material assets other than common stock of UCAR Global and intercompany debt owed to it. 11 In August 1995, UCAR completed an initial public offering of common stock. In connection with the offering, UCAR sold common stock representing 22% of the common stock outstanding immediately after the offering for net proceeds of $227 million and Union Carbide sold all of the common stock then owned by it. UCAR used net proceeds from the offering to contribute to UCAR Global an amount sufficient to redeem $175 million aggregate principal amount of Subordinated Notes at a redemption price equal to 110% of the aggregate principal amount redeemed, plus accrued interest of $4 million. We used the balance of the net proceeds for general corporate purposes and to reduce other outstanding indebtedness. In October 1995, we refinanced the bank credit facilities obtained in connection with the Recapitalization with the Senior Bank Facilities at more favorable interest rates and with more favorable covenants. In March 1996, Blackstone, an affiliate of Chase Manhattan Bank and certain members of management sold shares of common stock in a secondary public offering. After the offering, Blackstone owned about 20% of the then outstanding shares of common stock. In March 1997, the Senior Bank Facilities were amended to reduce interest rates, increase the amount available under our revolving credit facility to $250 million from $100 million and change covenants to allow more flexibility in uses of free cash flow for acquisitions, capital expenditures and restricted payments. In 1997, Blackstone sold about 14% of the then outstanding common stock in a secondary public offering. Concurrently with the offering, we repurchased 1,300,000 shares of common stock from Blackstone for $48 million. This repurchase constituted part of a previously announced stock repurchase program. After the offering and the repurchase, Blackstone ceased to be a principal stockholder of UCAR. In 1997, UCAR's Board of Directors authorized a program to repurchase up to $200 million of common stock at prevailing prices from time to time in the open market or otherwise depending on market conditions and other factors, without any established minimum or maximum time period or number of shares. UCAR purchased an aggregate of $92 million of common stock (including common stock repurchased from Blackstone) under this program. The last repurchase was made in 1997. We do not expect to repurchase additional common stock under this program in the near term. ACQUISITION OF MINORITY INTERESTS AND INTEREST IN JOINT VENTURE Affiliate. In 1995 and 1996, we acquired substantially all of the shares of our then 54%-owned Brazilian subsidiary that were owned by public shareholders in Brazil for an aggregate purchase price of $55 million, plus expenses. In April 1997, we acquired the outstanding shares of our then 50%-owned South African affiliate from Samancor Limited, our then joint venture partner in South Africa. The purchase price was $75 million, plus expenses. 12 We believe that these acquisitions have enabled us to better integrate worldwide operations, to recognize production efficiencies at various manufacturing facilities, to lower average companywide cost of sales and to better capture and manage cash flow from operations of these subsidiaries. ACQUISITIONS IN RUSSIA AND GERMANY. In late 1996, 1997 and early 1998, we acquired 99% of the equity of our Russian subsidiary. The aggregate investment was $57 million, plus expenses. In February 1997, through a newly formed 70%-owned German subsidiary, we acquired the graphite electrode business of Elektrokohle Lichtenberg AG. The 30% minority interest in our German subsidiary was held by a private company based in Germany not engaged in the graphite electrode business. The aggregate purchase price paid by our German subsidiary for the acquired assets was $15 million, consisting of $3 million for equipment and $12 million for working capital, plus expenses. We acquired our Russian and German subsidiaries to expand geographically. While we have been a supplier to Eastern Europe for over 25 years, we believed that these acquisitions would increase our market penetration in Eastern Europe, Russia and the other countries of the former Soviet Union, and the Middle East. In addition, many of the electric arc furnace steel producers in these markets consume lower quality graphite electrodes. Accordingly, sales by these two subsidiaries of their lower quality electrodes would generally be additive to sales made by our other subsidiaries, which continued to export ultra-high-power graphite electrodes to their existing customer base in these regions. The market for graphite electrodes in these regions has not grown as rapidly as we expected at the time of these acquisitions due primarily to global and regional economic conditions. In addition, Russia has been experiencing a continued economic crisis since at least August 1998, including the devaluation of its currency. In response, as part of our global restructuring and rationalization plan, we are closing the manufacturing operations of our German subsidiary and downsizing the manufacturing operations of our Russian subsidiary. After full implementation of the plan, our Russian subsidiary will have capacity to finish the manufacturing of about 10,000 metric tons of electrodes annually. It will be supplied with partially manufactured electrodes primarily by our Spanish subsidiary. ACQUISITION OF ADDITIONAL CATHODE PRODUCT MANUFACTURING OPERATIONS. In January 1997, we acquired 70% of the outstanding shares of Carbone Savoie, previously a wholly owned subsidiary of Pechiney S.A. The purchase price was $33 million, plus expenses. Carbone Savoie has facilities in Notre Dame and Venissieux, France. As a result of the acquisition, we are the largest manufacturer of cathodes in the free trading markets and we are allied with Aluminium Pechiney S.A. Aluminium Pechiney S.A. is one of the world's leading producers of aluminum and the leading supplier of smelting technology to the aluminum industry. Aluminium Pechiney S.A. is developing the use of graphite cathodes (instead of carbon cathodes) in its aluminum smelting technology. We believe that this development allows for substantial improvement in process efficiency. The graphite cathodes will be used by Aluminium Pechiney S.A. in its own plants and will be marketed to its licensees as well as to third parties. We believe that joint development efforts combining Aluminium Pechiney S.A.'s smelting technology and our graphite technology and expertise in high temperature industrial applications should result in process improvements in aluminum smelting. 13 RESTRUCTURING, RE-ENGINEERING AND OTHER PROJECTS. We have implemented several successful restructuring and re-engineering projects since the mid-1980s. These projects have eliminated work, improved operating efficiency and reduced costs. Since 1997, we have undertaken, with the assistance of consultants, various projects to further integrate global operations. We estimate that costs associated with these projects will aggregate $18 million over a two-year period ending mid-1999. We also estimate that, under current conditions, these projects will have a pay-back period of two years ending in 2000. As part of our global restructuring and rationalization plan, we intend to implement more than 150 identified projects to improve plant operating efficiency. We believe that these projects will yield annual cost savings of about $37 million in 1999, $46 million in 2000 and $47 million in 2001 and thereafter. These projects will require capital expenditures of about $24 million. These projects relate to such areas as energy conservation, raw material substitution, yield improvement, reduction in labor by automation, maintenance savings and reduction in plant administration. PROPOSED DIVESTITURE. We are seeking to divest or joint venture part or all of our graphite and carbon specialties business (which is part of our graphite and carbon product business segment). In 1998, our graphite and carbon specialties business had net sales of about $120 million. It includes our carbon refractories and composite tooling businesses. Any or all three of these businesses could be divested or joint ventured, individually or in some combination. We will divest or joint venture these businesses only if we can do so on acceptable terms. If these businesses are fully divested, net cash proceeds are expected to far exceed the cash costs included in the 1998 third quarter write-off and the capital expenditures required to achieve the cost savings expected under our global restructuring and rationalization plan. Any joint venture would reduce or eliminate any immediate net cash proceeds. No assurance can be given that any joint venture or divestiture will be completed or as to the net proceeds from any joint venture or divestiture or the timing of completion. We have no commitments with respect to any joint venture or divestiture. CLOSURE OF CANADIAN MANUFACTURING OPERATIONS. As part of our new global restructuring and rationalization plan, we are permanently closing our manufacturing operations in Welland, Canada. These operations had capacity to manufacture about 23,000 metric tons of graphite electrodes annually as well as carbon and graphite cathodes. Cathodes will continue to be manufactured in North America at our facility in Columbia, Tennessee. We expect to complete the closure in the second quarter of 1999. MARKETS AND INDUSTRY OVERVIEW We estimate that, in 1998, the worldwide market for graphite and carbon products was about $3 billion. These products are sold primarily to customers in the steel, silicon metal, ferronickel, thermal phosphorous and aluminum industries. Customers in these industries are located in virtually every industrialized country in the world. 14 USE OF GRAPHITE ELECTRODES IN ELECTRIC ARC FURNACES. There are two primary technologies for steelmaking: basic oxygen furnace steel production; and electric arc furnace steel production. Electric arc furnace steelmakers are called "market mills" or "mini-mills" because of their smaller capacity as compared to basic oxygen furnace steelmakers. Graphite electrodes are used primarily in electric arc furnace steel production. They are also used to refine steel in ladle furnaces and in other refining processes such as production of titanium dioxide. Electric arc furnaces typically range in size from those which produce about 25 metric tons of steel per production cycle to those which produce about 150 metric tons per production cycle. Graphite electrodes act as conductors of electricity into the furnace, generating sufficient heat to melt scrap metal or other material used to produce steel. The graphite electrodes are gradually consumed in the course of the steel production. Electric arc furnaces operate using either alternating or direct electric current. 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 depend 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 produced. 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 required in an electric arc furnace. Therefore, graphite electrodes are essential for electric arc furnace steel production. HISTORICAL GROWTH OF ELECTRIC ARC FURNACE STEEL PRODUCTION AND RECENT DEVELOPMENTS. Electric arc furnace steel production has, for many years, been the growth sector of the steel industry. There are currently in excess of 2,000 electric arc furnaces operating worldwide. Worldwide electric arc furnace steel production grew from 113 million metric tons (about 18% of total steel production) in 1975 to 271 million metric tons (about 34% of total steel production) in 1997, according to Company and industry estimates. We estimate that steelmakers worldwide added net new electric arc furnace steel production capacity of about 18 million metric tons in 1996, about 16 million metric tons in 1997 and about 19 million metric tons in 1998. For the two decades ended 1997, worldwide electric arc furnace steel production had experienced only two relatively minor downturns. Each of these downturns lasted for about one year. As a result of the global economic conditions which began in late 1997 and continue to date, there was a decline in electric arc furnace steel production to about 260 million metric tons (about 34% of total steel production) in 1998, according to Company and industry estimates. We believe that some previously announced additions to electric arc 15 furnace steel production capacity which had been scheduled for start-up in 1998 have been delayed or cancelled and we estimate that net new capacity added in 1998 was only 19 million metric tons. Further, we believe that a portion of the net new capacity added in the last three years has not yet become fully operational. RELATIONSHIP BETWEEN GRAPHITE ELECTRODE DEMAND AND ELECTRIC ARC FURNACE STEEL PRODUCTION. We believe that the worldwide growth in electric arc furnace steel production has been due primarily to improvements in the cost effectiveness and operating efficiency of electric arc furnace steelmaking. We believe that growth has also been due to the fact that, as a result of recent technical advances, electric arc furnace steelmakers are capable of producing nearly all of the product lines available from basic oxygen furnace steelmakers. Developments in electric arc furnace steelmaking that we believe improved average cost effectiveness and operating efficiency include: o Changes in equipment design and production processes stemming from the now largely completed conversion of furnaces from a refractory lined system to a water cooled system, which sharply reduced specific consumption. o Use of higher quality scrap metals and other raw materials. o Improvements in the size, strength and quality of graphite electrodes (including those developed by us). This improved efficiency resulted in a decrease in specific consumption. We estimate that specific consumption in the free trading markets declined from about 6.4 kilograms of graphite electrodes per metric ton of steel produced in 1974 to about 2.5 kilograms per metric ton in 1997. We believe that, on average, as the costs (relative to the benefits) increase for electric arc furnace steelmakers to achieve significant further efficiencies in electric arc furnace graphite electrode consumption, the decline in specific consumption will continue at a more gradual pace. We further believe that the rate of decline in the future will be impacted by the addition of new electric arc furnace steelmaking capacity. To the extent that this new capacity replaces old capacity, it has the effect of reducing industrywide specific consumption due to the efficiency of new electric arc furnaces. To the extent this new capacity increases industrywide electric arc furnace steel production capacity, it creates additional demand for graphite electrodes. During the period from the early 1990s through late 1997, increased levels of electric arc furnace steel production more than offset the decrease in specific consumption. This resulted in increased demand for graphite electrodes. In addition, since the mid-1980s, there has been a consolidation in the number of graphite electrode producers and a reduction in graphite electrode manufacturing capacity in the free trading markets. We believe that, during the mid-1990s, capacity and demand were in relative balance in the free trading markets. Throughout 1998 and continuing into 1999, global economic conditions have adversely impacted steel production, including steel produced in electric arc furnaces. As a result, demand for graphite electrodes declined through 1998. In response, as part of our global restructuring and rationalization plan, we are 16 reducing our annual graphite electrode manufacturing capacity by about 30,000 metric tons. We believe that this reduction represents about 4% of estimated graphite electrode manufacturing capacity in the free trading markets. We are not aware of any construction of new graphite electrode manufacturing facilities anywhere in the free trading markets. Two of our competitors have announced their intention to reduce their annual graphite electrode manufacturing capacity. Their announced reductions total more than 28,000 metric tons. During the period from the early 1990s through late 1997, there was a significant improvement in pricing of graphite electrodes in the free trading markets. Since mid-1998, there has been downward pressure on graphite electrode pricing. We estimate that the average cost of graphite electrodes represents about 3% of the cost of producing steel in an electric arc furnace. We estimate that, in 1998, the worldwide market for graphite electrodes was about $2.7 billion. OUR GRAPHITE ELECTRODE MARKET SHARE. We estimate that about two-thirds of electric arc furnace steelmakers in the free trading markets and about 85% of electric arc furnace steelmakers in the home markets purchased graphite electrodes from us in 1998. We further estimate that, in 1998, we supplied about 38% of all graphite electrodes purchased in the home markets and about 29% of those purchased in the free trading markets. Sales of graphite electrodes in the home markets accounted for about 50% of our net sales in 1998. We estimate that, in 1998, (i) sales in the United States accounted for about 23% of our total net sales of graphite electrodes and (ii) we sold graphite electrodes in over 80 countries, with no other country accounting for more than 10% of our total net sales of graphite electrodes. We estimate that we supplied all or a portion of the graphite electrodes consumed by about 50% of the new electric arc furnaces which commenced operation during the past three years. OUTLOOK FOR GRAPHITE ELECTRODES. During the past three years, we estimate that an aggregate of about 52 million metric tons of net new electric arc furnace steelmaking capacity was added. We are aware of about 44 million metric tons of announced net new electric arc furnace production capacity that is scheduled to start-up through the year 2001. This includes those announced additions to capacity which had been scheduled to start up in 1998 or earlier, but have been delayed. It excludes those which have been cancelled. Notwithstanding the growth in capacity, as a result of global economic conditions, steel production, including steel produced in electric arc furnaces, has declined since mid 1997. As a result, demand for and prices of graphite electrodes have declined. While we have seen some signs of a possible improvement, that improvement has not yet materialized in increased orders for graphite electrodes. We cannot predict either the timing or extent of changes in global economic conditions. If, however, global economic conditions in the future over the long term are 17 similar to those of the past two decades, we believe that worldwide production of steel in electric arc furnaces will continue to grow over the long term at its historical trendline annual growth rate of 4% and that, as a result, worldwide demand for graphite electrodes will grow over the long-term at an average annual rate of 1% to 2%. CARBON ELECTRODES. Carbon electrodes are used primarily to produce silicon metal, which is used in the manufacture of aluminum. Carbon electrodes are used and consumed in a manner similar to that of graphite electrodes, although at lower temperatures and with different consumption rates. We estimate that demand for carbon electrodes in the free trading markets declined by about 10% to about 63,000 metric tons in 1998. We believe that the decline was due primarily to the impact of global economic conditions on the production of silicon metal. We estimate that, in 1998, we sold about 39% of the carbon electrodes purchased in the free trading markets. We estimate that, in 1998, the worldwide market for carbon electrodes was about $130 million. We are the only major manufacturer of carbon electrodes in North and South America. CATHODES. Cathodes consist primarily of blocks used as lining for furnaces used to smelt aluminum. In a typical smelting furnace operating at a typical rate and efficiency of production, the cathodes must be replaced every 5 to 6 years. We believe that demand for cathodes in the free trading markets will grow over the long term at an average annual growth rate of about 3%, similar to the aluminum industry growth rate. We also believe that the demand for graphite cathodes will exceed that of carbon cathodes as new smelting furnaces are built and existing smelting furnaces are converted from carbon to graphite cathodes. We estimate that, in 1998, we sold about 31% of the carbon and graphite cathodes sold in the free trading markets. We estimate that, in 1998, the worldwide market for graphite and carbon cathodes was about $220 million. OTHER PRODUCTS. Our other products include flexible graphite (which is marketed under the trademark GRAFOIL(R)), graphite and carbon specialties (which include refractories and composite tooling), and systems and components for steelmaking furnaces. Flexible graphite is used in the manufacture of internal combustion engines for the automotive and other industries and in the chemical and petrochemical industries. The volume of flexible graphite sold has grown at an average annual rate in excess of 10% over the past 10 years, due primarily to demand for a high quality sealing material to replace asbestos and to a decline in prices resulting from reduced manufacturing costs as a result of improvements in manufacturing processes. Our graphite and carbon specialties are used in the metals, chemicals, transportation, energy, semiconductor and aerospace industries. MANUFACTURING PROCESSES 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). 18 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 1,700 degrees Fahrenheit in specially designed furnaces to carbonize the pitch. 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 carbonize the pitch, thereby adding strength to the electrodes. GRAPHITIZING. Using a process which 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. Carbon electrodes and graphite and carbon cathodes are manufactured by a comparable process (excluding, in the case of carbon electrodes and cathodes, impregnation and graphitization). Graphite and carbon specialties are made by a process similar to the process for manufacturing electrodes but using different mixtures of raw materials and different processing time periods. Flexible graphite is made from mined natural graphite flake that is acid treated, heat treated and rolled into sheets of desired thickness and width. We use robotics and statistical process controls in manufacturing processes and have a total quality control program which involves significant in-house training. 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. We utilize "pipeline" or "just-in-time" manufacturing systems at most of our electrode and cathode manufacturing facilities. These controls, programs and systems have improved product quality, reduced waste in the manufacturing process, resulted in more efficient utilization of manufacturing personnel and equipment, improved efficiency in customer order processing and reduced inventory requirements. Major maintenance at our facilities is conducted on an ongoing basis. Manufacturing operations at any facility may be subject to curtailment due to new laws or regulations, changes in interpretations of existing laws or regulations or changes in governmental enforcement policies. 19 The closure of our manufacturing operations in Canada and Germany and the downsizing of our manufacturing operations in Russia will reduce our graphite electrode manufacturing capacity by about 11%. After the closures, we will have capacity to manufacture about 245,000 metric tons of graphite electrodes annually. We have the capacity to manufacture about 30,000 metric tons of carbon electrodes annually and about 40,000 metric tons of cathodes annually. The following table sets forth certain information regarding our sales volumes: FOR THE YEAR ENDED DECEMBER 31, -------------------------------- 1996 1997 1998 ---- ---- ---- (In metric tons) Volume of graphite electrodes sold(a).........231,000 250,000 211,000 Volume of carbon electrodes sold.............. 30,000 28,000 25,000 - --------------- (a) Includes volume of graphite electrodes sold by our South African subsidiary both before and after its acquisition in April 1997. The results of such subsidiary are not consolidated in the Consolidated Financial Statements before that date. START After the closures and downsizing described above, we will operate 15 manufacturing facilities and three machine shops located in Brazil, England, France, Italy, Mexico, Russia, South Africa, Spain and the United States. Graphite electrodes are manufactured in each country (other than England) in which we have a manufacturing facility. Through restructuring and re-engineering projects, we have sought to modularize our graphite electrode manufacturing capacity. This enables us to seek to incrementally adjust capacity in use, as well as related costs, to accommodate anticipated normalized changes in sales volume. We believe that our modular facilities together with the diverse worldwide locations of our manufacturing operations position us to minimize impacts from various negative trends, and to benefit from various positive trends, in the graphite electrode industry. We also believe that we have adequate existing permanent capacity to meet any increased demand over the near term. Further, under current conditions, we are able to incrementally add new permanent capacity at our existing manufacturing facilities, when and as required, at an initial investment of less than $1,000 per annual metric ton. Carbon electrodes are manufactured in the United States. After the closures described above, graphite and carbon cathodes will be manufactured in Brazil, France and the United States. Graphite and carbon specialties are manufactured in France and the United States. Flexible graphite is manufactured in the United States. 20 PRODUCTS GRAPHITE ELECTRODES. Our principal products are graphite electrodes. Graphite electrodes are consumed primarily in the production of steel in electric arc furnaces. They are also used to refine steel in ladle furnaces and in other refining processes. 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 scrap metal, iron ore or other raw materials for processing into ingots or semi-finished continuously cast shapes. That heat is generated by graphite electrodes as electricity (as much as 150,000 amps) passes through them and creates an electric arc between the graphite electrodes and the raw materials. The graphite electrodes are gradually consumed in the production process. We believe that we provide the broadest range of sizes in graphite electrodes and that the quality of our graphite electrodes is equal to or better than that of comparable products of any other manufacturer. We also believe that there are presently no commercially viable substitutes for graphite electrodes in electric arc furnace steelmaking. OTHER PRODUCTS. We manufacture carbon electrodes. Carbon electrodes are consumed primarily in the production of silicon metal and also in the production of ferronickel and thermal phosphorous. The production of these materials involves processes similar to the production of steel in electric arc furnaces, but at lower temperatures. We manufacture carbon and graphite cathodes. Cathodes consist primarily of blocks used as liners for, and acting as conductors of electricity in, aluminum smelting furnaces. In addition, we manufacture flexible graphite which is used primarily to make gaskets for internal combustion engines, pipe flanges and other industrial applications. We manufacture graphite and carbon specialties for use in the metals, chemicals, transportation, energy, semiconductor and aerospace industries. Our graphite specialties consist primarily of molded and extruded graphite shapes sold to specialty machine shops and end users for machining and, to a lesser extent, molds, insulation substrates and other machined products. Most of these machined products are manufactured for specific applications or to meet customer specifications. Our carbon specialties consist primarily of carbon refractories which are used as lining for blast furnaces. In addition, we manufacture tooling made from graphite blocks. We sell proprietary water spray cooling systems and components for steelmaking furnaces, exhaust systems and other high temperature applications. These systems and components, designed by us, were first sold in 1986 and are fabricated by third party contractors in the United States and various other countries. We believe that our systems represent a significant improvement over prior technologies. The improvement results from both the increased life of furnace components resulting from the improved cooling processes and the reduction in maintenance down time resulting from various design improvements. 21 RAW MATERIALS AND SUPPLIERS The primary raw materials for graphite electrodes, graphite cathodes and graphite specialty products are petroleum cokes (needle coke for electrodes and regular grades for cathodes and specialty products), coal tar pitch and petroleum pitch. The primary raw materials for carbon electrodes, carbon cathodes and carbon specialty products are anthracite coal and coal tar pitch and, in some instances, a petroleum coke-based material. The primary raw material for flexible graphite is natural graphite flake. We purchase our raw materials from a variety of sources and have no material long-term purchase contracts with respect to any raw materials. Over the past several decades, we have purchased a majority of our petroleum coke from multiple plants of a single major petroleum company and, since 1988, have done so pursuant to annual purchase arrangements. We believe that the quality of our raw materials is the highest available and that, under current conditions, our raw materials are available in adequate quantities at market prices. Electric power or natural gas used in manufacturing processes is purchased from local suppliers under short-term contracts or in the spot market. 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 governmental regulations, suppliers' allocations to meet the demands of other purchasers during periods of shortage (or, in the case of energy suppliers, extended cold weather), interruptions in production by suppliers, and market and other events and conditions. Over the past several years, we have mitigated the effect of raw material and energy price increases on our results of operations through a combination of improved operating efficiency, permanent on-going cost savings and, prior to 1998, passing such price increases on to customers. However, there can be no assurance that such measures will successfully mitigate future increases in the price of petroleum coke or other raw materials or energy. 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, would have a material adverse effect on us. SALES AND CUSTOMER SERVICE; RESEARCH AND DEVELOPMENT Our products are sold primarily by our direct sales force, which operates from more than 20 sales offices. Our direct sales force is supported by our customer technical service personnel, and, to a lesser extent, by independent sales agents, most of whom have worked with us for many years, in various countries outside the home markets. We have a global business with a diversified customer base. Sales of our products to customers outside the United States accounted for about 70% of our net sales in 1998. No single customer or group of affiliated customers accounted for more than 3% of our net sales in 1998. We have had, for many years, a strong commitment to provide a high level of technical service to customers, which supports our sales activities. We employ about 60 engineers to provide technical assistance to customers in, among other 22 things, all areas of electric arc furnace design and operation, electrode specification and use and related matters to maximize customer production and minimize customer costs. This technical assistance includes periodically monitoring certain customers' electric arc furnace efficiency levels via computer modem. Carbone Savoie has its own dedicated sales and customer service groups that work closely with Aluminium Pechiney S.A.'s sales and customer service groups to maximize use of their respective products and technologies. We conduct, at our dedicated technology centers and manufacturing facilities throughout the world, a focused technology program to improve product quality and manufacturing processes. This program, which is conducted both independently and in conjunction with suppliers, customers and others, was initiated in 1984. About 80 technical professionals are directly involved in this program. Their activities are integrated with the efforts of over 100 engineers at our manufacturing facilities who are focused on improving manufacturing processes. In addition, Carbone Savoie operates its own dedicated cathode technology center employing about 20 professionals. Developments by us include larger and stronger electrodes (increasing our ability to supply various "supersized" electrodes), new chemical additives to enhance raw materials used in graphite electrodes and new applications for water spray cooling technology, resulting in the development of safer, more cost-effective and more efficient electric arc furnace steel and graphite electrode production. We have received recognition for the high quality of our products under several programs around the world and have been awarded preferred or certified supplier status by many major steel and other manufacturing companies. Our research and development expenses (other than certain expenses at our manufacturing facilities, which are included in cost of sales) were $8 million in 1996, $9 million in 1997 and $9 million in 1998. DISTRIBUTION Our customers generally seek to negotiate electrode prices and anticipated volumes on an annual basis. Our customers then generally place orders for electrodes three to six months prior to the specified delivery date. Such orders are cancelable by the customer. Therefore, we manufacture electrodes and seek to manage electrode inventory levels to meet rolling sales forecasts. We generally seek to maintain an appropriately low level of finished electrode inventories, taking into account these factors and the length of electrode manufacturing cycles. Other products are generally manufactured or fabricated to meet customer orders. Accordingly, inventory levels will vary with demand for these finished products. Finished products are generally stored at our manufacturing facilities. We ship our finished products to customers primarily by truck and ship, using "just-in-time" techniques where practicable. Proximity of manufacturing facilities to customers can provide a competitive advantage in terms of cost of delivery of electrodes to customers. The significance of these costs is affected by fluctuations in exchange rates, 23 methods of shipment, import duties and whether the manufacturing facilities are located in the same economic trading region as the customer. We believe that we are generally better positioned in terms of such proximity than our major competitors to supply graphite electrodes to the free trading markets. PATENTS AND TRADEMARKS We own or have obtained licenses to various domestic and foreign patents, patent applications and trademarks related to our products, processes and business. These patents expire at various times over the next 20 years. While these patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us. The tradename and trademark UCAR are owned by Union Carbide and licensed to us on a royalty-free basis under a license expiring in 2015, which license automatically renews for successive ten-year periods and permits non-renewal by Union Carbide commencing after the first ten-year renewal period upon five years' notice of non-renewal. The tradename and trademark CARBONE SAVOIE is owned by Carbone Savoie and used in connection with cathodes manufactured by it. It is a registered trademark in Europe. The trademark GRAFOIL(R) is owned by us and used in connection with flexible graphite manufactured by us. It is registered in the United States and elsewhere. These tradenames and trademarks are the only ones which are material to us. COMPETITION GRAPHITE ELECTRODES. There are 10 manufacturers of graphite electrodes in the free trading markets. We believe that we are the largest and SGL Carbon AG is the second largest. We estimate that we supplied about 38% of the graphite electrodes purchased in the home markets in 1998 and that we supplied about 29% of those purchased in the free trading markets in 1998. Other manufacturers of graphite electrodes include: SGL Carbon AG (whose plants are located in North America and Europe); The Carbide/Graphite Group, Inc. (whose plants are located in the United States); and four manufacturers in Japan (one of whom, Showa Denko Carbon, Inc., has a plant located in the United States). There are also government-controlled and independent graphite electrode manufacturers in the non-free trading markets. They generally provide less reliable delivery and produce lower quality products (with higher rates of breakage and specific consumption) for use in their respective countries and in countries which are their traditional trading partners. Most of these countries and partners are generally net importers of graphite electrodes. The pending antitrust investigations, lawsuits and claims are likely to have a material impact on the graphite electrode industry. We believe that, at a minimum, these impacts will include increased debt or cost burdens, or both, for the manufacturers named above. In December 1998, the U.S. subsidiary of SGL Carbon AG commenced a proceeding for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In its petition commencing the proceeding, the subsidiary 24 alleges that antitrust claims by steelmakers are unreasonable and, if allowed to proceed without reduction or delay, would render it unable to meet its obligations. It is possible that other competitors could commence similar proceedings. It is also possible that, as a result of these proceedings or the increased debt or costs mentioned above, one or more of our competitors could divest graphite electrode manufacturing facilities. This could increase the number or change the capabilities of our competitors. It is not uncommon for companies subject to such proceedings to enjoy, at least temporarily, a cost advantage as compared to their competitors. This advantage may enable them to compete more aggressively on price. While we cannot predict all of the possible impacts from these external circumstances, we believe that there will be increasing competition, particularly price competition, in the graphite electrode industry. In addition to the external circumstances described above, our competitive position in the industry could be impacted by internal circumstances. These include decisions by us with respect to maintaining profit margins rather than market share or other competitive or market strategies. All of the circumstances described above could adversely affect our market share or results of operations. They could also affect our ability to institute price increases or compel us to reduce prices or increase spending on research and development or marketing and sales, all of which could adversely affect us. OTHER PRODUCTS. There are two significant manufacturers of carbon electrodes in the world (excluding the government-controlled and independent manufacturers in the non-free trading markets). We believe that we are the largest and SGL Carbon AG is the second largest. We estimate that we supplied about 39% of the carbon electrodes purchased in the free trading markets in 1998. There are eight manufacturers of cathodes in the world (excluding the government- controlled and independent manufacturers in the non-free trading markets). We believe that we are the largest and SGL Carbon AG is the second largest. We estimate that we supplied about 31% of the cathodes purchased in the free trading markets in 1998. With respect to our other products, we compete with other graphite and carbon product manufacturers as well as manufacturers of non-graphite or carbon products used for similar purposes. OTHER COMPETITIVE FACTORS. The manufacture of high quality graphite and carbon products is a mature, capital intensive business which requires extensive process know-how developed over years of experience working with the various raw materials and their suppliers, furnace manufacturers and steel or aluminum producers or other end users (including working on the specific applications for finished electrodes and cathodes). It also requires high quality raw material sources and a developed energy supply infrastructure. There have been no significant new entrants in the manufacture of these products since 1950. Accordingly, while no assurance can be given that such will be the case, we believe that it is unlikely that there will be significant new entrants in the manufacture of these products in the next several years. 25 ENVIRONMENTAL MATTERS Since the 1970s, a wide variety of federal, state, local and foreign laws and regulations relating to the storage, handling, generation, treatment, emission, release, discharge and disposal of certain substances and wastes have been adopted. These laws and regulations (and the enforcement thereof) are periodically changed. We are subject to many of these laws and regulations. Certain of our facilities have experienced some level of regulatory scrutiny, have been required to take remedial action and have incurred related costs in the past and may experience further regulatory scrutiny, be required to take further remedial action and incur additional costs in the future. Although this has not been the case in the past, these costs could have a material adverse effect on us in the future. The principal United States laws and regulations to which we are subject are described below. The Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Safe Drinking Water Act and similar state or local laws 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 ("SUPERFUND"), and similar state laws provide for responses to and liability for releases of hazardous substances into the environment. The Toxic Substances Control Act and related laws are designed to assess the risk of new products to health and to the environment at early developmental stages. In addition, 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 United States 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 risks arising from industrial activities having high potential impact on the environmental quality of the air, water and soil. Regulated activities include, among other things: use of hazardous substances; packaging, labeling and transportation of products; management and disposal of toxic wastes; discharge of industrial and sanitary wastewater; and 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. As a result of amendments to the Clean Air Act, enacted in 1990, certain of our facilities will be required to comply with new standards for air emissions to be adopted by the United States Environmental Protection Agency (the "USEPA") and state environmental protection agencies over the next several years pursuant to regulations that are currently being drafted or that have been promulgated. The regulations which have been promulgated will necessitate the installation of additional controls and/or changes in certain manufacturing processes in order for us to achieve compliance with these regulations. Based on information currently available to us, we believe that compliance with these regulations will not have a material adverse effect on us. 26 We have received and continue periodically to receive notices from 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 PRPs relative contribution of hazardous substances to the site. Based on information currently available to us, we believe that any potential liability associated with being named a PRP will not have a material adverse effect on us. We sold a plant in Niagara Falls, New York in 1986. Adjacent to the plant is a solid waste landfill. Ownership of the landfill was retained by us, and the landfill was closed by us in 1987 in accordance with a closure plan approved by the New York State Department of Environmental Conservation. In early 1991, the Department notified us that it was investigating the landfill as a former inactive hazardous waste site. In September 1997, the site was reclassified from a class 2a site (a site for which the Department has insufficient information to determine whether hazardous wastes or substances are present) to a class 4 site (a site properly closed and requiring continued management). To date, the costs associated with this site 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 of environmental protection 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 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 laws, the ultimate 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 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 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 which we believe appropriate as described above. There can be no assurance, however, that we will not incur losses beyond the limits of, or outside the coverage of, our insurance. We currently believe that recovery under our insurance, if any, will not materially offset liabilities which have or may become due in connection with antitrust investigations or related lawsuits or claims. 27 EMPLOYEES At December 31, 1998, we had 4,952 employees, of which 1,291 were in the United States, 2,082 were in Europe (including Russia), 882 were in Mexico and Brazil, 415 were in South Africa, 276 were in Canada and 6 were in the Asia Pacific region. At December 31, 1998, we had 3,463 hourly employees. About 64% of our employees are covered by collective bargaining or similar agreements which expire at various times in each of the next several years. At December 31, 1998, about 1,924, or 39%, of our employees were covered by agreements which expire, or are subject to renegotiation, at various times during the remainder of 1999 or the first quarter of the year 2000. We believe that 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. There can be no assurance, however, that renewed or extended agreements will be reached without a work stoppage or strike or will be reached on terms satisfactory to us. A prolonged work stoppage at any one of our manufacturing facilities could have a material adverse effect on 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 2. PROPERTIES We operate the following facilities, which are owned or leased as indicated.
OWNED OR LOCATION OF FACILITY PRIMARY USE LEASED -------------------- ----------- ------ UNITED STATES Irvine, California................... Machine Shop and Sales Office Leased Danbury, Connecticut................. Administrative Office Leased Niagara Falls, New York.............. Coal Calcining Facility Owned Cleveland, Ohio...................... Flexible Graphite Manufacturing Facility Owned and Sales Office Parma, Ohio.......................... Technology Center Owned Clarksville, Tennessee............... Electrode Manufacturing Facility and Owned Sales Office Columbia, Tennessee.................. Electrode and Cathode Manufacturing Owned Facility and Sales Office Nashville, Tennessee................. Corporate Headquarters and Sales Office Leased Lawrenceburg, Tennessee.............. Carbon Specialties Manufacturing Facility Owned Clarksburg, West Virginia............ Graphite Specialties Manufacturing Owned Facility and Sales Office INTERNATIONAL Salvador Bahia, Brazil............... Electrode and Cathode Manufacturing Owned Facility Sao Paulo, Brazil.................... Sales Office Leased Welland, Canada(a)................... Electrode and Cathode Manufacturing Owned Facility and Sales Office
28
OWNED OR LOCATION OF FACILITY PRIMARY USE LEASED -------------------- ----------- -------- Hong Kong, China..................... Sales Office Leased Notre Dame, France................... Electrode and Graphite Specialties Owned Manufacturing Facility and Sales Office Notre Dame, France................... Cathode Manufacturing Facility and Sales Leased Office Rungis, France....................... Sales Office Leased Venissieux, France................... Cathode Manufacturing Facility and Owned Technology Center Caserta, Italy....................... Electrode Manufacturing Facility Owned Malonno, Italy....................... Machine Shop Owned Milan, Italy......................... Administration and Sales Office Leased Monterrey, Mexico.................... Electrode Manufacturing Facility and Owned Sales Office Moscow, Russia....................... Sales Office Leased Vyazma, Russia....................... Electrode Manufacturing Facility Owned Singapore............................ Sales Office Leased Meyerton, South Africa............... Electrode Manufacturing Facility and Owned Sales Office Pamplona, Spain...................... Electrode Manufacturing Facility and Owned Sales Office Lausanne, Switzerland(b)............. Sales Office and European Headquarters Owned Sheffield, United Kingdom............ Machine Shop and Sales Office Owned
------------ (a) Until closure which is scheduled for the second quarter of 1999. (b) Sales office and European Headquarters are located in a leased facility in Gland, Switzerland and will be moved to Lausanne, Switzerland in 1999. 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 do not own any other properties which are material to our financial condition. ITEM 3. LEGAL PROCEEDINGS PUERTO RICAN FACILITY LITIGATION. In 1978, a lawsuit entitled ORTIZ ET AL. V. UNION CARBIDE GRAFITO, INC. was commenced in the Superior Court of Puerto Rico (the "SUPERIOR COURT") by persons residing near our former facility in Yabucoa, Puerto Rico alleging property damage and personal injury due to air emissions and noise from the facility and seeking damages. The defendant in the lawsuit is one of our wholly owned subsidiaries which owned the facility. The facility ceased operations in 1989 and was demolished in 1994. Our subsidiary had no other operations. In 1986, the complaint was dismissed as to about two-thirds of the 759 plaintiffs for failure to provide discovery. In 1987, the complaint was dismissed as to the remaining plaintiffs for failure to prosecute the lawsuit. Certain of the plaintiffs thereafter retained new counsel and filed a motion to set aside the 1986 and 1987 dismissals. That motion was denied by the trial court and an appeal was taken to the Supreme Court of Puerto Rico (the "SUPREME COURT"). In 1992, the Supreme Court remanded the case to the Superior Court for a hearing on whether the dismissals should be vacated on the ground that plaintiffs' former counsel had allowed the dismissals to occur due to fraud. The hearing was held in March and June 1995, and a decision was rendered in favor of our subsidiary. In March 1996, the plaintiffs filed a writ of appeal with the 29 Circuit Court of Appeals. The writ of appeal was dismissed on procedural grounds. In June 1996, the plaintiffs filed a petition for certiorari to the Supreme Court seeking review of the dismissal of such writ of appeal. The Supreme Court issued a writ of certiorari to review the dismissal. The writ of certiorari is still pending before the Supreme Court. We believe that the ultimate disposition of this lawsuit will not have a material adverse effect on us. Union Carbide and Mitsubishi have agreed to indemnify UCAR and Blackstone for any liabilities in excess of $20 million arising out of this lawsuit. ANTITRUST INVESTIGATIONS. On June 5, 1997, we were served with subpoenas issued by the United States District Court for the Eastern District of Pennsylvania (the "DISTRICT COURT") to produce documents to a grand jury convened by attorneys for the Antitrust Division of the DOJ and a related search warrant in connection with a criminal investigation as to whether there has been any violation of U.S. federal antitrust laws by producers of graphite electrodes. Concurrently, representatives of Directorate General IV of the European Union, the antitrust enforcement authorities of the European Union (the "EU AUTHORITIES"), visited offices of our French subsidiary for purposes of gathering information in connection with an investigation as to whether there has been any violation of Article 85-1 of the Treaty of Rome, the antitrust law of the European Union, by those producers. In October 1997, we were served with subpoenas by the DOJ to produce documents relating to, among other things, our carbon electrode and bulk graphite businesses. In December 1997, UCAR's Board of Directors appointed a special committee of outside directors, consisting of John R. Hall and R. Eugene Cartledge, to exercise the power and authority of UCAR's Board of Directors in connection with antitrust investigations and related lawsuits and claims. On March 13, 1998, effective immediately, Robert P. Krass, then Chairman of the Board, President and Chief Executive Officer, and Robert J. Hart, then Senior Vice President and Chief Operating Officer, retired and Mr. Krass resigned as a director. On April 7, 1998, pursuant to a plea agreement between the DOJ and UCAR, the DOJ charged UCAR and unnamed co-conspirators with participating from at least July 1992 until at least June 1997 in an international conspiracy involving meetings and conversations in the Far East, Europe and the United States resulting in agreements to fix prices and allocate market shares in the United States and elsewhere, to restrict co-conspirators' capacity and to restrict non-conspiring producers' access to manufacturing technology for graphite electrodes. In addition, on April 24, 1998, pursuant to the plea agreement, UCAR pled guilty to a one-count charge of violating U.S. federal antitrust laws in connection with the sale of graphite electrodes and was sentenced to pay a non-interest-bearing fine in the aggregate amount of $110 million. The fine is payable in six annual installments of $20 million, $15 million, $15 million, $18 million, $21 million and $21 million, commencing July 23, 1998. The agreement was approved by the District Court and, as a result, under the plea agreement, we will not be subject to prosecution by the DOJ with respect to any other violations of the U.S. federal antitrust laws occurring prior to April 24, 1998. The payment due July 23, 1998 was timely made. 30 In April 1998, we became aware that the Canadian Competition Bureau (the "COMPETITION BUREAU") had commenced a criminal investigation as to whether there has been any violation of Canadian antitrust laws by producers of graphite electrodes. In March 1999, pursuant to a plea agreement between the Company's Canadian subsidiary and the Competition Bureau, our Canadian subsidiary pled guilty to a one count charge of violating Canadian antitrust laws in connection with the sale of graphite electrodes and was sentenced to pay a fine of Cdn.$11 million. The plea agreement was approved by the court and, as a result, we will not be subject to prosecution by the Competition Bureau with respect to any antitrust violations occurring prior to the date of the plea agreement. The fine was timely paid. The guilty pleas make it more difficult for us to defend against other investigations as well as civil lawsuits and claims. In June 1998, we became aware that the Japanese Fair Trade Commission, the Japanese antitrust enforcement authority (the "JFTC"), had commenced an investigation as to whether there has been any violation of the Act Concerning the Prohibition of Private Monopolization and Maintenance of Fair Trade by producers and distributors of graphite electrodes. On January 14, 1999, we received a request from the JFTC to explain, in writing, the purpose of various alleged meetings which took place between us and other producers of graphite electrodes during the period from 1992 to the present. The Company believes that, among other things, it has good defenses to any claim that it is subject to the jurisdiction of these authorities and does not intend to comply with this request. The independent distributor of the Company's products in Japan has been required to produce documents and witnesses to the JFTC. In March 1998, the JFTC issued a "warning" letter against the four Japanese graphite electrode producers. While the JFTC did not issue a similar warning against the Company, the warning issued against the Japanese producers did reference UCAR as a member of an alleged cartel. We have been vigorously protecting, and intend to continue to vigorously protect, our interests in connection with the investigations described above. We may, however, at any time settle any possible unresolved charges. We are cooperating with the EU authorities in its investigation and with the DOJ and the Competition Bureau in their continuing investigations of other producers of graphite electrodes. In connection with these investigations, we have produced and are producing documents and witnesses. It is possible that antitrust investigations seeking, among other things, to impose fines and penalties against us could be initiated by authorities in other jurisdictions. ANTITRUST LAWSUITS. In 1997, UCAR and other producers of graphite electrodes were served with complaints commencing various antitrust class action lawsuits. Subsequently, the complaints were either withdrawn without prejudice to refile or consolidated into a single complaint in the District Court (sometimes called the "ANTITRUST CLASS ACTION LAWSUIT"). In the consolidated complaint to the antitrust class action lawsuit, the plaintiffs allege that the defendants violated U.S. federal antitrust laws in connection with the sale of graphite electrodes and seek, among other things, an award of treble damages resulting from such alleged violations. In August 1998, the District Court certified a class of plaintiffs consisting of all persons who purchased graphite electrodes in the United States (sometimes called the "CLASS") directly from the defendants during the period from July 1, 1992 through June 30, 1997 (sometimes called the "CLASS PERIOD"). 31 In 1998, UCAR and other producers of graphite electrodes were served with a complaint by 27 steelmakers in the United States commencing a separate civil antitrust lawsuit in the District Court (sometimes called the "OPT-OUT LAWSUIT"). In the complaint to the opt-out lawsuit, the plaintiffs allege that the defendants violated U.S. federal antitrust laws in connection with the sale of graphite electrodes and seek, among other things, an award of treble damages resulting from such alleged antitrust violations. In 1998, the UCAR Group, other producers of graphite electrodes, Union Carbide and Mitsubishi were served with a complaint by Nucor Corporation and an affiliate commencing a civil antitrust and fraudulent transfer lawsuit in the District Court (sometimes called the "NUCOR LAWSUIT"). In the complaint to the Nucor lawsuit, the plaintiffs allege that the defendants violated U.S. federal antitrust laws in connection with the sale of graphite electrodes and that Union Carbide and Mitsubishi violated applicable state fraudulent transfer laws. The complaint seeks, among other things, an award of treble damages resulting from such alleged antitrust violations and an order to have payments made by UCAR to Union Carbide and Mitsubishi in connection with the Recapitalization declared to be fraudulent conveyances and returned to UCAR for purposes of enabling UCAR to satisfy any judgments resulting from such alleged antitrust violations. In 1998, the UCAR Group and other producers of graphite electrodes were served with a petition by Chaparral Steel Company commencing a separate civil antitrust lawsuit entitled CHAPARRAL STEEL COMPANY, ET AL. V. SHOWA DENKO CARBON, INC., ET. AL. in the District Court of Ellis County, Texas (the "TEXAS lawsuit"). In the petition to the Texas lawsuit, the plaintiff alleges that the defendants violated Texas antitrust laws in connection with the sale of graphite electrodes and seeks, among other things, an award of treble damages resulting from such alleged violations. Certain other steelmakers in the United States and Canada have also served the UCAR Group with complaints commencing five separate civil antitrust lawsuits (four in the United States and one in Canada) in various courts (sometimes called the "OTHER LAWSUITS"). The UCAR Group and other producers of graphite electrodes have been named as defendants in some or all of the complaints. In the complaints to the other lawsuits, the plaintiffs allege that the defendants violated applicable antitrust laws (and applicable conspiracy laws, in the case of the lawsuit in Canada) in connection with the sale of graphite electrodes and seek, among other things, an award of treble damages (in the case of lawsuits in the United States) or actual and punitive damages (in the case of the lawsuit in Canada) resulting from such alleged violations. Each of the other lawsuits in the United States has been transferred to the District Court and consolidated with the antitrust class action lawsuit, the opt-out lawsuit and the Nucor lawsuit for purposes of discovery. We are aware of other antitrust lawsuits in the United States in which other producers of graphite electrodes (but not us) are defendants and that some of those lawsuits have been settled. In addition, all antitrust lawsuits against SGL Carbon Corporation, the U.S. subsidiary of SGL Carbon AG, have been stayed as a result of the filing on December 17, 1998 of a petition by SGL Carbon Corporation in the United States District Court for the District of Delaware for reorganization under Chapter 11 of the U.S. Bankruptcy Code. 32 In February 1999, the UCAR Group and other producers of graphite electrodes were served with a complaint by 23 steelmakers and related parties outside the United States commencing a separate civil antitrust lawsuit entitled FERROMIN INTERNATIONAL TRADE CORPORATION, ET. AL. VS. UCAR, ET. AL. in the United States District Court for the Eastern District of Pennsylvania (the "FOREIGN CUSTOMER LAWSUIT"). The plaintiffs allege that the defendants violated U.S. federal antitrust laws in connection with the sale of graphite electrodes sold or sourced from the United States and those sold and sourced outside the United States. The plaintiffs seek, among other things, an award of treble damages resulting from such alleged antitrust violations. We believe that, among other things, we have strong defenses against claims alleging that purchases of graphite electrodes outside the United States are actionable under U.S. federal antitrust laws. Certain steelmakers in other countries who purchased graphite electrodes from us, and certain customers who purchased other products from us, have threatened to commence antitrust lawsuits against us in the United States and in other jurisdictions. Through March 25, 1999, we have settled the antitrust class action lawsuit, the opt-out lawsuit, the Nucor lawsuit and, except as stated below, all of the other lawsuits (in Canada as well as in the United States), certain of the threatened lawsuits and certain antitrust claims by certain other steelmakers who negotiated directly with us. The settlements cover virtually all of the actual and potential claims against us (but not other defendants) by steelmakers in the United States and Canada arising out of alleged antitrust violations occurring prior to the date of the respective settlements in connection with the sale of graphite electrodes. The only material exceptions are the Texas lawsuit, the foreign customer lawsuit and possible claims by customers in the United States and Canada whose aggregate purchases do not constitute a material portion of our sales in those countries. Although each settlement is unique, in the aggregate they consist primarily of current and deferred cash payments with some product credits and, in a few instances, discounts. Through March 25, 1999, all payments due have been timely made. Through December 31, 1998, an aggregate of $145 million (including the DOJ payment) was paid. As of December 31, 1998 and based on information known to us at March 25, 1999, the aggregate amount remaining due under these settlements was about $29 million, most of which is payable in 1999. Amounts due under the settlement of the antitrust class action may be increased if additional claims are filed by members of the class or if it is determined that steelmakers outside the United States who purchased graphite electrodes sourced within the United States are members of the class and such steelmakers file claims thereunder. The Texas lawsuit and the foreign customer lawsuit have not been settled and are still in their early stages. We have been vigorously defending, and intend to continue to vigorously defend, against the Texas lawsuit and the foreign customer lawsuit as well as all threatened lawsuits and possible claims, including those mentioned above. We may at any time, however, settle the Texas lawsuit and the foreign customer lawsuit as well as any threatened lawsuits and possible claims and we are actively negotiating settlements which we consider fair and reasonable with customers who are not parties to any lawsuit to settle certain of these claims. 33 It is possible that additional civil antitrust lawsuits seeking, among other things, to recover damages could be commenced against us in the United States and other jurisdictions. We recorded a charge of $340 million against results of operations for 1997 as a reserve for potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. Actual liabilities and expenses could be materially higher than $340 million. To the extent that these liabilities and expenses are reasonably estimable, at March 25, 1999, we believe that $340 million continues to represent the best estimate of these liabilities and expenses. The fines and settlements described above are within the amounts we used to evaluate the $340 million charge. SHAREHOLDER DERIVATIVE LAWSUIT. On March 4, 1998, UCAR was served with a complaint commencing a shareholder derivative lawsuit entitled JAROSLAWICZ V. KRASS, ET AL. in the Connecticut Superior Court (Judicial District of Danbury). Messrs. Krass and Hart, William P. Wiemels, then Vice President and Chief Financial Officer, Peter B. Mancino, General Counsel, Vice President and Secretary, and Fred C. Wolf, then Vice President, Administration and Strategic Projects, together with Messrs. Cartledge and Hall, Robert D. Kennedy, current Chairman of the Board, and Glenn H. Hutchins, Howard A. Lipson, Peter G. Peterson and Stephen A. Schwarzman, former directors, are named as defendants. UCAR is named as a nominal defendant. On March 13, 1998, effective immediately, Messrs. Krass and Hart retired and Mr. Krass resigned as a director. On March 18, 1998, Mr. Kennedy was elected Chairman of the Board and Chief Executive Officer, Mr. Wiemels became Vice President and Chief Operating Officer and Mr. Wolf became Vice President and Chief Financial Officer. On October 1, 1998, Messrs. Wiemels and Wolf retired. The plaintiff named in the complaint is David Jaroslawicz. In the complaint, the plaintiff alleges that the defendants breached their fiduciary duties in connection with alleged non-compliance by the UCAR Group and its employees with antitrust laws. The plaintiff also alleges that certain of the defendants sold common stock while in possession of materially adverse non-public information relating to such non-compliance with antitrust laws. The complaint seeks recovery for UCAR of damages to the UCAR Group resulting from these alleged breaches and sales. In May 1998, UCAR and the individual defendants filed a motion to dismiss the complaint on the grounds that plaintiff failed to make a demand upon UCAR's Board of Directors prior to commencing the lawsuit and to sufficiently allege that such a demand would have been futile. In response to the motion, plaintiff requested and obtained court permission to file an amended complaint. The amended complaint was served in July 1998. In August 1998, UCAR and the individual defendants moved to dismiss the complaint on the same grounds. The motion has been fully briefed. This lawsuit is still in its early stages. This lawsuit is being pursued for recovery from the individual defendants on behalf of (and payable to) UCAR and any indemnification obligations which UCAR may have to the individual defendants would result from judgments or settlements in favor of UCAR. As a result, we believe that UCAR's ultimate exposure in this lawsuit is limited to expenses, including defense costs, and possibly reimbursement of certain plaintiff's attorneys' fees and expenses. 34 SECURITIES CLASS ACTION LAWSUIT. In April and May 1998, UCAR was served with complaints commencing securities class actions in the United States District Court for the District of Connecticut. The complaints have been consolidated into a single lawsuit entitled IN RE: UCAR INTERNATIONAL INC. SECURITIES LITIGATION and the Florida State Board of Administration has been designated as lead plaintiff (without prejudice to defendants' right to contest such designation on the basis that such plaintiff would not be an adequate class representative). A consolidated amended complaint was served in September 1998. The defendants named in the consolidated amended complaint are UCAR and each of Messrs. Krass, Hart, Mancino, Wiemels, Wolf, Hutchins, Lipson, Peterson and Schwarzman. The proposed class consists of all persons (other than the defendants) who purchased common stock during the period from August 1995 through March 1998. In the consolidated amended complaint, the plaintiffs allege that, during such period, the defendants violated U.S. federal securities laws in connection with purchases and sales of common stock by making material misrepresentations and omissions regarding alleged violations of antitrust laws. The plaintiffs seek, among other things, to recover damages resulting from such alleged violations. UCAR and each of the individual defendants has filed a motion to dismiss the consolidated amended complaint. This lawsuit is still in its early stages and no evaluation of liability or exposure related to this lawsuit can yet be made. As mentioned above, the guilty pleas make it more difficult for UCAR to defend against claims asserted against it. OTHER PROCEEDINGS. We are involved in various other legal proceedings incidental to the conduct of our business. While it is not possible to determine the ultimate disposition of each of these other proceedings, we believe that the ultimate disposition of these other proceedings will not have a material adverse effect on us. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 35 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The common stock is listed on the NYSE under the trading symbol "UCR." The closing sale price of the common stock was $17 13/16 on December 31, 1998, the last trading day of our last fiscal year. The following table sets forth, for the periods indicated, the high and low closing sales prices for the common stock as reported by the NYSE: HIGH LOW 1997: ---- --- First Quarter......................... $45 $36 7/8 Second Quarter........................ $49 1/8 $38 Third Quarter......................... $48 11/16 $42 1/2 Fourth Quarter........................ $50 1/4 $36 13/16 1998: First Quarter......................... $41 1/4 $27 1/2 Second Quarter........................ $35 1/8 $29 Third Quarter......................... $30 5/8 $12 1/4 Fourth Quarter........................ $20 7/16 $14 5/8 As of March 1, 1999, there were 72 record holders of common stock. We estimate that about 4,000 stockholders are represented by nominees. The common stock is included in Standard & Poor's 400 Mid-Cap Index. Effective August 7, 1998, UCAR 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. 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 36 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 UCAR 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. UCAR 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. For stockholders who owned more than 15% of the outstanding shares of common stock on August 7, 1998, the thresholds described above are 22.5% (and not 15%) of the outstanding shares of common stock. The preferred stock issuable upon exercise of Rights consists of Series A Junior Participating Preferred Stock, par value $.01 per share, of UCAR. In general, each share of that preferred stock will be entitled to a minimum preferential quarterly dividend payment equal to the greater of $10 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. DIVIDEND AND STOCK REPURCHASE POLICIES AND RESTRICTIONS It is the current policy of UCAR's Board of Directors to retain earnings to finance plans and 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 UCAR'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 Senior Bank Facilities and the Subordinated Note Indenture and other factors deemed relevant by UCAR's Board of Directors. We do not anticipate paying any cash dividends (or repurchasing any material amount of common stock) in the near term. UCAR is a holding company that derives substantially all of its cash flow from UCAR Global. Consequently, UCAR's ability to pay dividends or repurchase common stock is dependent upon the earnings of UCAR Global and its subsidiaries and the distribution of those earnings by UCAR Global to UCAR. Under the Senior Bank Facilities, UCAR is permitted to pay dividends on and repurchase common stock, and UCAR Global is permitted to pay dividends to UCAR for those purposes, only in an aggregate amount of up to $15 million in 1999 and $20 million in 2000 and thereafter. We are also permitted to repurchase common stock from present or former directors, officers or employees in an aggregate amount of up to the lesser of $5 million per year (with unused amounts permitted to be carried forward) or $25 million on a cumulative basis since October 19, 1995. In addition, UCAR Global is permitted to pay dividends to UCAR (i) in respect of UCAR's administrative fees and expenses and (ii) to fund payments in connection with antitrust investigations, lawsuits and claims and securities and shareholder derivative lawsuits and claims. The total amount of dividends to fund those payments, plus the total amount paid on intercompany debt owed to UCAR for the same purpose, may not exceed $400 million (adjusted for certain imputed interest expense). 37 The Subordinated Note Indenture restricts the payment of dividends by UCAR Global to UCAR if (i) at the time of the proposed dividend, Global is unable to meet certain indebtedness incurrence and income tests or (ii) the total amount of the dividends paid exceeds specified aggregate limits based on consolidated net income, net proceeds from asset and stock sales and certain other transactions. These restrictions are not applicable to dividends paid to UCAR (i) in respect of UCAR's administrative fees and expenses and (ii) to purchase common stock held by present or former officers or employees subject to limits similar to those under the Senior Bank Facilities. RECENT SALES OF UNREGISTERED SECURITIES In December 1998 and the first quarter of 1999, UCAR sold an aggregate of 222,909 shares of common stock to certain members of senior management under executive employee stock purchase programs adopted by UCAR's Board of Directors in September 1998. The shares were sold for an aggregate of $3,496,260. These sales were exempt from registration under Section 4(2) of the Securities Act of 1933 because the shares were sold in transactions not involving any public offering. ITEM 6. SELECTED FINANCIAL DATA The following selected annual consolidated financial data (excluding the "quantity of graphite electrodes sold") have been derived from the Consolidated Financial Statements at the dates and for the periods indicated, which have been audited by KPMG LLP as indicated in their reports thereon. The selected consolidated financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements at December 31, 1997 and 1998 and for each of the years in the three-year period ended December 31, 1998 and the related notes thereto included elsewhere in this Report.
FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- (Dollars in millions, except per share data) STATEMENT OF OPERATIONS DATA: Net sales.................................................. $ 758 $ 901 $ 948 $ 1,097 $ 947 Gross profit............................................... 243 345 365 411 343 Selling, administrative and other expenses............... 79 115 90 115 103 Restructuring charges(a)................................... - 30 - - 86 Impairment loss on Russian assets.......................... - - - - 60 Antitrust investigations and related lawsuits and claims(b).................. - - - 340 - Operating profit (loss).................................... 162 189 268 (58) 77 Interest expense........................................... 19 93 61 64 73 Income (loss) before extraordinary item.................... 100 25 145 (160) (30) Extraordinary item, net of tax(c).......................... - 37 - - 7 Net income (loss).......................................... 100 (12) 145 (160) (37)
38
FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- (Dollars in millions, except per share data) Earnings (loss) per common share: Basic: Income (loss) before extraordinary item............................... $2.77 $0.55 $3.15 $(3.49) $(0.66) Net income (loss).................................. $2.77 $(0.26) $3.15 $(3.49) $(0.83) ===== ====== ===== ====== ====== Weighted average common shares outstanding (in thousands)(d).................... 35,840 45,960 46,274 45,963 44,972 Diluted: Income (loss) before extraordinary item......................................... $2.77 $0.52 $3.00 $(3.49) $(0.66) Net income (loss).................................. $2.77 $(0.24) $3.00 $(3.49) $(0.83) ===== ====== ===== ====== ====== Weighted average common shares outstanding (in thousands)(d).................... 35,840 48,763 48,469 45,963 44,972
FOR THE YEAR ENDED DECEMBER 31, 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- (Dollars in millions, except per share data) BALANCE SHEET DATA (AT PERIOD END): Cash and cash equivalents................................. $ 60 $ 53 $ 95 $ 58 $ 58 Total assets.............................................. 818 904 1,017 1,262 1,137 Total debt................................................ 247 668 635 732 804 Stockholders' equity (deficit)............................ 218 (141) 17 (227) (287) Working capital........................................... 235 215 263 94 203 OTHER DATA: Gross profit margin...................................... 32.1% 38.3% 38.5% 37.5% 36.2% Operating profit (loss) margin........................... 21.4 21.0 28.3 (5.3) 8.1 Depreciation and amortization............................ $ 39 $ 38 $ 36 $ 49 $ 51 Capital expenditures..................................... 34 65 62 79 52 EBITDA (adjusted for non-cash restructuring charges and impairment loss) (e)................................... 201 249 304 (9) 217 Cash flow provided by (used in) operations............ 174 130 172 172 (29) Cash flow used in investing.............................. (56) (116) (104) (221) (31) Quantity of graphite electrodes sold (thousands of metric tons) (f)(g).................. 196 217 205 242 211
- -------------------------- (a) For 1995, represents costs recorded in connection with closing of graphite electrode operations at Columbia, Tennessee. These costs consisted primarily of write-offs of fixed assets and other shut down costs. For 1998, represents costs recorded in connection with closing graphite electrode operations in Welland, Canada and Berlin, Germany and the consolidation of certain corporate administrative offices. These costs consisted primarily of severance, write-offs of fixed assets, environmental and other shut down costs. (b) Represents estimated potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. 39 (c) The 1995 extraordinary item resulted from early extinguishment of debt in connection with a redemption of Subordinated Notes and a refinancing of bank credit facilities. The 1998 extraordinary item resulted from early extinguishment of debt in connection with the refinancing of the Senior Bank Facilities. (d) In 1994, reflects common shares outstanding prior to our initial public offering, adjusted for the effects of the January 26, 1995 and August 3, 1995 stock splits. In 1995 and all other years thereafter, reflects common shares and potential common shares outstanding after our initial public offering, including potential common shares calculated in accordance with the "treasury stock method," wherein the net proceeds from the exercise of potential common shares are assumed to be used to repurchase common shares at the average closing price for such year. (e) EBITDA, for this purpose, means operating profit (loss), plus depreciation, amortization, impairment loss and the portion of restructuring charges applicable to non-cash asset write-offs. The amount of restructuring charges applicable to non-cash asset write-offs was $22 million for 1995 and $29 million for 1998. We believe that EBITDA is generally accepted as providing useful information regarding a company's ability to service and incur debt. EBITDA should not be considered in isolation or as a substitute for net income, cash flows from continuing operations or other consolidated income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. This method for calculating EBITDA may not be comparable to other companies. (f) Excludes graphite electrodes sold by our South African subsidiary, before it became wholly owned on April 21, 1997, of 24,000 metric tons in 1994, 27,000 metric tons in 1995, 26,000 metric tons in 1996 and 8,000 metric tons in 1997. (g) The quantity of graphite electrodes sold in the first quarter of 1994 was impacted by customer buy-ins during the fourth quarter of 1993 in advance of price increases effective in January 1994 and the quantity of graphite electrodes sold in the fourth quarter of 1997 was impacted by customer buy-ins in advance of price increases effective in January 1998. 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 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements at December 31, 1997 and 1998 and for each of the years in the three-year period ended December 31, 1998 and the related notes thereto included elsewhere in this Report.
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- (Dollars in millions, except per share data) 1997: Net sales...................................... $ 238 $ 290 $ 278 $ 291 Gross profit................................... 88 110 104 109 Net income (loss)(a)........................... 37 42 37 (276) Basic net income (loss) per share.............. $0.79 $0.93 $0.80 $(6.07) Diluted net income (loss) per share............ $0.76 $0.89 $0.77 $(6.07) 1998: Net sales...................................... $ 244 $ 248 $ 233 $ 222 Gross profit................................... 93 96 82 72 Net income (loss)(b)(c)........................ 35 31 (113) 10 40 Basic income (loss) per share before extraordinary item............................ $0.77 $0.70 $(2.51) $0.39 Basic net income (loss) per share.............. $0.77 $0.70 $(2.51) $0.22 ===== ===== ====== ===== Diluted income (loss) per share before extraordinary item............................ $0.74 $0.67 $(2.51) $0.38 Diluted net income (loss) per share........... $0.74 $0.67 $(2.51) $0.22 ===== ===== ====== =====
- ---------------- (a) Includes a charge of $2 million ($1 million after tax) in the third quarter of 1997 and $338 million ($309 million after tax) in the fourth quarter of 1997 associated with estimated potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. (b) The third quarter of 1998 includes a restructuring charge of $86 million ($77 million after tax) recorded in connection with closing graphite electrode operations in Welland, Canada and Berlin, Germany and the consolidation of certain administrative offices and an impairment loss of $60 million ($58 million after tax) associated with our Russian operations. (c) The 1998 fourth quarter includes an extraordinary charge of $11 million ($7 million after tax) associated with early extinguishment of debt. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL COMPANY BACKGROUND. In 1995, UCAR International Inc. ("UCAR" and, together with its subsidiaries, the "UCAR GROUP," "WE" or "US") consummated a leveraged recapitalization (the "RECAPITALIZATION"), an initial public offering of common stock, a redemption of a portion of the subordinated notes (the "SUBORDINATED NOTES") issued in connection with the Recapitalization and a refinancing of the bank credit facilities established in connection with the Recapitalization with new senior secured bank credit facilities (the "SENIOR BANK FACILITIES"). In 1995 and 1996, we acquired substantially all of the shares of our Brazilian subsidiary owned by public shareholders in Brazil. In late 1996, 1997 and early 1998, we acquired substantially all of the equity of our Russian subsidiary. In 1997, we acquired 70% of the equity of Carbone Savoie S.A.S. ("CARBONE SAVOIE"). We also acquired, through a newly formed 70%-owned German subsidiary, the graphite electrode business of Elektrokohle Lichtenberg AG in Germany. In addition, we acquired the outstanding shares of our South African subsidiary held by our former 50%-joint venture partner in South Africa. These acquisitions were accounted for as purchases. In 1997, we refinanced the Senior Bank Facilities and repurchased $92 million of common stock. We also undertook, with the assistance of consultants, various projects to integrate global operations. We estimate that costs associated with these projects will aggregate $18 million over a two-year period ending mid-1999. We also estimate that, under current conditions, these projects will have a pay-back period of two years ending in 2000. Additionally, in 1997, UCAR's Board of Directors accelerated the vesting of outstanding performance stock options associated with 1998 performance targets which resulted in a non-cash charge of $12 million. 41 GLOBAL RESTRUCTURING AND RATIONALIZATION PLAN. In September 1998, UCAR's Board of Directors adopted a global restructuring and rationalization plan. The plan is intended to enhance stockholder value by focusing on optimizing margins, maximizing cash flow, generating growth in earnings and strengthening competitiveness through operating and overhead cost reduction and plant rationalization. The plan is also intended, over the long term, to strengthen our position as a low cost producer supplying the steel and metals industries and, over the near term, to respond to global economic conditions that are adversely impacting our customers. We believe that, under current conditions, the plan will have a positive impact on earnings in the second half of 1999. We estimate that the plan will generate permanent annual cost savings at a rate of about $80 million by the end of 1999, $111 million by the end of 2000 and $135 million by the end of 2001 and thereafter, reduce working capital needs and improve efficiencies. We anticipate achieving about $64 million of savings in 1999. The plan resulted in a 1998 third quarter restructuring charge of $86 million ($77 million after income tax). The restructuring charge includes $47 million for asset write-offs and related shut down costs, $30 million for employee severance and related benefit costs, and $9 million for postmonitoring and environmental clean-up costs. The plan also included the rationalization and downsizing of our Russian operations and we recorded an impairment loss on long-lived Russian assets of $60 million. The key elements of the plan consist of: o Rationalization of manufacturing operations, including closure of higher cost operations in Germany and Canada and downsizing of operations in Russia. We are reducing our annual graphite electrode manufacturing capacity by about 11%, or 30,000 metric tons. Our German operation manufactured "green" electrodes and had about 70 employees. Our Canadian operation manufactures graphite electrodes (with annual capacity of 23,000 metric tons) and carbon and graphite cathodes. It has about 280 employees. Cathodes will continue to be manufactured in North America at our manufacturing facility in Columbia, Tennessee. Our Russian operation will have its annual graphite electrode manufacturing capacity reduced to 10,000 metric tons from 17,000 metric tons. The closures and downsizing are expected to generate annual cost savings of about $24 million in 1999, $33 million in 2000 and $35 million in 2001 and thereafter. o Centralization and consolidation of administrative functions, including relocation of our corporate headquarters to Nashville, Tennessee and centralization of our European administrative activities in Lausanne, Switzerland, on a cost center basis. This includes the consolidation of finance and administrative functions, including accounting, treasury, information systems, accounts receivable/payable, purchasing and human resources, along with targeted outsourcing, to gain efficiencies. Our new 42 corporate headquarters in Nashville will be centrally located near our facilities in Clarksville, Columbia and Lawrenceburg, Tennessee. We believe that this centralization and consolidation will generate annual savings in total overhead (selling, administrative and other expense, research and development, and other expense (net)) of about $16 million in 1999, $26 million in 2000 and $30 million in 2001 and thereafter. We also believe that this centralization and consolidation will contribute to permanently reducing our effective annual income tax rate, which we believe will generate tax savings of about $3 million in 1999, $5 million in 2000 and $6 million in 2001. o Implementation of more than 150 identified projects to reduce cost and improve operating efficiencies. We believe that these projects will yield annual savings of about $37 million in 1999, $46 million in 2000 and $47 million in 2001 and thereafter, after initial capital expenditures of about $24 million. These projects relate to such areas as energy conservation, raw material substitution, yield improvement, reduction in labor by automation, maintenance savings and reduction in plant administration. This plan is expected to result in improved cash flow from operations. If this cash flow is used to reduce debt, it would result in interest savings of about $1 million by year 2000 and $17 million by year 2001. As part of the plan, we are seeking to divest or joint venture all or part of our graphite and carbon specialties business (which is part of our graphite and carbon products segment) on acceptable terms. No assurance can be given that any divestiture or joint venture will be completed or as to timing or terms of any such transaction. REFINANCING. In November 1998, the Senior Bank Facilities were refinanced and the indenture governing the Subordinated Notes (the "SUBORDINATED NOTE INDENTURE") was amended. In connection with the refinancing, we obtained additional term debt of $210 million. Following the refinancing, the covenants under the Senior Bank Facilities are more restrictive than they had been prior to the time when we recorded the $340 million charge described below. The covenants do, however, allow us to implement our global restructuring and rationalization plan. Further, the covenants do not restrict our ability to draw on our revolving credit facility unless payments and reserves with respect to the litigation matters described below exceed $400 million (adjusted for certain imputed interest expense). LITIGATION MATTERS. Since 1997, we have been served with subpoenas, search warrants and information requests by antitrust authorities in the United States and elsewhere in connection with investigations as to whether there has been any violation of antitrust laws by producers of graphite electrodes. In addition, antitrust class action and other civil lawsuits have been commenced and threatened against us and other producers of graphite electrodes in the United States and elsewhere. We recorded a charge against results of operations for 1997 in the amount of $340 million as a reserve for estimated potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. UCAR has also been named as a nominal defendant in a shareholder derivative lawsuit and is a defendant in a securities class action lawsuit, each of which is based, in part, on the subject matter of the antitrust investigations, lawsuits and claims. It is possible that antitrust investigations in other jurisdictions and additional civil lawsuits could be commenced. 43 In April 1998, pursuant to a plea agreement with the Antitrust Division of the United States Department of Justice (the "DOJ"), UCAR pled guilty to a one-count charge of violating U.S. federal antitrust laws in connection with the sale of graphite electrodes and was sentenced to pay a non-interest-bearing fine in the aggregate amount of $110 million, payable in six annual installments. In March 1999, pursuant to a plea agreement with the Canadian Competition Bureau, our Canadian subsidiary pled guilty to a one-count charge of violating Canadian antitrust laws in connection with the sale of graphite electrodes and was sentenced to pay a fine of Cdn.$11 million. The guilty pleas have made it more difficult to defend against other investigations, lawsuits and claims. Through March 25, 1999, we have settled virtually all of the actual and potential graphite electrode antitrust claims by steelmakers in the United States and Canada as well as antitrust claims by certain other steelmakers. In the aggregate, the fines and settlements are within the amounts we used for purposes of evaluating the $340 million charge. Actual liabilities and expenses could be materially higher than such charge. We do not believe that the outcome of the shareholder derivative lawsuit will have a material adverse effect on us. The securities class action is still in its early stages and no evaluation of potential liability can yet be made. GLOBAL ECONOMIC CONDITIONS. We are a global company and serve every geographic market worldwide. Accordingly, we are always impacted in varying degrees, both positively and negatively, as country or regional conditions affecting the markets for our products fluctuate. In 1996, most of the markets for our products were experiencing strong demand. The markets for graphite electrodes and certain of our other products in Western Europe were, however, experiencing weaker demand due to a regional economic downturn. In the aggregate, these circumstances positively impacted our results of operations for 1996. In 1997, the markets for our products in Western Europe began to experience stronger demand as that region began to recover from its economic downturn. Conversely, an economic downturn began in the Asia Pacific region. This downturn did not, however, materially affect the markets for our products until 1998. In 1998, the economic downturn in the Asia Pacific region directly or indirectly affected most of the worldwide markets for our products. This downturn has directly affected demand for steel and other metals in the Asia Pacific region. To the extent that certain regions (such as Eastern Europe, Africa, South America and the Middle East) were major exporters of steel and other metals to the Asia Pacific region, this downturn has also affected demand for their products. In some instances, those exporters have sought to sell their products in other regions (such as North America and Western Europe), thereby adversely affecting demand for steel and other metals produced in those other regions. All of these factors have resulted in a reduction in global demand for and production of steel and other metals. As a result, our customers have sought to reduce their inventories of supplies (such as inventories of electrodes) as well as reduce their production rates. All of these circumstances have adversely 44 affected demand for graphite electrodes and some of our other products. We also experienced downward pressure in certain markets on pricing of graphite electrodes and some of our other products beginning in early 1998. These circumstances negatively impacted our results of operations in 1998. While we have seen some signs of a possible improvement, that improvement has not yet materialized. In addition, in light of typical order patterns for graphite electrodes, we do not expect an improvement until the second half of 1999. We cannot predict the timing or extent of changes in future global economic conditions. If, however, global economic conditions in the future over the long term are similar to those of the past two decades, we believe that worldwide production of steel in electric arc furnaces will continue to grow over the long term at its historical compound average annual growth rate of 4% and that, as a result, worldwide demand for graphite electrodes will grow over the long term at an average rate of 1% to 2%. CURRENCY MATTERS. We sell our products in more than 80 countries in multiple currencies. The prices for our products in each currency are based on evaluations of the relevant exchange rates, the relationship among all of our prices in the various relevant currencies, and competitive and other factors. Price increases or discounts are instituted when, as and if local conditions permit or require. The impact on net sales of any price increase or discount in foreign currencies can be mitigated or exaggerated by changes in currency exchange rates. We enter into hedging transactions to reduce our exposure to changes in currency exchange rates. While most of our sales are made to customers in markets where local currencies are readily convertible into U.S. dollars, we make sales to customers in other markets, particularly countries in Eastern Europe, the Middle East and the Asia Pacific region. When we deem it appropriate, the terms of sale to customers in these markets require payment in U.S. dollars, deutsche marks or yen and may additionally require prepayment or delivery of a bank letter of credit or equivalent security for payment. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain items in the Consolidated Statements of Operations and the increase or decrease (expressed as a percentage of such item in the comparable prior period) of such items: 45
PERCENTAGE FOR THE YEAR ENDED INCREASE DECEMBER 31, (DECREASE) ------------ ---------- 1996 TO 1997 TO 1996 1997 1998 1997 1998 ---- ---- ---- ---- ---- (Dollars in millions) Net sales....................................... $948 $1,097 $947 16% (14)% Cost of sales................................... 583 686 604 18 (12) ---- ------- ----- -- ---- Gross profit.................................... 365 411 343 13 (17) Selling, administrative and other expenses...... 90 115 103 28 (10) Restructuring charges........................... -- -- 86 N/M N/M Impairment loss on Russian assets............... -- -- 60 N/M N/M Antitrust investigations and related lawsuits and claims............ -- 340 -- N/M N/M Operating profit (loss)......................... 268 (58) 77 N/M N/M
- ---------------------- N/M: Not Meaningful The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in the Consolidated Statements of Operations:
FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1996 1997 1998 ---- ---- ---- Net sales.................................................. 100.0% 100.0% 100.0% Cost of sales.............................................. 61.5 62.5 63.8 ----- ----- ----- Gross profit............................................... 38.5 37.5 36.2 Selling, administrative and other expenses................. 9.5 10.5 10.9 Restructuring charges...................................... -- -- 9.1 Impairment loss on Russian assets.......................... -- -- 6.3 Antitrust investigations and related lawsuits and claims....................... -- 31.0 -- Operating profit (loss).................................... 28.3 (5.3) 8.1
46 The following table sets forth, for the periods indicated, certain items in the Consolidated Statements of Operations and certain information as to gross profit margins related to our business segments:
GRAPHITE AND CARBON GRAPHITE ELECTRODE PRODUCTS BUSINESS SEGMENT SEGMENT FOR THE YEAR ENDED FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31, ------------ ------------ (Dollars in millions) (Dollars in millions) 1996 1997 1998 1996 1997 1998 ---- ---- ---- ---- ---- ---- Net sales..................................... $696 $788 $652 $252 $309 $295 Cost of sales................................. 412 479 405 171 207 199 ------ ------ ---- ----- ----- ----- Gross profit.................................. 284 309 247 81 102 96 Gross profit margin........................... 40.8% 39.2% 37.9% 32.1% 33.0% 32.5%
1998 COMPARED TO 1997. Net sales in 1998 were $947 million, a decrease of $150 million, or 14%, from net sales in 1997 of $1,097 million. Gross profit in 1998 was $343 million, a decrease of $68 million, or 17%, from gross profit in 1997 of $411 million. Gross profit margin in 1998 was 36.2% of net sales as compared to gross profit margin in 1997 of 37.5% of net sales. These changes were due primarily to changes in global economic conditions which reduced demand for steel and other metals. This, in turn, reduced demand for most of our products, particularly graphite electrodes. GRAPHITE ELECTRODE BUSINESS SEGMENT. Net sales in 1998 were $652 million, a decline of $136 million, or 17%, from net sales in 1997 of $788 million. The majority of this decline, about $98 million, was due to lower volume of graphite electrodes sold. Our volume of graphite electrodes sold declined 31,000 metric tons to 211,000 metric tons in 1998 from 242,000 metric tons in 1997. The average selling price (in U.S. dollars and net of changes in currency exchange rates) declined $110 per metric ton to $3,013 per metric ton in 1998 from $3,123 per metric ton in 1997. The reduction in selling price was primarily due to the stronger dollar in relation to the other currencies in which we sell graphite electrodes. The adverse impact of the currency translation was about $34 million in 1998. Cost of sales declined $74 million, or 15%, to $405 million in 1998 from $479 million in 1997. The reduction was due primarily to lower volume of graphite electrodes sold. This decline in volume adversely affected our capacity utilization rate, which typically has the effect of increasing cost of sales per metric ton sold since the same fixed costs must be absorbed by a smaller quantity of products. As a result of the changes described above, gross profit declined $62 million, or 20%, to $247 million in 1998 from $309 million in 1997 and gross profit margin decreased to 37.9% of net sales in 1998 from 39.2% of net sales in 1997. 47 GRAPHITE AND CARBON PRODUCTS BUSINESS SEGMENT. Net sales in 1998 were $295 million, a decline of $14 million, or 5%, from net sales in 1997 of $309 million. The majority of this decline, about $13 million, was due to lower volume of carbon refractories sold. Carbon refractories are used primarily as lining for blast furnaces. Blast furnace linings last for several years and demand for refractories fluctuates based on the cycle for lining replacements. In addition, net sales of graphite specialties declined $7 million due to lower demand from the semi-conductor, aerospace and aircraft industries. Net sales of carbon electrodes declined $5 million due to lower volume of carbon electrodes sold as a result of lower demand for silicon metals. These decreases were partially offset by a $9 million increase in net sales of cathodes. This increase was due to increased volume and prices of cathodes sold as a result of increases in aluminum production and increases in demand for graphite cathodes in lieu of carbon cathodes in certain smelting furnace relinings. Cost of sales declined $8 million, or 4%, to $199 million in 1998 from $207 million in 1997. The decline was due primarily to lower overall volume of products sold and, to a lesser extent, changes in product mix. As a result of the changes described above, gross profit declined $6 million, or 6%, to $96 million in 1998 from $102 million in 1997 and gross profit margin declined to 32.5% of net sales in 1998 from 33.0% of net sales in 1997. OPERATING PROFIT FOR THE UCAR GROUP. Operating profit in 1998 was $77 million as compared to an operating loss in 1997 of $58 million. Operating profit in 1998 was impacted primarily by restructuring charges of $86 million and impairment loss on Russian assets of $60 million. Operating profit in 1997 was impacted primarily by a charge of $340 million for estimated potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. Excluding those charges and impairment loss, operating profit would have been $223 million in 1998 as compared to $282 million in 1997, a decrease of $59 million. In addition, operating profit as a percentage of net sales would have been 24% in 1998 as compared to 26% in 1997. Excluding those charges and impairment loss, the change in operating profit was primarily due to decreases in gross profit. Selling, administrative and other expenses decreased $12 million, or 10%, to $103 million in 1998 from $115 million in 1997. The decrease was due to the non-cash charge for accelerated vesting of outstanding performance stock options of $12 million in 1997 which did not recur in 1998. Other expense (net) was $8 million in 1998 as compared to $5 million in 1997. The increase was primarily due to consulting fees associated with projects that we undertook to improve operating efficiency, integrate worldwide 48 operations and generate earnings growth. These fees totaled $9 million in 1998 as compared to $4 million in 1997. Interest income increased to $14 million in 1998 from $9 million in 1997, primarily because of higher average investment levels in Brazil. OTHER ITEMS AFFECTING THE UCAR GROUP. Interest expense increased to $73 million in 1998 from $64 million in 1997. In 1998, the average outstanding total debt balance was $783 million and the average annual interest rate was 8.8% inclusive of imputed interest of $5 million on the non-interest-bearing $110 million antitrust fine payable to the DOJ in six annual installments. In 1997, the average outstanding total debt balance was $726 million and the average annual interest rate was 8.9%. We incurred additional debt to finance a portion of the fines and settlements paid in connection with the antitrust investigations and related lawsuits and claims. Provision for income taxes was $32 million in 1998 as compared to $39 million in 1997. In 1998, the provision for income taxes was significantly higher than the amount computed by applying the United States federal income tax rate primarily due to the non-deductibility of the impairment loss, imputed interest expense associated with the antitrust fine, limited deductibility of certain antitrust settlements, foreign losses resulting from the restructuring charge which provided no tax benefit, other taxes related to the restructuring charge, and the generation of excess foreign tax credits where we consider utilization unlikely. This was partially offset by foreign earnings taxed at lower rates. 1997 COMPARED TO 1996. Net sales in 1997 were $1,097 million, an increase of $149 million, or 16%, from net sales in 1996 of $948 million. Gross profit in 1997 was $411 million, an increase of $46 million, or 13%, from gross profit in 1996 of $365 million. Gross profit margin in 1997 was 37.5% of net sales as compared to gross profit margin in 1996 of 38.5% of net sales. The increase in net sales and gross margin was primarily attributable to the acquisitions of Carbone Savoie and our Russian, German and South African subsidiaries (sometimes called the "ACQUIRED COMPANIES") in late 1996 and early 1997. The acquired companies added $140 million of the $149 million increase in net sales, after taking into account inter-company sales to them which would have been classified as third party sales prior to their respective acquisitions. These inter-company sales include sales of raw material, which were reduced by $13 million in 1997. The decrease in gross profit margin in 1997 as compared to 1996 was primarily due to our acquisitions of Carbone Savoie and our Russian and German subsidiaries, which have lower gross profit margins than our other subsidiaries. GRAPHITE ELECTRODE BUSINESS SEGMENT. Net sales in 1997 were $788 million, an increase of $92 million, or 13%, from net sales in 1996 of $696 million. The increase was primarily attributable to the acquired companies. Our volume of graphite electrodes sold in 1997 was 242,000 metric tons. Excluding the acquired companies, the volume of graphite electrodes sold increased 10,000 metric tons, or 5%, to 215,000 metric tons in 1997 from 205,000 metric tons in 1996, which added $31 million of net sales in 1997. This increase of 10,000 metric tons in the volume of graphite electrodes sold was primarily due to the economic recovery in Western Europe, purchases by certain customers in advance of 49 announced price increases effective January 1, 1998, or "customer buy-ins," and increased export shipments to the Asia Pacific and Middle East regions. Excluding the acquired companies, increases in the average selling price (in U.S. dollars and net of changes in currency exchange rates) added about $38 million to net sales in 1997. The Western European currencies weakened considerably in 1997 against the U.S. dollar. Accordingly, these price increases were more than offset by the negative impact of currency translation on net sales of graphite electrodes, which amounted to about $43 million. Costs of sales increased $67 million, or 16%, to $479 million in 1997 from $412 million in 1996. This increase was primarily due to the increase in volume of graphite electrodes sold. In addition, higher raw material costs and normal inflation in other costs were offset by cost reduction projects. Further, higher than anticipated costs related to our Russian subsidiary increased overall costs of sales. As a result of the changes described above, gross profit was $309 million, or 39.2% of net sales, in 1997 as compared to $284 million, or 40.8% of net sales, in 1996. GRAPHITE AND CARBON PRODUCTS BUSINESS SEGMENT. Net sales in 1997 were $309 million, an increase of $57 million, or 23%, from net sales of $252 million in 1996. The increase in net sales was primarily attributable to the acquired companies, which added net sales of $71 million after taking into account inter-company sales to the acquired companies which would have been classified as third party sales prior to their respective acquisitions. Excluding the acquired companies, our non-graphite electrode businesses remained relatively stable on a combined basis in 1997 as compared to 1996. A decline in volume of carbon electrodes and graphite specialties sold was offset by an increase in volume and prices of carbon refractories sold and a slight increase in net sales of flexible graphite. Cost of sales increased $36 million, or 21%, to $207 million in 1997 from $171 million in 1996. This increase was primarily due to the increase in volume of products sold. Higher unit cost of sales of the acquired companies and higher raw material costs were more than offset by cost improvement projects and changes in product mix. Gross profit was $102 million, or 33.0% of net sales, in 1997, up from $81 million, or 32.1% of net sales, in 1996. OPERATING LOSS FOR THE UCAR GROUP. Operating loss in 1997 was $58 million, a decrease of $326 million from operating profit of $268 million (28.3% of net sales) in 1996. Operating profit in 1997 was primarily impacted by a $340 million charge for estimated potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims, a $12 million non-cash charge for the accelerated vesting of outstanding performance stock options and $4 million of consulting fees associated with projects that we undertook to improve operating efficiency, integrate worldwide operations and generate earnings growth. Excluding the $340 million charge, operating profit would have been $282 million (25.7% of net sales) in 1997. Selling, administrative and other expenses were $115 million in 1997, an increase of $25 million, or 27.8%, from $90 million in 1996. Selling, administrative and other expenses in 1997 included the $12 million non-cash 50 charge for the accelerated vesting of outstanding performance stock options. Additionally, the acquired companies had selling, administrative and other expenses amounting to $16 million in 1997. Other income or expense (net) was expense of $5 million in 1997 as compared to income of $1 million in 1996. The change resulted primarily from $4 million of consulting fees associated with projects that we undertook to improve operating efficiency, integrate worldwide operations and generate earnings growth. OTHER ITEMS AFFECTING THE UCAR GROUP. Interest expense increased to $64 million in 1997 from $61 million in 1996. In 1997, the average outstanding total debt balance was $726 million and the average annual interest rate was 8.9% as compared to an average outstanding total debt balance of $643 million and an average annual interest rate of 9.4% in 1996. The decline in the average annual interest rate was primarily attributable to decreases in interest rates resulting from the amendment of the Senior Bank Facilities in March 1997. The increase in outstanding debt resulted primarily from $124 million of investments in acquisitions, $92 million for repurchase of common stock and $79 million for capital expenditures, offset by net cash flow from operations of $172 million. Provision for income taxes was $39 million in 1997 as compared to $68 million in 1996. In 1997, the provision for income taxes was significantly higher than the amount computed by applying the United States federal income tax rate primarily due to the fact that a majority of the charge in connection with antitrust investigations and related lawsuits and claims will not be deductible. These increases were offset to a much lesser extent by our tax exemption in Brazil, tax credits in the United States associated with research and development expenses and tax benefits recognized in Italy and Spain associated with capital expenditures and fixed asset revaluations, respectively. UCAR's share of net income from its company carried at equity was $2 million during the period from January 1, 1997 to April 21, 1997 as compared to $7 million for all of 1996. In April 1997, we acquired the outstanding shares of our South African subsidiary held by our former 50%-joint venture partner. Following the acquisition, our South African subsidiary's results of operations were consolidated with our results of operations. EFFECTS OF INFLATION In general, our cost of sales is affected by the inflation in each country in which we have a manufacturing facility. During the past three years, the effects of inflation in the United States and foreign countries (except for highly inflationary countries) have been offset by a combination of improved operating efficiency, permanent cost savings and, prior to 1998, increased prices for graphite electrodes and certain of our other products. Accordingly, during the past three years, these effects have not been material to us. The cost of petroleum coke, a principal raw material used by us, and natural gas, which is used by us in our electrode, cathode and graphite specialties baking operations, may fluctuate widely for various reasons, including fuel shortages 51 and cold weather. Changes in such costs were not material to us during the past three years. No assurance can be given that future increases in our cost of sales or other expenses will not exceed the rate of inflation or the amounts, if any, by which we may be able to increase prices for our products. We maintain operations in Brazil, Russia and Mexico, countries which have had in the past, and may have now or in the future, highly inflationary economies. Accordingly, the financial statements of these foreign operations have been remeasured as described below as if the functional currencies of their economic environments were the U.S. dollar. Prior to January 1, 1998, Brazil was considered to have a highly inflationary economy. Accordingly, translation gains and losses for our Brazilian operations were included in the Consolidated Statements of Operations for 1996 and 1997. Effective January 1, 1998, Brazil was no longer considered to have a highly inflationary economy. For 1998, unrealized gains and losses resulting from translating assets and liabilities of our Brazilian operations into U.S. dollars were accumulated in an equity account in the Consolidated Balance Sheet. As a result of the devaluation of the Brazilian currency in January 1999 and changes in the Brazilian inflation rate, it is possible that Brazil could be considered to have a highly inflationary economy in 1999. This would result in accounting for translation gains and losses in the same manner for which they were accounted for in 1996 and 1997. In light of significant increases in inflation in Mexico, effective since January 1, 1997, Mexico has been considered to have a highly inflationary economy. Accordingly, translation gains and losses for our Mexican operations were included in the Consolidated Statements of Operations for 1997 and 1998. We have always considered Russia to have a highly inflationary economy. Accordingly, translation gains and losses for our Russian subsidiary are included in the Consolidated Statements of Operations for both 1997 and 1998. EFFECTS OF CHANGES IN CURRENCY EXCHANGE RATES We produce and sell our products in multiple currencies. As a result, in general, our results of operations are affected by changes in currency exchange rates. When the local currencies of foreign countries in which we have a manufacturing facility decline (or increase) in value relative to the U.S. dollar, this has the effect of reducing (or increasing) the U.S. 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 U.S. dollars. We price products manufactured at our facilities for sale in local and certain export markets in local currencies. Accordingly, when the local currencies increase (or decline) in value relative to the U.S. 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. During the past three years, many of the currencies in which we manufacture and sell our products weakened against the U.S. dollar. This adversely affected our net sales and, to a lesser extent, benefited our cost of sales as reported 52 in U.S. dollars. In the case of net sales of graphite electrodes, the adverse impact was not material in 1996, $43 million in 1997 and $34 million in 1998. Through early 1998, we sought to mitigate these adverse impacts on net sales by increasing local currency prices for some of our products in various regions as circumstances permitted. We have not been able to do so since then. We cannot predict changes in currency exchange rates in the future or whether those changes will have positive or negative impacts on our net sales or cost of sales. No assurance can be given that we would be able to mitigate any adverse effects of such changes. To manage certain exposures to general economic and specific financial market risks caused by changes in currency exchange rates, we engage in hedging activities and use various off-balance sheet financial instruments. The amount of currency exchange contracts used by us to minimize these risks was $350 million at December 31, 1996, $353 million at December 31, 1997 and $484 million at December 31, 1998. At December 31, 1998, total outstanding U.S. dollar-denominated debt of our foreign subsidiaries (excluding our Russian and Swiss subsidiaries which used the U.S. dollar as their functional currency) was $209 million. Changes in the currency exchange rates between the U.S. dollar and the currencies in the countries in which these subsidiaries are located result in foreign currency gains and losses that are reported in other (income) expense (net) in the Consolidated Statements of Operations. While changes in currency exchange rates did not materially affect us in the past three years, there can be no assurance that such changes will not have a material adverse effect on us in the future. Our foreign subsidiaries with U.S. dollar-denominated debt have entered into foreign currency contracts to protect against changes in currency exchange rates. The amount of such contracts was $169 million at December 31, 1996, $214 million at December 31, 1997 and $209 million at December 31, 1998. We believe that such contracts reduce our exposure to changes in currency exchange rates related to such borrowings. Since late 1998, the Brazilian economy has been subject to various economic pressures. Inflation substantially increased and economic activity began to decline. In January 1999, the Brazilian currency devalued. These circumstances may affect other countries in South America. We have manufacturing operations in Brazil, and these circumstances can be expected to impact us. They may reduce demand for our products in Brazil or elsewhere in South America. They may also reduce our costs in Brazil, which are paid in local currency. In addition, they would increase our gross profit margin, since a significant portion of the sales of our Brazilian subsidiary are denominated in U.S. dollars. If the devaluation had occurred on January 1, 1998, we believe that, on a pro forma basis, we would have had an increase in net income of our Brazilian subsidiary. No assurance can be given, however, that these circumstances will not adversely affect us. LIQUIDITY AND CAPITAL RESOURCES Our sources of funds have consisted principally of: invested capital; cash flow from operations; and debt financing. Our uses of those funds (other than 53 for operations) have consisted principally of: debt reduction; capital expenditures; in 1997, repurchases of common stock; in 1996 and 1997, acquisition of controlling interests in new companies or businesses; and, in 1998, payment of fines, liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. We are highly leveraged and we have substantial obligations in connection with antitrust and securities investigations, lawsuits and claims. We had aggregate outstanding indebtedness of $804 million, aggregate cash, cash equivalents and short-term investments of $69 million and a stockholders' deficit of $287 million at December 31, 1998. OVERVIEW OF DEBT FINANCING. In connection with the Recapitalization, we obtained senior secured bank credit facilities which provided for borrowings of up to $685 million, of which $585 million was used at that time. We also issued $375 million of Subordinated Notes, $175 million of which were redeemed in 1995. In October 1995, we replaced those bank credit facilities with the Senior Bank Facilities, which had more favorable interest rates and favorable covenants and required less collateral. The Senior Bank Facilities initially provided for borrowings of up to $620 million, of which $520 million was used at that time. In March 1997, the Senior Bank Facilities were amended to reduce interest rates, increase our revolving credit facility to $250 million from $100 million and change certain covenants to allow greater flexibility in uses of free cash flow for acquisitions, capital expenditures and stock repurchases and other restricted payments. In April 1998, we obtained a limited waiver of a breach, if any, of certain covenants in the Senior Bank Facilities relating to our compliance with laws prior to March 13, 1998 and our obligation to deliver certain financial information within 90 days of the end of the prior year. In connection with the waiver, we agreed to grant to our senior lenders a security interest in substantially all of our assets. We also agreed to amend certain provisions of the Senior Bank Facilities. These amendments had the effect of increasing interest rates paid by us. In addition, in reliance on the waiver, we were able to borrow an additional $35 million under our revolving credit facility. The waiver was not, however, effective for any additional borrowings and provided that it would terminate no later than July 1999. Under the Subordinated Note Indenture, subject to certain exceptions, we may not incur additional indebtedness if our adjusted coverage ratio is less than certain specified ratios. In April 1998, as a result of the $340 million charge, our adjusted coverage ratio was less than those specified ratios. As a result, under the Subordinated Note Indenture, we could not, with limited exceptions, incur additional indebtedness (even under the Senior Bank Facilities). In November 1998, we refinanced the Senior Bank Facilities and amended the Subordinated Note Indenture. The refinancing consisted of the addition of a new $210 million senior secured term debt facility to the Senior Bank Facilities and the amendment of the Senior Bank Facilities. The amendments included, among 54 other things, modification of covenants and representations relating to compliance with laws, absence of material legal proceedings and absence of material adverse changes in our business, financial condition or results of operations insofar as they relate to certain antitrust, shareholder derivative and securities investigations, lawsuits and claims. The amendments to the Subordinated Note Indenture, among other things, eliminated the $340 million charge from the calculation of our adjusted coverage ratio. This amendment enabled us to incur additional debt in the refinancing. As a result of the refinancing and the amendment of the Subordinated Note Indenture, we have the ability (subject to compliance with applicable covenants, conditions and other terms in the future under both the Senior Bank Facilities and the Subordinated Note Indenture) to borrow under our revolving credit facility. At December 31, 1998, $200 million was available for borrowing under our revolving credit facility. CASH FLOW AND PLANS TO MANAGE LIQUIDITY. For at least the past five years, we have had positive annual cash flow from operations (excluding, in 1998, payments in connection with antitrust investigations, lawsuits and claims). Typically, the first quarter of each year results in neutral or negative cash flow from operations (after deducting cash used for capital expenditures and excluding those payments) due to various factors. These factors include interest payments on the Subordinated Notes and the payment during the first quarter of each year of variable compensation with respect to the immediately preceding year. Typically, the other three quarters result in significant positive cash flow from operations (after deducting cash used for capital expenditures and excluding those payments). The third quarter tends to produce relatively less positive cash flow primarily as a result of interest payments on the Subordinated Notes due in that quarter and scheduled plant shutdowns by our customers for vacations. We believe that 1999 will follow the historical pattern. To minimize interest expense, except for our Brazilian subsidiary, we typically operate on a "zero-cash" basis. This means that we use, and are dependent on, funds available under our revolving credit facility and monthly or quarterly cash flow from operations as our primary sources of liquidity. We believe that our global restructuring and rationalization plan will, over the next one to two years, improve our cash flow from operations for a given level of net sales. In addition to projects described above, as part of the plan, we are also seeking to improve cash flow from operations in 1999 through improvements in production scheduling and inventory management. In 1999, the improvements in cash flow from operations resulting from the plan will be partially offset by cash costs associated with the plan. Our indebtedness and obligations in connection with antitrust and securities investigations, lawsuits and claims could have important consequences for our liquidity. A substantial portion of our cash flow from operations must be dedicated to debt service and payment of these obligations, thereby reducing funds available to us for other purposes. Our leverage and these obligations may hinder our ability to adjust rapidly to changing market conditions or other events. In this regard, the plea agreement with the DOJ will assist us in our efforts to meet our obligations as they become due since the plea agreement permits us to pay the balance of $110 million non-interest-bearing fine in five annual installments. Our leverage and these obligations make us more vulnerable to economic downturns or in the event that these obligations are greater than expected. 55 Our ability to service our debt and meet these and other obligations as they come due will depend on our future financial and operating performance, which, in turn, is subject to, among other things, changes in the graphite and carbon products industry, global and regional economic conditions and certain financial, business and other factors beyond our control, including interest rates. No assurance can be given that our cash flow from operations and capital resources will be sufficient to enable us to meet our debt service and other obligations when due. If we are unable to do so, we could be required to limit or discontinue, temporarily or permanently, certain of our business plans, activities or operations, reduce or delay capital expenditures, sell certain of our assets or businesses, restructure or refinance some or all of our debt or incur additional debt, or sell additional common stock or other securities. No assurance can be given that we would be able to take any of such actions on favorable terms or at all. Our current plan is to continue our long-term strategy of being a low-cost supplier of high quality products and provider of superior services to customers. Consistent with this strategy and in order to maximize funds available to meet our obligations, we are focusing significant efforts on reducing operating expenses, capital expenditures beyond those contemplated by our global restructuring and rationalization plan and other cash requirements and commitments, while maintaining necessary and appropriate business operations. We believe that the long-term fundamentals of our business continue to be sound. Accordingly, although no assurance can be given that such will be the case, we believe, based on our expected cash flow from operations and existing capital resources and taking into account our efforts to maximize funds available to meet our obligations, we will be able to manage our working capital and cash flow to permit us to service our debt and meet our obligations as they become due. DESCRIPTION OF SENIOR BANK FACILITIES. The Senior Bank Facilities consist of: o A Tranche A Facility in the initial amount of $270 million consisting of: (i) a Tranche A Letter of Credit Facility providing for the initial issuance of up to $225 million (including reserves for interest rate and, if applicable, currency exchange rate fluctuations) of U.S. dollar-denominated letters of credit for the purpose of supporting U.S. dollar-denominated or foreign currency-denominated loans to certain of our foreign subsidiaries under facilities arranged with local lending institutions; (ii) a Tranche A Term Loan Facility providing for initial term loans of $45 million to UCAR Global Enterprises Inc. ("UCAR GLOBAL"); and (iii) a Tranche A Reimbursement Loan Facility to reimburse drawings under those letters of credit or refinance those local facilities. The Tranche A Facility amortizes in quarterly installments over four years, commencing March 31, 1998, with installments ranging from $50 million in 1998 to $85 million in 2001, with the final installment payable on December 31, 2001. 56 o A Tranche B Facility providing for initial term loans of $120 million to UCAR Global. The Tranche B Facility amortizes over five years, commencing March 31, 1998, with nominal quarterly installments during the first four years, and quarterly installments aggregating $116 million in 2002, with the final installment payable on December 31, 2002. o A Revolving Credit Facility providing for revolving and swingline loans to, and the issuance of U.S. dollar-denominated letters of credit for the account of, UCAR Global and certain of our other U.S. subsidiaries in an aggregate principal and stated amount at any time not to exceed $250 million. The Revolving Credit Facility terminates on December 31, 2001. As a condition to each borrowing under the Revolving Credit Facility, we are required to represent, among other things, that the sum of payments and reserves relating to specified litigation liabilities has not and is not reasonably expected to exceed $400 million. If we were unable to make that representation (or the other required representations), we would not be able to borrow. o A Tranche C Facility providing for initial term loans of $210 million to Global and our Swiss subsidiary. The Tranche C Facility was added in connection with the refinancing. The Tranche C Facility amortizes over five years, commencing March 31, 1999, with nominal quarterly installments during the first four years, and quarterly installments aggregating $206 million in 2003, with the final installment payable on December 31, 2003. Our aggregate required installment payments for the Tranche A, Tranche B and Tranche C Facilities during 1999 are $62 million. We paid in advance $60 million in 1995 and $25 million in 1996 of installments due on the Tranche A Facility and $25 million in 1995 and $30 million in 1996 of installments due on the Tranche B Facility. We have not made any advance payments since 1996. We are required to make mandatory prepayments under the Senior Bank Facilities in the amount of: o Either 75% or 50% (depending on the ratio of (i) our adjusted total debt plus adjusted reserves relating to specified litigation liabilities to (ii) our adjusted total EBITDA) of our adjusted excess cash flow. Our adjusted excess cash flow is determined after taking into account, among other things, debt service on the Senior Bank Facilities and the Subordinated Notes. Our obligation to make these prepayments, if any, arises after the end of each year with respect to our adjusted excess cash flow during the prior year. Any mandatory prepayments would be reduced by voluntary prepayments made during the prior year. The refinancing increased the percentage of our excess cash flow required to be applied to these prepayments. o 100% of the net proceeds of certain asset sales or incurrence of certain indebtedness. o 50% of the net proceeds of the issuance of any equity securities by UCAR. 57 Mandatory prepayments require either prepayment of loans, reduction of letters of credit or both. No mandatory prepayments were required in 1996, 1997 or 1998. We may make voluntary prepayments under the Senior Bank Facilities up to four times each year. There is no penalty or premium due in connection with prepayments (whether voluntary or mandatory), except that, as a result of the refinancing, a premium equal to 1.0% of the principal amount prepaid is due on prepayments under the Tranche B or Tranche C Facilities prior to December 31, 1999. UCAR unconditionally and irrevocably guaranteed the obligations of UCAR Global and the other borrowers under the Senior Bank Facilities. This guarantee is secured, with certain exceptions, by first priority security interests in all of the outstanding capital stock of UCAR Global and all of the intercompany debt owed to UCAR. Each of UCAR Global's subsidiaries has guaranteed, with certain exceptions, the obligations of UCAR Global and its other subsidiaries under the Senior Bank Facilities, except that our U.S. subsidiaries have not guaranteed obligations of our foreign subsidiaries. The obligations of UCAR Global and the other borrowers under the Senior Bank Facilities as well as these guarantees are secured, with certain exceptions, by first priority security interests in substantially all of our assets, except that no more than 65% of the capital stock or other equity interests in our foreign subsidiaries held directly by our U.S. subsidiaries and no other foreign assets secure obligations or guarantees of our U.S. subsidiaries (including UCAR Global). We have not guaranteed or secured obligations to the extent that guarantees or security interests are limited or prohibited by applicable contracts or laws or to the extent that the cost or tax consequences of guarantees or security interests were not justified. After the refinancing, the interest rates applicable to the Tranche A and Revolving Credit Facilities are, at our option, either adjusted LIBOR plus a margin ranging from 2.25% to 2.75% (depending on the same ratio) or the alternate base rate plus a margin ranging from 1.25% to 1.75% (depending on the same ratio). The interest rate applicable to the Tranche B and Tranche C Facilities is either adjusted LIBOR plus 3.25% or the alternate base rate plus 2.25%. The alternate base rate is the higher of Chase Manhattan Bank's prime rate or the federal funds effective rate plus 0.50%. At the option of foreign borrowers under local facilities, the interest rate under the local facilities is either adjusted LIBOR plus 0.25%, an alternate base rate (which varies from facility to facility) or, in the case of local currency-denominated loans, the local interbank offered rate plus 0.25%. After the refinancing, UCAR Global pays a per annum fee ranging from 2.25% to 2.75% (depending on the same ratio) of the aggregate face amount of outstanding letters of credit under the Tranche A and Revolving Credit Facilities and a per annum fee of 0.50% on the undrawn portion of the commitments under the Revolving Credit Facility. The effect of the refinancing has been to increase interest rates by about 2.00% per annum and commitment fees by about 0.25% per annum from those which would otherwise have been payable in the absence of both the waiver and the refinancing. The Senior Bank Facilities contain a number of significant covenants that, among other things, restrict our ability to sell assets, incur additional indebtedness, repay or refinance other debt or amend other debt instruments, create liens on assets, enter into leases, investments or acquisitions, engage 58 in mergers or consolidations, make capital expenditures, engage in transactions with affiliates, or pay dividends or make other restricted payments that otherwise restrict corporate activities. In addition, we are required to comply with specified minimum interest coverage and maximum leverage ratios. The refinancing effected changes to these covenants to make them generally more restrictive, but with exceptions intended to permit implementation of our global restructuring and rationalization plan. Among the changes is a change to the calculation of our leverage ratio so as to include reserves relating to specified litigation liabilities as debt. We enter into agreements with financial institutions which are intended to limit, or cap, our exposure to incurrence of additional interest expense due to increases in variable interest rates. During 1995, we purchased interest rate caps on up to $375 million of debt, limiting the floating interest rate factor on this debt to a weighted-average rate of 8.5% through 1997. During 1997, we purchased interest rate caps on up to $250 million of debt, limiting the floating interest rate factor on this debt to a weighted-average rate of 8.2% for the period commencing February 1998 and continuing through various dates ending February 2001. In February 1999, we purchased interest rate caps on $300 million of debt, limiting the floating interest rate factor on this debt to 5.0% through 1999. Fees related to these agreements are charged to interest expense over the term of the agreements. Use of these agreements satisfy requirements under the Senior Bank Facilities. The Senior Bank Facilities prohibit modification of the Subordinated Note Indenture in any manner adverse to the lenders under the Senior Bank Facilities and limit our ability to refinance the Subordinated Notes without the consent of those lenders. In addition to the failure to pay principal, interest and fees when due, events of default under the Senior Bank Facilities include: failure to comply with applicable covenants; failure to pay when due, or other defaults permitting acceleration of, other indebtedness exceeding $7.5 million; judgment defaults in excess of $7.5 million to the extent not covered by insurance; certain events of bankruptcy; and certain changes in control. For this purpose, a change in control occurs on the date on which: UCAR ceases to own 100% of the outstanding capital stock of UCAR Global; any person (other than management) beneficially owns more than 25% of the total voting power of UCAR at a time when management beneficially owns less than a majority of that voting power; a majority of the directors of UCAR then serving are individuals who were neither nominated by management or by a majority of the directors of UCAR (or by directors so nominated) then serving; or a change in control of UCAR or UCAR Global occurs under the indenture or agreement governing any other indebtedness exceeding $7.5 million. There can be no assurance that we will have the financial resources necessary to repay amounts due under the Senior Bank Facilities upon an event of default. DESCRIPTION OF SUBORDINATED NOTES. UCAR Global has $200 million aggregate principal amount of Subordinated Notes outstanding. Interest on the Subordinated Notes is payable semi-annually on January 15 and July 15 of each year at the rate of 12% per annum. The Subordinated Notes mature on January 15, 2005. 59 Except as described below, UCAR Global may not redeem the Subordinated Notes prior to January 15, 2000. On or after that date, UCAR Global may redeem the Subordinated Notes, in whole or in part, at specified redemption prices beginning at 104.5% of the principal amount redeemed for the year commencing January 15, 2000 and reducing to 100% of the principal amount redeemable for the years commencing January 15, 2003 and thereafter, in each case together with accrued and unpaid interest. Upon the occurrence of a change of control, (i) UCAR Global will have the option to redeem the Subordinated Notes in whole but not in part at a redemption price equal to 100% of the principal amount redeemed, plus a specified premium, plus accrued and unpaid interest and (ii) if UCAR Global does not so redeem the Subordinated Notes, UCAR Global will be required to make an offer to repurchase the Subordinated Notes at a price equal to 101% of the principal amount redeemed, together with accrued and unpaid interest. For this purpose, a change in control occurs on (i) the date on which any person (other than a former principal stockholder and management) beneficially owns more than 35% of the total voting power of UCAR and such stockholder and management beneficially own a lesser percentage of that voting power and do not have the right or ability to elect or designate for election a majority of UCAR's Board of Directors or (ii) the date, at the end of any two-year period, on which individuals, who at the beginning of such period were directors of UCAR (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 UCAR's Board of Directors. The Subordinated Notes are unsecured and subordinated to all existing and future senior indebtedness of UCAR Global. The Subordinated Notes will rank pari passu with any future senior subordinated indebtedness of UCAR Global and senior to all other subordinated indebtedness of UCAR Global. UCAR has unconditionally guaranteed the Subordinated Notes on a senior subordinated basis. The Subordinated Note Indenture contains a number of covenants that, among other things, restrict our ability to incur additional indebtedness, pay dividends, make investments, create or permit to exist restrictions on distributions from subsidiaries, or sell assets, repurchase Subordinated Notes, engage in certain transactions with affiliates or enter into certain mergers and consolidations. The Subordinated Note Indenture also prohibits UCAR from engaging in any business activities other than holding the stock of UCAR Global and certain permitted investments. In addition to the failure to pay principal and interest on, or repurchase when required, the Subordinated Notes, events of default under the Subordinated Note Indenture include failure to comply with certain covenants in the Subordinated Note Indenture, failure to pay at maturity or acceleration of other indebtedness exceeding $25 million, judgment defaults in excess of $25 million to the extent not covered by insurance and certain events of bankruptcy. The Subordinated Note Indenture contains provisions as to legal defeasance and 60 covenant defeasance. There can be no assurance that we will have the financial resources necessary to repurchase the Subordinated Notes upon a change in control, pay amounts due in connection with any legal or covenant defeasance or pay amounts due under the Subordinated Note Indenture upon an event of default. CASH FLOW PROVIDED BY (USED IN) OPERATIONS. In 1998, $29 million of cash flow was used in operations. In 1997, $172 million of cash flow was provided by operations. This change was primarily due to fines, liabilities and expenses in connection with antitrust investigations and related lawsuits and claims of $142 million in 1998 as compared to $3 million in 1997. The balance of the change was primarily attributable to lower gross profit. Decreases in notes and accounts receivable and in accounts payable and accruals, and increases in inventory, resulting primarily from the decline in net sales and reduction in production due to global economic conditions largely offset each other. CASH FLOW USED IN INVESTING ACTIVITIES. We used $31 million in investing activities in 1998 as compared to $221 million in 1997. Most of the change is due to the fact that we used $124 million in 1997 in connection with the acquisition of Carbone Savoie and our German and South African subsidiaries. The balance of the change is due to a decrease of $27 million in capital expenditures to $52 million in 1998 from $79 million in 1997. A portion of the capital expenditures in 1998 was used to complete cost reduction and operating efficiency projects begun in prior years. In addition, we had net proceeds from short-term investments held by our Brazilian subsidiary of $9 million in 1998 as compared to net purchases of short-term investments by our Brazilian subsidiary of $20 million in 1997. CASH FLOW PROVIDED BY FINANCING ACTIVITIES. Cash flow provided by financing activities was $62 million in 1998 as compared to $13 million in 1997. In 1998, we had net long-term borrowings of $128 million, primarily under the Senior Bank Facilities in April and November 1998. These net long-term borrowings include the repayment of a short-term loan of $40 million to our Russian subsidiary that was refinanced on a long-term basis under the Senior Bank Facilities. The net long-term borrowings were also used to finance the increase in working capital, including fines, liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. Also, in 1998, we paid $12 million in financing costs associated with refinancing the Senior Bank Facilities and amending the Subordinated Note Indenture in November 1998. In 1997, net long-term borrowings were $74 million, primarily under the Senior Bank Facilities. These net total borrowings were used to finance a portion of the acquisitions described above and to repurchase a portion of the $92 million of common stock. RESTRICTIONS ON DIVIDENDS AND STOCK REPURCHASES Under the Senior Bank Facilities, we are permitted to pay dividends on common stock and repurchase common stock only in an aggregate amount of up to $15 million in 1999 and $20 million in 2000 and thereafter. Under the Subordinated Note Indenture, there are restrictions on the payment of dividends by UCAR Global to UCAR. We do not anticipate paying any dividends or repurchasing any material amounts of common stock in the near term. 61 ACCOUNTING CHANGES Effective January 1, 1998, we adopted Statement of Financial Accounting Standards ("SFAS") 130, "Reporting Comprehensive Income." SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Earlier periods have been restated to conform with SFAS 130. Our comprehensive income (loss) consists of net income (loss) and foreign currency translation adjustments. Comprehensive income was $145 million for 1996. Comprehensive losses were $174 million for 1997 and $64 million for 1998. We do not provide for U.S. income taxes on foreign currency translation since the existing tax and reporting basis differences in foreign investments are considered essentially permanent in duration. Effective January 1, 1998, we adopted SFAS 131, "Disclosures About Segments of an Enterprise and Related Information," and SFAS 132, "Employers' Disclosures about Pension and Other Postretirement Benefits." These statements address presentation and disclosure matters and have no impact on our financial position, results of operations or cash flows. The presentations for 1996 and 1997 have been restated to conform with the presentation for 1998. In 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 is effective for fiscal years beginning after December 15, 1998. We adopted SOP 98-1 in 1998. The implementation of SOP 98-1 did not have a material impact on our financial position, results of operations or cash flows. In 1998, we changed our method of accounting for the cost of certain U.S. inventories from the last-in first-out method (LIFO) to the first-in first-out (FIFO) method. We believe the new method to be preferable because it provides improved consistency in accounting for worldwide inventories and avoids potential distortion of future profits from anticipated decrements. The Consolidated Financial Statements for all periods have been restated to reflect this change in accordance with the requirements of Accounting Principles Board Opinion 20, "Accounting Changes." The restatement did not have a material impact on consolidated net income (loss) or related per share amounts in 1996 (adjusted, as discussed below), 1997 or 1998. The restatement has no cash flow impact. The analyses performed by us in considering our change to the FIFO method in 1998 revealed that the LIFO method adopted in 1996 produced unrepresentative results for certain new items. We had previously changed our method of application of LIFO to provide specific parameters for defining new items within the LIFO calculation and had recognized a $7 million increase (net of taxes of $4 million) in net income as the cumulative effect of a change in accounting in 1996. As a result of these analyses, we revised our previous LIFO calculations and reduced 1996 net income by the cumulative effect of the change in accounting of $7 million ($0.15 per share). This revision eliminated the impact of the unrepresentative results for certain new items. 62 In June 1998, the Financial Accounting Standards Board issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. We are currently evaluating the impact of SFAS 133 on our financial position, results of operations and cash flows. YEAR 2000 ISSUE The Year 2000 issue results from the fact that many computer programs were written using two rather than four digits to define the applicable year. Any computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in processing errors, miscalculations or failures causing disruptions of operations, including, among other things, temporary inability to process transactions or otherwise engage in similar normal business activities. In 1996, we decided to upgrade and integrate substantially all of our systems, both domestic and foreign. As part of this process, for the past three years, we have been remediating our existing systems so that they are Year 2000 compliant. Remediation consists of identifying, analyzing, replacing or modifying, and testing our existing systems so that they are Year 2000 compliant. Testing includes documentation review. In addition, since 1996, when we have installed or plan to install new systems, whether installed as part of this upgrade and integration, as part of process improvement or cost reduction projects or otherwise, we believe that they have been, or will be at the time of installation, Year 2000 compliant. We identified the following systems that required analysis for Year 2000 compliance: finance and control systems; local and wide area networks; production process systems and instrumentation; stand-alone and networked personal computers; and other business equipment and site systems. Substantially all of our personal computers have been analyzed, modified or replaced, and tested. Substantially all of our finance and control systems have been analyzed and modified or replaced and are currently being tested. We expect to complete testing in the second quarter of 1999. Our production process systems and instrumentation and local and wide area networks are being remediated on a plant-by-plant basis. Likewise, our other business equipment and site systems are being remediated on a site-by-site basis. We expect to be substantially complete with this remediation by the end of the second quarter of 1999. We have conducted surveys of customers, suppliers and service providers to determine whether they have any Year 2000 issues which, if unaddressed, could have a material impact on us. Based on responses which we have received from these surveys, we believe that customers and critical suppliers and service providers representing about 85% of our business activities involving third parties will be Year 2000 compliant on a timely basis. The critical suppliers and service providers who responded negatively to our surveys do not represent sole suppliers or service providers where an interruption in supply or service would materially impair continued normal business activities. No utility provider responded negatively to our survey. 63 We are developing contingency plans that respond to risks of either one or more of our systems not becoming Year 2000 compliant or our customers or critical suppliers or service providers not becoming Year 2000 compliant on a timely basis. We expect to have these plans in place by the end of the third quarter of 1999, with particular emphasis on the completion of remediation by our manufacturing operations and the ability of certain electric utility providers that supply electric power to our manufacturing operations to become Year 2000 compliant on a timely basis. Contingency plans will include consideration of alternative sources of supply or service, customer communication plans and plant and business response plans. The failure to sufficiently remediate Year 2000 issues in a timely fashion could pose substantial risks for us. These risks include possible manufacturing system malfunctions, including shut downs. The extent of these risks to us is uncertain at this time. Since 1996, we estimate that we have incurred and will incur an aggregate incremental cost of about $3 million for internal and external services in connection with Year 2000 issues. Internal costs consist principally of payroll costs for our information systems group. ASSESSMENT OF THE EURO On January 1, 1999, eleven of the member countries of the European Union established fixed conversion rates between their existing currencies (called "LEGACY CURRENCIES") and one common currency called the euro. The euro trades on currency exchanges and may be used in business transactions. Beginning in January 2002, new euro-denominated currency will be issued and legacy currencies will be withdrawn from circulation. Our subsidiaries affected by the euro conversion are establishing plans to address issues raised by the euro currency conversion. These issues include, among others, the need to adapt computer and financial systems to accommodate euro-denominated transactions and the impact of a common currency on pricing. We believe that, under current conditions, the conversion of legacy currencies into the euro will not have a material adverse affect on us. 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. The following table sets forth certain information regarding environmental expenses and capital expenditures.
FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1996 1997 1998 ---- ---- ---- (Dollars in millions) Expenses relating to environmental protection................... $15 $14 $12 Capital expenditures related to environmental protection........ 14 15 8
64 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS We are exposed to market risks primarily from changes in interest rates and currency exchange rates. To manage our exposure to these changes, we routinely enter into various hedging transactions that have been authorized according to documented policies and procedures. We do not use derivatives for trading purposes or to generate income or engage in speculative activity, and we never use leveraged derivatives. Our exposure to changes in interest rates results primarily from floating rate long-term debt tied to LIBOR. We use interest rate caps to manage the risk associated with these changes. Our exposure to changes in currency exchange rates results primarily from: o Investments in our foreign subsidiaries and in our share of the earnings of those subsidiaries, which are denominated in local currencies. o Raw material purchases made by our foreign subsidiaries in a currency other than the local currency. o Export sales made by our subsidiaries in a currency other than the local currency. When we deem it appropriate, we may attempt to limit our risks associated with changes in currency exchange rates through both operational and financial market activities. Financial instruments are used to hedge existing exposures, firm commitments and, potentially, anticipated transactions. We use forward, option and swap contracts to reduce risk by essentially creating offsetting currency exposures. At December 31, 1998, we held contracts for the purpose of hedging these risks with an aggregate notional amount of about $484 million. All of our contracts mature within one year. All of our contracts are accounted for as hedges and, accordingly, gains and losses are reflected in the cost basis of the underlying transaction. At December 31, 1998, unrealized gains and losses on outstanding foreign currency contracts were not material. We used a sensitivity analysis to assess the potential effect of changes in currency exchange rates and interest rates on reported earnings at December 31, 1998. Based on this analysis, a hypothetical 10% weakening or strengthening in the U.S. dollar would not have resulted in a material effect on our reported earnings. A hypothetical increase in interest rates of 100 basis points across all maturities would have had an insignificant effect on our reported earnings, due to the use of interest rate caps and the fact that the interest rate on the Senior Notes is fixed. 65 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Independent Auditors' Report......................................... 67 Consolidated Balance Sheets.......................................... 68 Consolidated Statements of Operations................................ 69 Consolidated Statements of Cash Flows................................ 70 Consolidated Statements of Stockholders' Equity (Deficit)............ 71 Notes to Consolidated Financial Statements........................... 72 All schedules are omitted because they are not required or are not applicable or because the information is included in the Consolidated Financial Statements or the notes thereto. 66 INDEPENDENT AUDITORS' REPORT To the Board of Directors UCAR International Inc.: We have audited the accompanying Consolidated Balance Sheets of UCAR International Inc. and Subsidiaries as of December 31, 1997 and 1998, and the related Consolidated Statements of Operations, Cash Flows and Stockholders' Equity (Deficit) for each of the years in the three-year period ended December 31, 1998. These Consolidated Financial Statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the Consolidated Financial Statements referred to above present fairly, in all material respects, the financial position of UCAR International Inc. and Subsidiaries at December 31, 1997 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1998, in conformity with generally accepted accounting principles. In 1998, the Company changed its method of accounting for the cost of certain U.S. inventories from the last-in first-out method to the first-in first-out method. Previously issued financial statements have been restated as discussed in Note 2. /s/ KPMG LLP Stamford, Connecticut February 26, 1999 67 UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in millions, except per share data) AT DECEMBER 31, ---------------- 1997 1998 ---- ---- ASSETS Current assets: Cash and cash equivalents.............................. $ 58 $ 58 Short-term investments................................. 20 11 Notes and accounts receivable.......................... 242 198 Inventories: Raw materials and supplies............................ 53 58 Work in process....................................... 148 150 Finished goods........................................ 34 56 ---- ---- 235 264 Prepaid expenses....................................... 40 47 ---- ---- Total current assets.................................. 595 578 ---- ---- Property, plant and equipment............................ 1,289 1,220 Less: accumulated depreciation.......................... 724 752 ---- ---- Net fixed assets...................................... 565 468 ---- ---- Other assets............................................. 102 91 ---- ---- Total assets.......................................... $ 1,262 $ 1,137 ===== ===== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable....................................... $ 76 $ 67 Short-term debt........................................ 76 19 Payments due within one year on long-term debt......... 52 63 Accrued income and other taxes......................... 35 28 Other accrued liabilities.............................. 262 198 ---- ---- Total current liabilities............................. 501 375 ---- ---- Long-term debt........................................... 604 722 Other long-term obligations.............................. 313 266 Deferred income taxes.................................... 58 48 Minority stockholders' equity in consolidated entities... 13 13 Stockholders' equity (deficit): Preferred stock, par value $.01, 10,000,000 shares authorized, none issued.................................. -- -- Common stock, par value $.01, 100,000,000 shares authorized, 47,330,570 shares issued at December 31, 1997; 47,411,296 shares issued at December 31, 1998......... -- -- Additional paid-in capital............................. 520 521 Accumulated other comprehensive (loss)................. (130) (157) Retained earnings (deficit)............................ (525) (566) Less: cost of common stock held in treasury, 2,402,427 shares at December 31, 1997, 2,226,498 shares at December 31, 1998..................................... (92) (85) ---- ---- Total stockholders' equity (deficit).................. (227) (287) ---- ---- Total liabilities and stockholders' equity (deficit).. $ 1,262 $ 1,137 ===== ===== See accompanying Notes to Consolidated Financial Statements. 68 UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in millions, except per share data) FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- Net sales........................................ $ 948 $ 1,097 $ 947 Cost of sales.................................... 583 686 604 ---- ---- ---- Gross profit................................... 365 411 343 Research and development......................... 8 9 9 Selling, administrative and other expenses....... 90 115 103 Restructuring charge............................. -- -- 86 Impairment loss on Russian assets................ -- -- 60 Antitrust investigations and related lawsuits and claims..................................... -- 340 -- Other (income) expense (net)..................... (1) 5 8 ---- ------ ---- Operating profit (loss)........................ 268 (58) 77 Interest expense................................. 61 64 73 ---- ---- ---- Income (loss) before provision for income taxes 207 (122) 4 Provision for income taxes....................... 68 39 32 ---- ---- ---- Income (loss) of consolidated entities......... 139 (161) (28) Less: minority stockholders' share of income.... 1 1 2 Plus: UCAR share of net income from company carried at equity .............................. 7 2 -- ---- ---- ---- Income (loss) before extraordinary item........ 145 (160) (30) Extraordinary item, net of tax................... -- -- 7 ---- ---- ---- Net income (loss)............................. $ 145 $ (160) $ (37) ==== ==== ==== Earnings (loss) per common share: BASIC: ----- Income (loss) before extraordinary item....... $ 3.15 $ (3.49) $(0.66) Extraordinary item, net of tax................ -- -- (0.17) ---- ---- ----- Net income (loss) per share................... $ 3.15 $ (3.49) $(0.83) ==== ===== ===== DILUTED: ------- Income (loss) before extraordinary item....... $ 3.00 $ (3.49) $(0.66) Extraordinary item, net of tax................ -- -- (0.17) ---- ---- ----- Net income (loss) per share................... $ 3.00 $ (3.49) $(0.83) ==== ===== ===== See accompanying Notes to Consolidated Financial Statements. 69 UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in millions, except per share data) FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- Cash flow from operating activities: Net income (loss)............................. $ 145 $ (160) $ (37) Extraordinary item, net of tax................ -- -- 7 Non-cash (credits) charges to net income (loss): Depreciation and amortization................ 36 49 51 Deferred income taxes........................ 19 (38) (24) Restructuring charge......................... -- -- 86 Impairment loss on Russian assets............ -- -- 60 Accelerated vesting of performance stock options.................................... -- 12 -- Other non-cash (credits) charges............. 10 7 (3) Antitrust investigations and related lawsuits and claims........................ -- 340 -- Working capital*.............................. (45) (43) (159) Long-term assets and liabilities.............. 7 5 (10) --- --- ---- Net cash provided by (used in) operating activities................................ 172 172 (29) --- --- --- Cash flow from investing activities: Capital expenditures.......................... (62) (79) (52) Capital incentive grant....................... -- -- 3 Purchase of subsidiaries...................... (45) (124) -- Purchases of short-term investments........... -- (59) (28) Maturities of short-term investments.......... -- 39 37 Redemption/sale of assets..................... 3 2 9 --- --- --- Net cash used in investing activities........ (104) (221) (31) ---- ---- --- Cash flow from financing activities: Short-term debt borrowings (reductions)....... 22 23 (58) Long-term debt borrowings..................... 2 178 420 Long-term debt reductions..................... (58) (104) (292) Financing costs............................... -- (2) (12) Purchase of treasury stock.................... -- (92) -- Sale of common stock.......................... 4 5 4 Tax benefit arising from exercise of employee stock options................................ 4 5 -- --- --- --- Net cash provided by (used in) financing activities.................................. (26) 13 62 --- --- --- Net increase (decrease) in cash and cash equivalents................................... 42 (36) 2 Effect of exchange rate changes on cash and cash equivalents..................................... -- (1) (2) Cash and cash equivalents at beginning of period....................................... 53 95 58 --- --- --- Cash and cash equivalents at end of period...... $ 95 $ 58 $ 58 === === === Supplemental disclosures of cash flow information: Net cash paid during the year for: Interest expense............................. $ 54 $ 62 $ 70 Income taxes................................. 45 72 61 * Net change in working capital due to the following components: (Increase) decrease in current assets: Notes and accounts receivable................ $ (6) $ (30) $ 49 Inventories.................................. (29) 5 (27) Prepaid expenses............................. 6 (1) (1) Payments for antitrust investigations and related lawsuits and claims................. -- (3) (142) Increase (decrease) in payables and accruals.. (16) (14) (38) --- --- --- Working capital......................... $ (45) $ (43) $ (159) === === ==== See accompanying Notes to Consolidated Financial Statements. 70 UCAR INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Dollars in millions)
ACCUMULATED TOTAL ADDITIONAL OTHER RETAINED STOCKHOLDERS' COMMON PAID-IN COMPREHENSIVE EARNINGS TREASURY EQUITY STOCK CAPITAL (LOSS) (DEFICIT) STOCK (DEFICIT) ----- ------- ------ --------- ----- --------- Balance at December 31, 1995, as previously reported........... $ -- $ 485 $ (116) $ (536) $ -- $ (167) Effect of restatement (Note 2) -- -- -- 26 -- 26 ---- ----- ----- ------ ---- ------ Balance at December 31, 1995, as restated........................ -- 485 (116) (510) -- (141) Comprehensive income (loss): Net income, as adjusted (Note 2) -- -- -- 145 -- 145 Foreign currency translation adjustments................ -- -- -- -- -- -- ---- ----- ----- ------ ---- ------ Total comprehensive income (loss)..................... -- -- -- 145 -- 145 Exercise of employee stock options..................... -- 5 -- -- -- 5 Tax benefit arising from exercise of employee stock options...................... -- 4 -- -- -- 4 Reclassification of: Common stock subject to "puts" -- 8 -- -- -- 8 Related loans to management.. -- (3) -- -- -- (3) Cost of secondary offering.... -- (1) -- -- -- (1) ---- ----- ----- ------ ---- ------ Balance at December 31, 1996.... -- 498 (116) (365) -- 17 Comprehensive income (loss): Net loss..................... -- -- -- (160) -- (160) Foreign currency translation adjustments................ -- -- (14) -- -- (14) ---- ----- ----- ------ ---- ------ Total comprehensive income (loss)...................... -- -- (14) (160) -- (174) Exercise of employee stock options..................... -- 6 -- -- -- 6 Tax benefit arising from exercise of employee stock options..................... -- 5 -- -- -- 5 Repurchase of common stock.... -- -- -- -- (92) (92) Vesting of performance stock options..................... -- 12 -- -- -- 12 Cost of secondary offering.... -- (1) -- -- -- (1) ---- ----- ----- ------ ---- ------ Balance at December 31, 1997.... -- 520 (130) (525) (92) (227) Comprehensive income (loss): Net loss..................... -- -- -- (37) -- (37) Foreign currency translation adjustments................. -- -- (27) -- -- (27) ---- ----- ----- ------ ---- ------ Total comprehensive income (loss)...................... -- -- (27) (37) -- (64) Sale of common stock - stock options..................... -- 1 -- -- -- 1 Sale of common stock - treasury stock.............. -- -- -- (4) 7 3 ---- ----- ----- ------ ---- ------ Balance at December 31, 1998.... $ -- $ 521 $ (157) $ (566) $ (85) $ (287) ==== ===== ===== ====== ==== =====
See accompanying Notes to Consolidated Financial Statements. 71 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) DISCUSSION OF BUSINESS AND STRUCTURE IMPORTANT TERMS The following terms are used to identify various companies or groups of companies, markets or other matters in the Consolidated Financial Statements. "UCAR" refers to UCAR International Inc. only. UCAR is the issuer of the publicly traded common stock covered by the Consolidated Financial Statements. "Global" refers to UCAR Global Enterprises Inc. only. Global is a holding company and a direct wholly owned subsidiary of UCAR. Global is the only subsidiary directly owned by UCAR. Global is the issuer of the outstanding 12% senior subordinated notes due 2005 (the "Subordinated Notes") and is the primary borrower under the senior secured bank credit facilities (the "Senior Bank Facilities"). "Company" refers collectively to UCAR, its subsidiaries and its and their predecessors to the extent those predecessor's activities related to the graphite and carbon business. "Subsidiaries" refers to those companies which, at the relevant time, were majority-owned or wholly-owned directly or indirectly by UCAR or its predecessors. All of UCAR's subsidiaries have been wholly-owned (with de minimis exceptions in the case of certain foreign subsidiaries) since January 1, 1996, except for its German subsidiary, UCAR Elektroden GmbH ("UCAR Elektroden"), and Carbone Savoie S.A.S. ("Carbone Savoie"), both of which have been 70%-owned since the Company acquired them in early 1997, and except for its South African subsidiary, EMSA (Pty) Ltd. ("EMSA"), which was 50% owned until April 1997, when it became 100% owned. The Company operates in two business segments: graphite electrodes; and graphite and carbon products. The Company develops, manufactures and markets graphite and carbon products, including electrodes, for the steel, ferroalloy, aluminum, chemical, aerospace and transportation industries. Its principal products are graphite electrodes, carbon electrodes, graphite and carbon cathodes, graphite and carbon specialties and flexible graphite. SECONDARY OFFERINGS AND STOCK REPURCHASE PROGRAM On March 6, 1996, certain stockholders (including the principal stockholder) and members of management sold an aggregate of 16,675,000 shares in a secondary public offering. After the offering, the principal stockholder owned approximately 20% of the then outstanding common stock. UCAR did not sell any shares in or receive any proceeds from the offering. Approximately 193,000 of the shares sold by management consisted of shares issued upon the exercise of vested stock options concurrent with the offering and UCAR received proceeds of approximately $1.5 million from the exercise of such options. 72 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (1) DISCUSSION OF BUSINESS AND STRUCTURE -- (CONTINUED) On February 10, 1997, UCAR's Board of Directors authorized a program to repurchase up to $100 million of common stock at prevailing prices from time to time in the open market or otherwise depending on market conditions and other factors, without any established minimum or maximum time period or number of shares. On April 3, 1997, the principal stockholder sold 6,411,227 shares in a secondary public offering. UCAR did not sell any shares in or receive any proceeds from the offering. Concurrently with the offering, as part of the program mentioned above, UCAR repurchased 1,300,000 shares from the principal stockholder for $48 million. After the offering and the repurchase of shares, the principal stockholder ceased to be a principal stockholder of UCAR. On December 8, 1997, UCAR's Board of Directors increased the maximum amount of common stock which may be purchased under the program mentioned above from $100 million to $200 million. Through December 31, 1997, UCAR purchased an aggregate of $92 million of common stock (including the shares repurchased from the principal stockholder) under the program. No common stock was purchased under the program in 1998. ACQUISITION OF SUBSIDIARIES On November 10, 1996, the Company purchased the controlling equity interest in Graphite PLC, which operates a graphite electrode business in Vyazma, Russia. The Company acquired 90% of the equity of Graphite PLC through a tender offer to its major shareholders, which included members of the board of directors and employees of Graphite PLC. The aggregate investment was $50 million. Thereafter, in 1997 and early 1998, the Company increased its ownership to 99% (at December 31, 1998) of such equity for an additional investment of $7 million. Graphite PLC changed its name to UCAR Grafit OAO ("UCAR Grafit"). On January 2, 1997, the Company acquired 70% of the outstanding shares of Carbone Savoie, a wholly-owned subsidiary of a competitor in the cathode business, for a purchase price of $33 million. Carbone Savoie is the leading manufacturer of carbon cathodes which are used in the production of aluminum. On February 1, 1997, the Company, through a newly formed 70%-owned subsidiary, UCAR Elektroden, purchased the graphite electrode business of Elektrokohle Lichtenberg AG ("EKL") in Berlin, Germany. The 30% minority interest in UCAR Elektroden was held by a private German company. UCAR Elektroden and UCAR Grafit worked in tandem, with UCAR Elektroden manufacturing newly formed ungraphitized electrodes and UCAR Grafit baking, pitch impregnating, rebaking and graphitizing those electrodes. The aggregate purchase price paid by UCAR Elektroden for the EKL assets was $15 million. 73 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (1) DISCUSSION OF BUSINESS AND STRUCTURE -- (CONTINUED) On April 22, 1997, the Company purchased the shares of its then 50%-owned joint venture affiliate, EMSA, held by the Company's joint venture partner. EMSA operates a graphite electrode manufacturing facility and sales office in South Africa. The purchase price was $75 million, plus expenses. These acquisitions were accounted for as purchases and, accordingly, the purchase prices have been allocated to the assets purchased and liabilities assumed based upon the fair values at the dates of purchase. The Company recorded $20 million and $6 million of goodwill in connection with the acquisitions of EMSA and UCAR Grafit, respectively. The Consolidated Financial Statements have not been restated to reflect the increased ownership of EMSA at any date or for any period prior to the date of purchase. On September 24, 1998, the Company announced that it was closing its manufacturing operations in Berlin, Germany and Welland, Canada and downsizing its manufacturing operations in Vyazma, Russia. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Consolidated Financial Statements present the consolidated financial position, results of operations and cash flows of the Company for all periods presented. All significant intercompany transactions have been eliminated in consolidation. CASH EQUIVALENTS Cash equivalents are considered to be all highly liquid investments that are readily convertible to known amounts of cash and so near to maturity that they present insignificant risk of changes in value because of changes in interest rates. SHORT-TERM INVESTMENTS Investment securities at December 31, 1998 consisted of government securities and other debt securities. The Company classifies these securities as held-to-maturity and, accordingly, has recorded them at amortized cost. INVENTORIES Inventories are stated at cost or market, whichever is lower. Cost is determined generally on the "first-in first-out" ("FIFO") method in the United States. The "average cost" method is used elsewhere. 74 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) FIXED ASSETS AND DEPRECIATION Fixed assets are carried at cost. Expenditures for replacements are capitalized and the replaced items 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 Company generally uses accelerated depreciation methods for tax purposes, where appropriate. Depreciation expense was $36 million in 1996, $48 million in 1997 and $50 million in 1998. The carrying value of fixed assets is assessed annually and when factors indicating an impairment are present. The Company determines such impairment by measuring undiscounted future cash flows. If an impairment is present, the assets are reported at the lower of discounted cash flows or fair value. GOODWILL Goodwill, which represents the excess of purchase price over fair value of net assets acquired, is amortized on a straight-line basis over the expected periods to be benefited, generally 20 years. When circumstances warrant, the Company assesses the recoverability of this intangible asset by determining whether the amortization of the goodwill balance over its remaining life can be recovered through undiscounted future operating cash flows of the acquired operation. The amount of goodwill impairment, if any, is measured based on projected discounted future operating cash flows. DERIVATIVE FINANCIAL INSTRUMENTS The Company does not use derivative financial instruments for trading purposes. They are used to manage well-defined interest rate risk and specific financial market risk caused by currency exchange rate fluctuations. The Company enters into foreign currency instruments to manage exposure to currency exchange rate fluctuations. These foreign currency instruments, which include forward exchange contracts, purchased currency options and currency option collars, hedge primarily U.S. dollar denominated debt held by several of the Company's foreign subsidiaries and identifiable foreign currency receivables, payables and commitments held by the Company's 75 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) 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. Currency option collars are financial arrangements for simultaneous purchases and sales of currency options having the same maturity and the same principal amount. The result is the creation of a range in which a best and worst price is defined, while minimizing option cost. Premiums and discounts on forward exchange contracts are amortized over the life of the contracts. Net premiums on options purchased (or sold under currency collar strategies) are amortized over the life of the options. Forward exchange contracts, purchased currency options and currency option collars are carried at market value. Gains and losses due to revaluation of these contracts or option positions are recognized currently as other (income) expense (net) and are intended to mitigate income or expense caused by the accounting revaluation of the Company's foreign and domestic subsidiaries' net foreign exchange positions. The Company enters into agreements with financial institutions which are intended to limit, or cap, its exposure to the incurrence of additional interest expense due to increases in variable interest rates. Fees related to these interest rate cap agreements (as well as proceeds received under their provisions) are charged (or credited) to interest expense over the term of the agreements. RESEARCH AND DEVELOPMENT Research and development costs are charged to expense 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 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 income in the period that includes the enactment date. STOCK-BASED COMPENSATION PLANS The Company accounts for stock-based compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to 76 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) Employees" ("APB 25"). As such, compensation expense is recorded on the date of grant only if the market price of the underlying stock exceeded the exercise price or if vesting is subject to performance conditions. The total amount of recorded compensation expense, if any, is based on the number of instruments that eventually vest. No compensation expense is recognized for forfeited awards, failure to satisfy a service requirement or failure to satisfy a performance condition. The Company's accruals of compensation expense for awards subject to performance conditions are based on the Company's assessment of the probability of satisfying the performance conditions. RETIREMENT PLAN The cost of pension benefits under the Company's retirement plans is determined by independent actuarial firms using the "projected unit credit" actuarial cost method. Contributions to the U.S. plan are made in accordance with the requirements of the Employee Retirement Income Security Act of 1974. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS The estimated cost of future medical and life insurance benefits is determined by 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. POSTEMPLOYMENT BENEFITS The Company accrues postemployment benefits expected to be paid before retirement, principally severance, over employees' active service periods. USE OF ESTIMATES Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the Consolidated Financial Statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. FOREIGN CURRENCY TRANSLATION Generally, except for operations in Brazil in 1996 and 1997 and Russia and Mexico in 1997 and 1998, unrealized gains and losses resulting from translating foreign subsidiaries' assets and liabilities into U.S. dollars are accumulated in other comprehensive income on the balance sheet until such time as the operations are sold or substantially or completely liquidated. Translation gains and losses relating to operations, where high inflation exists, are included in income in the Consolidated Financial Statements. 77 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) ACCOUNTING CHANGES Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") 130, "Reporting Comprehensive Income". SFAS 130 established standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Earlier periods have been restated to conform with SFAS 130. Comprehensive income (loss) of the Company consists of net income (loss) and foreign currency translation adjustments. The Company does not provide for U.S. income taxes on foreign currency translation since the existing tax and reporting basis differences in foreign investments are considered essentially permanent in duration. Effective January 1, 1998, the Company adopted SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," and SFAS 132, "Employers' Disclosures about Pension and Other Postretirement Benefits," which are effective for fiscal years beginning after December 15, 1997. These statements address presentation and disclosure matters and have no impact on the Company's financial position, results of operations or cash flows. The presentation for 1996 and 1997 has been restated to conform with the presentation for 1998. In 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 is effective for financial statements for fiscal years beginning after December 15, 1998. The Company has adopted the provisions of SOP 98-1 in 1998. The implementation of SOP 98-1 did not have a material impact on the Company's financial position, results of operations or cash flows. In 1998, the Company changed its method of accounting for the cost of certain U.S. inventories from the last-in first-out method (LIFO) to the first-in first-out (FIFO) method. The Company believes the new method to be preferable because it provides improved consistency in accounting for worldwide inventories and avoids potential distortion of future profits from anticipated decrements. The Consolidated Financial Statements for all periods have been restated to reflect this change in accordance with the requirements of Accounting Principles Board Opinion 20, "Accounting Changes." The restatement did not have a material impact on consolidated net income (loss) or related per share amounts in 1996 (adjusted, as discussed below), 1997 or 1998. The restatement has no cash flow impact. The analyses performed by the Company in considering its change to the FIFO method in 1998 revealed that the LIFO method adopted in 1996 produced unrepresentative results for certain new items. The Company had previously changed its method of application of LIFO to provide specific parameters for defining new items within the LIFO calculation and had recognized a $7 million increase (net of taxes of $4 million) in net income as the cumulative 78 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) effect of a change in accounting in 1996. As a result of these analyses, the Company revised its previous LIFO calculations and reduced 1996 net income by the cumulative effect of the change in accounting of $7 million ($0.15 per share). This revision eliminated the impact of the unrepresentative results for certain new items. In June 1998, the Financial Accounting Standards Board issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company is presently evaluating the impact of this statement on its financial position, results of operations and cash flows in the period of adoption. (3) UCAR GLOBAL ENTERPRISES INC. UCAR has no material assets, liabilities or operations other than those that result from its ownership of 100% of the outstanding common stock of Global and intercompany debt. Separate financial statements of Global are not presented because they would not be material to holders of the Subordinated Notes. The following table summarizes the consolidated assets and liabilities of Global and its subsidiaries at December 31, 1997 and 1998 and their consolidated results of operations for the three years ended December 31, 1998: AT DECEMBER 31, --------------- 1997 1998 ---- ---- (Dollars in millions) Assets: Current assets............................... $ 595 $ 578 Non-current assets........................... 667 559 ----- ----- Total assets.............................. $ 1,262 $ 1,137 ===== ===== Liabilities: Current liabilities.......................... $ 501 $ 375 Non-current liabilities...................... 975 1,036 ----- ----- Total liabilities........................ $ 1,476 $ 1,411 ===== ===== Minority stockholders' equity in consolidated entities....................................... $ 13 $ 13 ===== ===== 79 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (3) UCAR GLOBAL ENTERPRISES INC. -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, ------------------ 1996 1997 1998 ---- ---- ---- (Dollars in millions) Net sales.................................. $ 948 $ 1,097 $ 947 Gross profit............................... 365 411 343 Income (loss) before extraordinary item 145 (160) (30) Net income (loss).......................... 145 (160) (37) (4) FINANCIAL INSTRUMENTS The Company does not use derivative financial instruments for trading purposes. They are used to manage well-defined interest rate risk and specific financial market risk caused by currency exchange rate fluctuations. FOREIGN CURRENCY CONTRACTS The amount of foreign exchange contracts used by the Company to minimize foreign currency exposure was $350 million at December 31, 1996, $353 million at December 31, 1997 and $484 million at December 31, 1998. Contracts hedging U.S. dollar denominated debt totaled $169 million at December 31, 1996, $214 million at December 31, 1997 and $209 million at December 31, 1998. Of the total foreign exchange contracts, approximately $144 million (41%) were offsetting at December 31, 1996, approximately $93 million (26%) were offsetting at December 31, 1997 and approximately $142 million (29%) were offsetting at December 31, 1998. SALE OF RECEIVABLES Certain of the Company's foreign subsidiaries sold receivables of $15 million in 1996, $16 million in 1997 and $16 million in 1998 without recourse and sold receivables of $65 million in 1996, $74 million in 1997 and $52 million in 1998 with recourse to banking institutions. Receivables sold with recourse remaining uncollected from customers were $15 million at December 31, 1996, $16 million at December 31, 1997 and $6 million at December 31, 1998. INTEREST RATE RISK MANAGEMENT The Company enters into agreements with financial institutions which are intended to limit, or cap, its exposure to the incurrence of additional interest expense due to increases in variable interest rates. During 1995, the Company purchased interest rate caps on up to $375 million of debt, limiting the floating interest rate factor on this debt to a weighted-average rate of 8.5% through 1997. During 1997, the Company purchased interest rate caps on up to $250 million of 80 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (4) FINANCIAL INSTRUMENTS -- (CONTINUED) debt, limiting the floating interest rate factor on this debt to a weighted-average rate of 8.2% for the period commencing February 1998 and continuing through various dates ending February 2001. Fees related to these agreements are charged to interest expense over the term of the agreements. FAIR MARKET VALUE DISCLOSURES SFAS 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: CASH AND CASH EQUIVALENTS, SHORT-TERM INVESTMENTS, SHORT-TERM RECEIVABLES, ACCOUNTS PAYABLE AND OTHER CURRENT PAYABLES--The carrying amount approximates fair value because of the short maturity of these instruments. DEBT--Fair values of debt and related interest rate risk agreements approximate carrying value at December 31, 1996, 1997 and 1998, except for the Subordinated Notes which are carried at $200 million and had an estimated fair value of $230 million at December 31, 1996, $224 million at December 31, 1997 and $216 million at December 31, 1998. FOREIGN CURRENCY CONTRACTS--Foreign currency contracts are carried at market value. (5) SEGMENT REPORTING The Company has two reportable operating segments: graphite electrodes; and graphite and carbon products. The graphite electrode segment produces and markets graphite electrodes to electric arc furnace and ladle furnace steelmakers. The graphite and carbon products segment produces and markets carbon electrodes, flexible graphite, cathodes and graphite and carbon specialties. These reportable segments are managed separately because of the different products and markets they serve. The accounting policies of the reportable segments are the same as those described in Note 2. The Company evaluates the performance of its operating segments based on gross profit. Intersegment sales and transfers are not material. 81 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (5) SEGMENT REPORTING -- (CONTINUED) The following tables summarize financial information concerning the Company's reportable segments. The line item entitled "Other" includes corporate related items. FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1996 1997 1998 ---- ---- ---- (Dollars in millions) Net sales to external customers: Graphite electrodes............. $ 696 $ 788 $ 652 Graphite and carbon products.... 252 309 295 ----- ----- ----- Consolidated net sales......... $ 948 $ 1,097 $ 947 ===== ===== ===== Gross profit: Graphite electrodes............. $ 284 $ 309 $ 247 Graphite and carbon products.... 81 102 96 ----- ----- ----- Consolidated gross profit...... $ 365 $ 411 $ 343 ===== ===== ===== Depreciation and amortization: Graphite electrodes............. $ 27 $ 35 $ 36 Graphite and carbon products.... 7 10 11 Other........................... 2 4 4 ----- ----- ----- Consolidated depreciation and amortization................. $ 36 $ 49 $ 51 ===== ===== ===== The Company does not report assets by business segment. Assets are managed based on geographic location because certain facilities are shared by both business segments. 82 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (5) SEGMENT REPORTING -- (CONTINUED) The following tables summarize information as to the Company's operations in different geographic areas: FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- (Dollars in millions) Net sales (a): United States.................... $ 388 $ 393 $ 321 Canada........................... 46 54 56 Mexico........................... 88 98 65 Brazil........................... 61 64 57 France........................... 250 287 148 Italy............................ 56 54 47 Switzerland (b).................. -- -- 107 South Africa..................... -- 53 59 Other Countries.................. 59 94 87 ----- ----- ----- Total.......................... $ 948 $ 1,097 $ 947 ===== ===== ===== (a) Net sales are based on location of seller. (b) During 1998, the ownership of certain existing export sales were transferred to our Swiss subsidiary. AT DECEMBER 31, 1996 1997 1998 ---- ---- ---- (Dollars in millions) Long-lived assets (c): United States.................... $ 160 $ 172 $ 166 Canada........................... 24 23 1 Mexico........................... 28 30 28 Brazil........................... 73 71 61 France........................... 51 87 97 Italy............................ 35 40 43 Russia........................... 45 65 2 South Africa..................... -- 81 62 Other Countries.................. 19 21 23 ----- ----- ----- Total.......................... $ 435 $ 590 $ 483 ===== ===== ===== (c) Long-lived assets represent net fixed assets and goodwill, net of accumulated amortization. 83 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (6) COMPANY CARRIED AT EQUITY On April 21, 1997, the Company purchased the 50% interest in EMSA that it did not already own for $75 million, plus expenses. Commencing April 22, 1997, EMSA's assets, liabilities and results of operations are included in the Consolidated Financial Statements. During 1998, the Company did not account for any companies using the equity method. The following tables summarize information for EMSA during the period it was a 50%-owned company carried at equity: FOR THE YEAR FOR THE PERIOD ENDED JANUARY 1 TO DECEMBER 31, 1996 APRIL 21, 1997 ----------------- -------------- (Dollars in millions) Net sales.............................. $ 65 $ 21 Cost of sales.......................... 39 12 Selling, administrative and other expenses 4 1 Other (income) expense (net)........... (1) 2 Income taxes........................... 9 2 ---- ---- Net income........................... $ 14 $ 4 ==== ==== UCAR share of net income............... $ 7 $ 2 ==== ==== AT DECEMBER 31, 1996 (Dollars in millions) Current assets.............................. $ 40 Non-current assets.......................... 16 --- Total assets.............................. 56 --- Current liabilities......................... 16 Non-current liabilities..................... 4 --- Total liabilities......................... 20 --- Net assets................................ $ 36 === UCAR share of net assets.................... $ 18 === The Company recorded net sales to EMSA of $22 million in 1996 and $3 million from January 1, 1997 to April 21, 1997. 84 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (7) LONG-TERM DEBT The following table presents the long-term debt of the Company: AT DECEMBER 31, 1997 1998 ---- ---- (Dollars in millions) Senior Bank Facilities: Tranche A Facility (letters of credit) ... $ 214 $ 209 Tranche A Facility (term loans) .......... 45 1 Tranche B Facility........................ 120 119 Tranche C Facility........................ -- 210 Revolving Facility........................ 65 35 ---- --- Total Senior Bank Facilities............ 444 574 Subordinated Notes........................... 200 200 Italian lire loans and obligations........... 2 1 Deutsche mark loans.......................... 10 10 ---- --- Subtotal.................................. 656 785 Less: payments due within one year.......... 52 63 ---- --- Total................................... $ 604 $ 722 ==== === On March 19, 1997, the Senior Bank Facilities were amended to reduce interest rates, increase the Revolving Facility (as defined below) to $250 million from $100 million and change certain covenants to allow greater flexibility in uses of free cash flow for acquisitions, capital expenditures and stock repurchases and other restricted payments. On April 10, 1998, the Company obtained a limited waiver of a breach, if any, of certain covenants relating to compliance with laws prior to March 13, 1998 and its obligation to deliver certain financial information within 90 days of the end of the prior year. In connection with the waiver, the Company agreed to grant a security interest in substantially all of its assets. We also agreed to amend certain provisions of the Senior Bank Facilities. These amendments had the effect of increasing interest rates. In addition, in reliance on the waiver, the Company was able to borrow an additional $35 million under the Revolving Facility. The waiver was not, however, effective for any additional borrowings and provided that it would terminate no later than July 10, 1999. Under the Subordinated Notes, subject to certain exceptions, the Company may not incur additional indebtedness if its adjusted coverage ratio is less than certain specified ratios. As a result of the $340 million charge against results of operations for 1997 as a reserve for estimated potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims, its adjusted coverage ratio was less than those specified ratios and, under the Subordinated Note Indenture, it could not, with limited exceptions, incur additional indebtedness (even under the Senior Bank Facilities). 85 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (7) LONG-TERM DEBT -- (CONTINUED) On November 3, 1998, the Company amended the Subordinated Notes. On November 10, 1998, the Company refinanced the Senior Bank Facilities. The refinancing consisted of the addition of the Tranche C Facility (as defined below) and amendments to, among other things, modify covenants and representations relating to compliance with laws, absence of material legal proceedings and absence of material adverse changes insofar as they relate to antitrust, shareholder derivative and securities investigations, lawsuits and claims. The amendments to the Subordinated Notes, among other things, eliminated the $340 million charge from the calculation of the Company's adjusted coverage ratio. As a result of the refinancing and the amendment of the Subordinated Notes, the Company has the ability (subject to compliance with applicable covenants, conditions and other terms in the future under both the Senior Bank Facilities and the Subordinated Notes) to borrow under the Revolving Facility. At December 31, 1998, $200 million was available for borrowing under the Revolving Facility. SENIOR BANK FACILITIES The Senior Bank Facilities consist of: o A Tranche A Facility in the initial amount of $270 million consisting of: (i) a Tranche A Letter of Credit Facility providing for the initial issuance of up to $225 million (including reserves for interest rate and, if applicable, currency exchange rate fluctuations) of U.S. dollar-denominated letters of credit for the purpose of supporting U.S. dollar-denominated or foreign-currency denominated loans to certain of foreign subsidiaries under facilities arranged with local lending institutions; (ii) a Tranche A Term Loan Facility providing for initial term loans of $45 million to Global; and (iii) a Tranche A Reimbursement Loan Facility to reimburse drawings under those letters of credit or refinance those local facilities. The Tranche A Facility amortizes in quarterly installments over four years, commencing March 31, 1998, with installments ranging from $50 million in 1998 to $85 million in 2001, with the final installment payable on December 31, 2001. o A Tranche B Facility providing for initial term loans of $120 million to Global. The Tranche B Facility amortizes over five years, commencing March 31, 1998, with nominal quarterly installments during the first four years, and quarterly installments aggregating $116 million in 2002, with the final installment payable on December 31, 2002. 86 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (7) LONG-TERM DEBT -- (CONTINUED) o A Revolving Facility providing for revolving and swingline loans to, and the issuance of U.S. dollar-denominated letters of credit for the account of, Global and certain other U.S. subsidiaries in an aggregate principal and stated amount at any time not to exceed $250 million. The Revolving Facility terminates on December 31, 2001. As a condition to each borrowing under the Revolving Facility, the Company is required to represent, among other things, that the sum of payments and reserves relating to specified litigation liabilities has not and is not reasonably expected to exceed $400 million. o A Tranche C Facility providing for initial term loans of $125 million to Global and $85 million to its Swiss subsidiary. The Tranche C Facility was added in connection with the refinancing. The Tranche C Facility amortizes over five years, commencing March 31, 1999, with nominal quarterly installments during the first four years, and quarterly installments aggregating $206 million in 2003, with the final installment payable on December 31, 2003. The Company paid in advance $60 million in 1995 and $25 million in 1996 of installments due on the Tranche A Facility and $25 million in 1995 and $30 million in 1996 of installments due on the Tranche B Facility. The Company has made no such advance payments since 1996. The Company is required to make mandatory prepayments in the amount of : o Either 75% or 50% (depending on the ratio of (i) adjusted total debt plus adjusted reserves relating to specified litigation liabilities to (ii) adjusted total EBITDA) of adjusted excess cash flow. Adjusted excess cash flow is determined after taking into account, among other things, debt service on the Senior Bank Facilities and the Subordinated Notes. The obligation to make these prepayments, if any, arises after the end of each year with respect to adjusted excess cash flow during the prior year. Any mandatory prepayments would be reduced by voluntary prepayments made during the prior year. The refinancing increased the percentage of excess cash flow required to be applied to these prepayments. o 100% of the net proceeds of certain asset sales or incurrence of certain indebtedness. o 50% of the net proceeds of the issuance of any equity securities by UCAR. Mandatory prepayments require either prepayment of loans, reduction of letters of credit or both. No mandatory prepayments were required in 1996, 1997 or 1998. The Company may make voluntary prepayments under the Senior Bank Facilities up to four times each year. There is no penalty or premium due in connection with prepayments (whether voluntary or mandatory), except that, as a result of the refinancing, a premium equal to 1% of the principal amount prepaid is due on prepayments under the Tranche B or Tranche C Facilities prior to December 31, 1999. 87 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (7) LONG-TERM DEBT -- (CONTINUED) UCAR unconditionally and irrevocably guaranteed the obligations of Global and the other borrowers under the Senior Bank Facilities. This guarantee is secured, with certain exceptions, by first priority security interests in all of the outstanding capital stock of Global and all of the intercompany debt owed to UCAR. Each of Global's subsidiaries has guaranteed, with certain exceptions, the obligations of Global and its other subsidiaries under the Senior Bank Facilities, except that its U.S. subsidiaries have not guaranteed obligations of our foreign subsidiaries. The obligations of Global and the other borrowers under the Senior Bank Facilities as well as these guarantees are secured, with certain exceptions, by first priority security interests in substantially all of the Company's assets, except that no more than 65% of the capital stock or other equity interests in its foreign subsidiaries held directly by its U.S. subsidiaries and no other foreign assets secure obligations or guarantees of its U.S. subsidiaries (including Global). After the refinancing, the interest rates applicable to the Tranche A and Revolving Facilities are, at the Company's option, either adjusted LIBOR plus a margin ranging from 2.25% to 2.75% (depending on the same ratio) or the alternate base rate plus a margin ranging from 1.25% to 1.75% (depending on the same ratio). The interest rate applicable to the Tranche B and Tranche C Facilities is, at the Company's option, either adjusted LIBOR plus 3.25% or the alternate base rate plus 2.25%. The alternate base rate is the higher of Chase Manhattan Bank's prime rate or the federal funds effective rate plus 0.50%. At the option of foreign borrowers under local facilities, the interest rate under the local facilities is either adjusted LIBOR plus 0.25%, an alternate base rate (which varies from facility to facility) or, in the case of local currency-denominated loans, the local interbank offered rate plus 0.25%. After the refinancing, Global pays a per annum fee ranging from 2.25% to 2.75% (depending on the same ratio) of the aggregate face amount of outstanding letters of credit under the Tranche A and Revolving Facilities and a per annum fee of 0.50% on the undrawn portion of the commitments under the Revolving Facility. The effect of the refinancing has been to increase interest rates by approximately 2.00% per annum and commitment fees by approximately 0.25% per annum from those which would otherwise have been payable in the absence of both the waiver and the refinancing. The Company enters into agreements with financial institutions which are intended to limit, or cap, its exposure to incurrence of additional interest expense due to increases in variable interest rates. Use of these agreements satisfies requirements under the Senior Bank Facilities. The weighted-average interest rate on the Senior Bank Facilities was 7.93% during 1996, 7.38% during 1997 and 7.08% during 1998. 88 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (7) LONG-TERM DEBT -- (CONTINUED) The Senior Bank Facilities contain a number of significant covenants that, among other things, restrict the Company's ability to sell assets, incur additional indebtedness, repay or refinance other debt or amend other debt instruments, create liens on assets, enter into leases, investments or acquisitions, engage in mergers or consolidations, make capital expenditures, engage in transactions with affiliates, or pay dividends or make other restricted payments and that otherwise restrict corporate activities. In addition, the Company is required to comply with specified minimum interest coverage and maximum leverage ratios. The refinancing effected changes to these covenants to make them generally more restrictive. Among the changes is a change to the calculation of the leverage ratio so as to include reserves relating to specified litigation liabilities as debt. In addition to the failure to pay principal, interest and fees when due, events of default under the Senior Bank Facilities include: failure to comply with applicable covenants; failure to pay when due, or other defaults permitting acceleration of, other indebtedness exceeding $7.5 million; judgment defaults in excess of $7.5 million to the extent not covered by insurance; certain events of bankruptcy; and certain changes in control. Under the Senior Bank Facilities, UCAR is permitted to pay dividends on and repurchase common stock, and Global is permitted to pay dividends to UCAR for those purposes, only in an aggregate amount of up to $15 million in 1999 and $20 million in 2000 and thereafter. UCAR and Global are also permitted to repurchase common stock from present or former directors, officers or employees in an aggregate amount of up to the lesser of $5 million per year (with unused amounts permitted to be carried forward) or $25 million on a cumulative basis since October 19, 1995. In addition, Global is permitted to pay dividends to UCAR (i) in respect of UCAR's administrative fees and expenses and (ii) to fund payments in connection with antitrust investigations, lawsuits and claims and securities and shareholder derivative lawsuits and claims. The total amount of dividends to fund those payments, plus the total amount paid on intercompany debt owed to UCAR for the same purpose, may not exceed $400 million (adjusted for certain imputed interest expense). SUBORDINATED NOTES Global has $200 million aggregate principal amount of Subordinated Notes outstanding. Interest on the Subordinated Notes is payable semiannually at the rate of 12% per annum. The Subordinated Notes mature on January 15, 2005. Except as described below, Global may not redeem the Subordinated Notes prior to January 15, 2000. On or after that date, Global may redeem the Subordinated Notes in whole or in part at specified redemption prices beginning at 104.5% of the principal amount redeemed for the year commencing January 15, 2000 and reducing to 100% of the principal amount redeemable for the years January 15, 2003 and thereafter, in each case together with accrued and unpaid interest. 89 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (7) LONG-TERM DEBT -- (CONTINUED) Upon the occurrence of a change of control, (i) Global will have the option to redeem the Subordinated Notes in whole but not in part at a redemption price equal to 100% of the principal amount redeemed, plus a specified premium, plus accrued and unpaid interest and (ii) if Global does not so redeem the Subordinated Notes, Global will be required to make an offer to repurchase the Subordinated Notes at a price equal to 101% of the principal amount redeemed, together with accrued and unpaid interest. The Subordinated Notes are unsecured and subordinated to all existing and future senior indebtedness of Global. The Subordinated Notes will rank pari passu with any future senior subordinated indebtedness of Global and senior to all other subordinated indebtedness of Global. UCAR has unconditionally guaranteed the Subordinated Notes on a senior subordinated basis. The indenture relating to the Subordinated Notes contains a number of covenants that, among other things, restrict the Company's ability to incur additional indebtedness, pay dividends, make investments, create or permit to exist restrictions on distributions from subsidiaries, sell assets, repurchase Subordinated Notes, engage in certain transactions with affiliates or enter into certain mergers and consolidations. It also prohibits UCAR from engaging in any business activities other than holding the stock of Global and certain permitted investments. In addition to the failure to pay principal and interest when due or repurchase the Subordinated Notes when required, events of default under the Subordinated Notes include: failure to comply with applicable covenants; failure to pay at maturity or upon acceleration of other indebtedness exceeding $25 million, judgment defaults in excess of $25 million to the extent not covered by insurance; and certain events of bankruptcy. The indenture restricts the payment of dividends by Global to UCAR if (i) at the time of the proposed dividend, Global is unable to meet certain indebtedness incurrence and income tests or (ii) the total amount of the dividends paid exceeds specified aggregate limits based on consolidated net income, net proceeds from asset and stock sales and certain other transactions. These restrictions are not applicable to dividends paid to UCAR (i) in respect of UCAR's administrative fees and expenses and (ii) to purchase common stock held by present or former officers or employees subject to limits similar to those under the Senior Bank Facilities. DEUTSCHE MARK LOANS In order to consummate the purchase by UCAR Elektroden of net working capital assets from EKL (approximate U.S. dollar equivalent of $12 million), UCAR Elektroden arranged a bank facility with BHF Bank Aktiengesellschaft. 90 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (7) LONG-TERM DEBT -- (CONTINUED) The facility consists of a committed term loan of deutsche mark 17.3 million (U.S. dollar equivalent of approximately $10 million in December 1998) and a revolving line of credit for deutsche mark 2.5 million (U.S. dollar equivalent of approximately $1.5 million in December 1998). The term portion of the facility is committed through December 2000, with repayment of the outstanding balance of deutsche mark 17.3 million due on December 31, 2000. The revolving portion of the facility is committed for one year, with an option to renew annually. Credit support is provided by Global's guarantee of UCAR Elektroden's obligations under the facility. The facility requires that Global remain in compliance with the Senior Bank Facilities and that the facility not be subordinate to the obligations of the Senior Bank Facilities. It also restricts the withdrawal of capital from UCAR Elektroden. The shareholders of UCAR Elektroden have undertaken not to dispose of their capital contributions during the term of the facility. EXTRAORDINARY ITEM In November 1998, the Company recorded a charge of $11 million ($7 million after tax) related to the refinancing of the Senior Bank Facilities. The extraordinary charge represents $8 million of fees paid to amend the Senior Bank Facilities and the write-off of $3 million of deferred debt issuance costs. OTHER At December 31, 1998, payments due on long-term debt in the four years after 1999 are: $77 million in 2000; $87 million in 2001; $117 million in 2002; and $206 million in 2003. The Company's weighted-average interest rate on short-term borrowings outstanding was 7.2% at December 31, 1997 and 9.1% at December 31, 1998. (8) INCOME TAXES Total income taxes were allocated as follows: FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- (Dollars in millions) Income from operations.................... $ 68 $ 39 $ 32 Extraordinary item........................ -- -- (4) Stockholders' equity (deficit)............ (4) (5) -- ---- ---- ---- $ 64 $ 34 $ 28 ==== ==== ==== 91 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (8) INCOME TAXES -- (CONTINUED) The income taxes credited to stockholders' equity (deficit) in 1996 and 1997 relate to the tax benefit arising from the exercise of employee stock options. The following table summarizes the U.S. and non-U.S. components of income (loss) before provision for income taxes: FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- (Dollars in millions) U.S....................................... $ 43 $ (275) $ (39) Non-U.S................................... 164 153 43 ---- ---- ---- $ 207 $ (122) $ 4 ==== ==== ==== Income tax expense attributable to income from operations consists of: CURRENT DEFERRED TOTAL ------- -------- ----- (Dollars in millions) For the year ended December 31, 1996 U.S. federal income taxes........ $ (1) $ 16 $ 15 Non-U.S. income taxes............ 50 3 53 ---- ---- ---- $ 49 $ 19 $ 68 ==== ==== ==== For the year ended December 31, 1997 U.S. federal income taxes........ $ 11 $ (41) $ (30) Non-U.S. income taxes............ 66 3 69 ---- ---- ---- $ 77 $ (38) $ 39 ==== ==== ==== For the year ended December 31, 1998 U.S. federal income taxes........ $ 10 $ (4) $ 6 Non-U.S. income taxes............ 46 (20) 26 ---- ---- ---- $ 56 $ (24) $ 32 ==== ==== ==== In December 1992, the Company obtained an income tax exemption from the Brazilian government on income generated from graphite electrode production through 1999. The exemption reduced the net expense associated with income taxes by $4 million in 1996, $6 million in 1997 and $5 million in 1998. 92 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (8) INCOME TAXES -- (CONTINUED) Income tax expense attributable to income from operations differed from the amounts computed by applying the U.S. federal income tax rate of 35 percent to pretax income from operations as a result of the following: FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- (Dollars in millions) Tax at statutory U.S. federal rate........... $ 72 $ (43) $ 2 Nondeductible (deductible) portion of estimated liabilities and expenses associated with antitrust investigations and related lawsuits and claims................................. -- 85 (18) Nondeductible portion of impairment loss..... -- -- 19 Nondeductible imputed interest associated with antitrust fines............................ -- -- 2 U.S. investment losses related to restructuring charge..................................... -- -- (32) Other taxes related to restructuring charge.. -- -- 9 Foreign earnings taxed at different rates.... 3 4 (13) Foreign operating losses with no benefit provided................................... -- -- 9 Brazilian tax exemption...................... (4) (6) (5) Net taxes related to foreign dividends and other remittances.......................... 4 -- 8 Adjustments to deferred tax asset valuation allowance: Foreign tax credits........................ (8) -- 12 Restructuring.............................. -- -- 32 Antitrust investigations and related lawsuits and claims.............................. -- -- 11 Other........................................ 1 (1) (4) ---- --- --- $ 68 $ 39 $ 32 ==== === === 93 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (8) INCOME TAXES -- (CONTINUED) The significant components of deferred income tax expense attributable to income from operations are as follows: FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- (Dollars in millions) Deferred tax expense (exclusive of the effects of other components below)..... $ 27 $ (38) $ (79) Increase (decrease) in beginning-of- the-year balance of the valuation allowance for deferred tax assets...... (8) -- 55 ---- --- ---- $ 19 $ (38) $ (24) ==== === ==== The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1997 and 1998 are presented below: AT DECEMBER 31, 1997 1998 (Dollars in millions) Deferred tax assets: Depreciation.................................. $ 9 $ 8 Estimated liabilities and expenses associated with antitrust investigations and related lawsuits and claims......................... 28 23 Sales and product allowances.................. 1 1 Compensation and benefit plans................ 55 55 Excess foreign tax credits.................... 18 30 Inventory..................................... 2 2 Provision for scheduled plant closings and other restructurings........................ 1 61 AMT tax credit carryforwards.................. 1 4 Debt issuance costs........................... 4 3 Other......................................... 6 9 --- --- Total gross deferred tax assets............. 125 196 Less: valuation allowance.................. (3) (58) --- --- Deferred tax assets........................ $ 122 $ 138 --- --- 94 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (8) INCOME TAXES -- (CONTINUED) AT DECEMBER 31, --------------- 1997 1998 ---- ---- (Dollars in millions) Deferred tax liabilities: Depreciation................................ $ 87 $ 86 Compensation and benefit plans.............. 1 1 Inventory................................... 17 13 Other....................................... 11 5 -- --- Total gross deferred tax liabilities....... 116 105 --- --- Net deferred tax asset.................... $ 6 $ 33 === === Deferred income tax assets and liabilities are classified on a net current and noncurrent basis within each tax jurisdiction. Deferred income tax assets are included in prepaid expenses in the amount of $30 million at December 31, 1997 and $35 million at December 31, 1998 and in other assets in the amount of $43 million at December 31, 1997 and $52 million at December 31, 1998. Deferred tax liabilities are also included in accrued income and other taxes in the amount of $9 million at December 31, 1997 and $6 million at December 31, 1998. The net change in the total valuation allowance for 1998 was an increase of $55 million. The increase results primarily from deferred taxes associated with the Canadian ($28 million) and German ($4 million) restructurings, antitrust claims ($11 million) and excess foreign tax credits ($12 million) where the Company considers realizability unlikely. There was no change in the valuation allowance in 1997. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company had excess foreign tax credit carryforwards of $18 million at December 31, 1997 and $30 million at December 31, 1998. Of these tax credit carryforwards, $1 million expire in 1999, $1 million expire in 2000, $1 million expire in 2001, $5 million expire in 2002 and $22 million in 2003. The Company used foreign tax credits to reduce U.S. current tax liabilities in the amount of $30 million in 1996, $53 million in 1997 and $38 million in 1998. Based upon the level of historical taxable income and projections for future taxable income over the periods during which these credits are utilizable, management believes it is more likely than not the Company will realize the benefits of these deferred tax assets net of the existing valuation allowances at December 31, 1998. 95 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (8) INCOME TAXES -- (CONTINUED) U.S. income taxes have not been provided on undistributed earnings of foreign subsidiaries. The Company's intention is to reinvest these earnings permanently or to repatriate the earnings only when it is tax efficient to do so. Accordingly, the Company believes that any U.S. tax on repatriated earnings would be substantially offset by U.S. foreign tax credits. (9) OTHER (INCOME) EXPENSE (NET) The following table presents an analysis of other (income) expense (net): FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- (Dollars in millions) Interest income....................... $ (9) $ (9) $ (14) Global integration project consulting fees................................ -- 4 9 Bank fees............................. 2 2 3 Amortization of goodwill.............. -- 1 1 Other................................. 6 7 9 ---- ---- ---- Total other (income) expense (net).. $ (1) $ 5 $ 8 ==== ==== ==== (10) INTEREST EXPENSE The following table presents an analysis of interest expense: FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- (Dollars in millions) Interest incurred on debt............. $ 59 $ 62 $ 66 Amortization of debt issuance costs... 2 2 2 Interest imputed on antitrust fines... -- -- 5 ---- ---- ---- Total interest expense........... $ 61 $ 64 $ 73 ==== ==== ==== 96 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (11) SUPPLEMENTARY BALANCE SHEET DETAIL AT DECEMBER 31, 1997 1998 (Dollars in millions) Notes and accounts receivable: Trade....................................... $ 220 $ 172 Other....................................... 28 31 ----- ----- 248 203 Allowance for doubtful accounts............. (6) (5) ----- ----- $ 242 $ 198 ===== ===== Property, plant and equipment: Land and improvements....................... $ 45 $ 43 Buildings................................... 231 199 Machinery and equipment..................... 949 946 Construction in progress and other.......... 64 32 ----- ----- $ 1,289 $ 1,220 ===== ===== Other assets: Goodwill (net).............................. $ 25 $ 15 Deferred income taxes....................... 43 52 Benefits protection trust................... 10 2 Long-term receivables....................... 5 8 Other....................................... 19 14 ----- ----- $ 102 $ 91 ===== ===== Accounts payable: Trade....................................... $ 63 $ 54 Other....................................... 13 13 ----- ----- $ 76 $ 67 ===== ===== Other accrued liabilities: Accrued accounts payable.................... $ 26 $ 13 Payrolls.................................... 8 7 Restructuring............................... 2 57 Employee compensation and benefits.......... 47 31 Estimated liabilities and expenses associated with antitrust investigations and related lawsuits and claims...................... 174 78 Other....................................... 5 12 ----- ----- $ 262 $ 198 ===== ===== 97 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (11) SUPPLEMENTARY BALANCE SHEET DETAIL -- (CONTINUED) AT DECEMBER 31, 1997 1998 (Dollars in millions) Other long-term obligations: Postretirement benefits..................... $ 83 $ 83 Employee severance costs.................... 23 12 Pension and related benefits................ 22 21 Estimated liabilities and expenses associated with antitrust investigations and related lawsuits and claims...................... 163 117 Other....................................... 22 33 ---- ---- $ 313 $ 266 ==== ==== The following table presents an analysis of the allowance for doubtful accounts: AT DECEMBER 31, 1997 1998 (Dollars in millions) Balance at beginning of year.................... $ 6 $ 6 Deductions...................................... -- (1) ---- ---- Balance at end of year.......................... $ 6 $ 5 ==== ==== (12) LEASES Lease commitments under noncancelable operating leases extending for one year or more will require the following future payments: (Dollars in millions) 1999................................................ $ 5 2000................................................ 3 2001................................................ 2 2002................................................ 2 2003................................................ 2 After 2003.......................................... 3 Total lease and rental expenses under noncancelable operating leases extending one month or more were $4 million in 1996, $5 million in 1997 and $5 million in 1998. 98 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (13) BENEFIT PLANS RETIREMENT PLANS AND POSTRETIREMENT BENEFIT PLANS Until February 25, 1991, the Company participated in the U.S. retirement plan of Union Carbide Corporation ("Union Carbide"). Effective February 26, 1991, the Company formed its 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 the Company. All Company employees who retired prior to February 25, 1991 are covered under the Union Carbide plan. Pension benefits under the Company plan are based primarily on years of service and compensation levels prior to retirement. Net pension cost for the U.S. retirement plan were $6 million in each of 1996 and 1997 and $7 million for 1998. 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. Net pension costs for plans of foreign subsidiaries amounted to $1 million in 1996, $1 million in 1997 and $7 million in 1998 which includes a $7 million curtailment loss for the Canadian pension plan recorded in conjunction with the Company's restructuring charge. The Company also provides health care and life insurance benefits for eligible retired employees. These benefits are provided through various insurance companies and health care providers. The Company accrues the estimated net postretirement benefit costs during the employees' credited service periods. The components of the Company's consolidated net pension costs are as follows: FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- (Dollars in millions) Service cost............................... $ 7 $ 7 $ 8 Interest cost.............................. 9 12 13 Expected return on assets.................. (9) (12) (14) Amortization of transition obligation (asset) -- -- (1) Settlement loss............................ -- -- 1 Curtailment loss........................... -- -- 7 --- --- --- Net pension cost........................ $ 7 $ 7 $ 14 === === === 99 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (13) BENEFIT PLANS -- (CONTINUED) The components of the Company's consolidated net postretirement benefits costs are as follows: FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1996 1997 1998 ---- ---- ---- (Dollars in millions) Service cost................................ $ 2 $ 2 $ 3 Interest cost............................... 5 6 5 Amortization of prior service cost.......... (3) (3) (3) --- --- --- Net postretirement benefit cost.......... $ 4 $ 5 $ 5 === === === The reconciliation of beginning and ending balances of benefit obligations and fair value of plan assets, and the funded status of the plan, are as follows: POSTRETIREMENT PENSION BENEFITS BENEFITS AT DECEMBER 31, AT DECEMBER 31, ---------------- --------------- 1997 1998 1997 1998 ---- ---- ---- ---- (Dollars in millions) Changes in benefit obligation: Net benefit obligation at beginning of year............................... $ 140 $ 172 $ 74 $ 81 Service cost......................... 7 8 2 3 Interest cost........................ 12 13 6 5 Plan amendments...................... -- 1 1 -- Foreign currency exchange rate changes (4) (4) (1) (1) Actuarial loss....................... 8 10 4 2 Acquisition of EMSA.................. 14 -- -- -- Curtailment.......................... -- 4 -- (1) Settlement........................... -- (3) -- -- Special termination benefits......... -- 3 -- -- Gross benefits paid.................. (5) (5) (5) (5) ----- ----- ----- ----- Net benefit obligation at end of year............................ $ 172 $ 199 $ 81 $ 84 ===== ===== ===== ===== Changes in plan assets: Fair value of plan assets at beginning of year............................ $ 123 $ 165 $ -- $ -- Actual return on plan assets......... 21 17 -- -- Acquisition of EMSA.................. 20 -- -- -- Foreign currency exchange rate changes (4) (5) -- -- Employer contributions............... 10 2 5 5 Gross benefits paid.................. (5) (5) (5) (5) ----- ----- ----- ----- Fair value of plan assets at end of year............................ $ 165 $ 174 $ -- $ -- ===== ===== ===== ===== 100 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (13) BENEFIT PLANS -- (CONTINUED) POSTRETIREMENT PENSION BENEFITS BENEFITS AT DECEMBER 31, AT DECEMBER 31, ---------------- ---------------- 1997 1998 1997 1998 ---- ---- ---- ---- (Dollars in millions) Reconciliation of funded status: Funded status at end of year........ $ (7) $ (25) $ (81) $ (84) Unrecognized net transition obligation (asset)................. (8) (6) 1 -- Unrecognized prior service cost..... 3 4 (5) (1) Unrecognized net actuarial (gain) loss (8) (1) 2 2 ----- ----- ----- ----- Net amount recognized at end of year............................ $ (20) $ (28) $ (83) $ (83) ===== ===== ===== ===== Assumptions used to determine net pension costs, pension projected benefit obligation, net postretirement benefit costs and postretirement benefits projected benefit obligation are as follows: POSTRETIREMENT PENSION BENEFITS BENEFITS AT DECEMBER 31, AT DECEMBER 31, ---------------- ---------------- 1997 1998 1997 1998 ---- ---- ---- ---- Weighted-average assumptions as of measurement date: Discount rate....................... 7.48% 7.61% 7.00% 7.34% Expected return on plan assets ..... 8.93% 8.83% N/A N/A Rate of compensation increase....... 5.12% 4.85% 4.50% 4.58% Health care cost trend on covered charges: Initial......................... N/A N/A 8.70% 8.14% Ultimate........................ N/A N/A 5.23% 5.11% Years to ultimate............... N/A N/A 7 6 Assumed health care cost trend rates have a significant effect on the amounts reported for net postretirement benefits. A one-percentage-point change in the health care cost trend rate would change the accumulated postretirement benefit obligation by approximately $7 million as of December 31, 1998 and change net postretirement benefit costs by approximately $1 million for 1998. 101 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (13) BENEFIT PLANS -- (CONTINUED) OTHER NON-QUALIFIED PLANS Since January 1, 1995, the Company has established various unfunded, non-qualified supplemental retirement and deferred compensation programs for certain eligible employees. In 1995, the Company established a benefits protection trust (the "Trust") to partially provide for the benefits of employees participating in these plans. At December 31, 1997 and 1998, the Trust had assets of approximately $10 million and $2 million, respectively, which are included in other assets on the Consolidated Balance Sheet. SAVINGS PLAN The Company's employee savings plan provides eligible employees the opportunity for long-term savings and investment. Participating employees can contribute 1.0% to 7.5% of employee compensation as basic contributions and an additional 0.5% to 10.0% of employee compensation as supplemental contributions. The Company contributes on behalf of each participating employee an amount equal to 30% for 1996 and 1997 and 50% for 1998 of the employee's basic contribution. The Company contributed $2 million in each of 1996, 1997 and 1998. INCENTIVE PLAN In 1996 and 1997, the Company provided group profit sharing plans for employees in various subsidiaries. Costs for these profit sharing plans were $17 million in 1996 and $19 million in 1997. Effective January 1, 1998, the Company implemented a global profit sharing plan for the Company's worldwide employees. This plan is based on the global financial performance of the Company. In 1998, the cost for the plan was $10 million. (14) RESTRUCTURING PLAN In September 1998, the Company recorded a restructuring charge of $86 million in connection with a global restructuring and rationalization plan to reduce costs and improve operating efficiencies. The principal actions of the plan involve the closure of manufacturing operations in Welland, Canada and Berlin, Germany, and the centralization and consolidation of administrative and financial functions. These actions, which will result in the elimination of approximately 430 administrative and manufacturing positions, are expected to be completed in 1999. 102 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (14) RESTRUCTURING PLAN -- (CONTINUED) The major components of the restructuring charge and the remaining accrual balance as of December 31, 1998 were as follows: BALANCE AT ORIGINAL 1998 ACTIVITY DECEMBER 31, CHARGE/ACCRUAL CASH NONCASH 1998 Severance and related costs $ 30 $ -- $ -- $ 30 Write-off of property, plant and equipment 28 -- 28 -- Plant shut down and related 19 -- 1 18 costs Postmonitoring and environmental 9 -- -- 9 ---- ----- ----- ---- $ 86 $ -- $ 29 $ 57 ==== ===== ===== ==== (15) MANAGEMENT COMPENSATION AND INCENTIVE PLANS In January 1995, the Company entered into three-year employment agreements with certain officers which automatically renew annually for additional one-year terms. The employment agreements provide the officers with the opportunity to receive bonuses based in part on the achievement of designated EBITDA targets. The Company recorded expenses applicable to these bonuses of $5 million in 1996 and $3 million in 1997. At December 31, 1998, only one officer was subject to such an agreement. In June 1998, the Company entered into a five-year employment agreement with its new president and chief executive officer. UCAR has adopted several stock option plans. The aggregate number of shares subject to the plans was 6,387,000 at December 31, 1997 and 9,500,000 at December 31, 1998. The plans permit options to be granted to employees, and in the case of one plan, since March 1998, also to non-employee directors. In January 1995, UCAR granted 12-year options to management to purchase 4,761,000 shares at an exercise price of $7.60 per share, of which options for 3,967,400 shares vested fully at the time of UCAR's initial public offering and the balance were performance options, one-half of which vest in each of 1998 and 1999 if EBITDA for those years is equal to or exceeds a target amount. In December 1997, UCAR's Board of Directors approved the accelerated vesting of the outstanding performance options associated with the 1998 performance targets and, accordingly, the Company recorded compensation expense of $12 million ($9 million after tax). In addition, because the Company has not met the probability criterion associated with achieving the 1999 performance targets, no compensation expense associated with those performance options has been recorded. 103 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (15) MANAGEMENT COMPENSATION AND INCENTIVE PLANS -- (CONTINUED) In February 1997, UCAR granted fully vested 10-year options to management to purchase 155,000 shares at an exercise price of $37.59 per share. UCAR granted 10-year options to management to purchase shares throughout 1998, as follows: o Options for 621,000 shares were granted to certain officers at exercise prices ranging from $29.22 to $34.36 per share. Options for 300,000 shares vest one year from the grant date, options for 221,000 shares vest two years from the grant date and the remaining options for 100,000 shares vest three years from the grant date. o Options for 1,935,000 shares were issued to certain officers and management, at exercise prices ranging from $15.50 to $17.06 per share. Options for 17,000 shares were vested on the grant date and options for 628,000 shares vest one year from the grant date. The remaining options for 1,290,000 shares vest seven years from the grant date. Accelerated vesting occurs as the market price for the common stock equals or exceeds specified amounts. In September 1998, UCAR adopted a loan program under which management received approximately $3 million in 1998. In September 1998, UCAR adopted stock purchase programs under which management may purchase common stock at fair market value on the date of purchase. During 1998, 201,373 shares of common stock were sold to management. In February 1996, UCAR granted 10-year options to management to purchase 960,000 shares at an exercise price of $35.00 per share. In May 1996, UCAR granted additional 10-year options to management to purchase 4,000 shares at an exercise price of $40.44 per share. In February 1997, UCAR granted additional 10-year options to management to purchase 61,500 shares at an exercise price of $39.31 per share. The options granted vest eight years from the date of grant. Accelerated vesting occurs as the market price of the common stock equals or exceeds specified amounts. At December 31, 1997, 460,350 of such options were fully vested. The Company applies APB 25 in accounting for its stock-based compensation plans. Accordingly, no compensation cost has been recognized for its time vesting options. The compensation cost that has been charged against income for its performance vesting options was $12 million in 1997. If compensation cost for the Company's stock-based compensation plans was determined by the fair value method prescribed by SFAS 123, the Company's net income (loss) and net income (loss) per share would have been reduced or increased to the pro forma amounts indicated below: 104 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (15) MANAGEMENT COMPENSATION AND INCENTIVE PLANS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 (Dollars in millions, except per share data) Net income (loss): As reported.......................... $ 145 $ (160) $ (37) Pro forma............................ 142 (156) (41) Diluted net income (loss) per share: As reported ........................ 3.00 (3.49) (0.83) Pro forma........................... 2.93 (3.39) (0.91) A summary of the status of the Company's stock-based compensation plans as of December 31, 1996, 1997 and 1998, and changes during the years then ended is presented below:
FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ------ ----- ------ ----- ------ ----- (Shares in thousands) Time vesting options: Outstanding at beginning of year................ 2,787 $ 7.60 3,572 $15.01 3,324 $16.98 Granted at market price.. -- -- -- -- 1,884 17.06 Granted at price exceeding market.................. 964 35.02 62 39.31 621 32.37 Granted at price below market.................. -- -- 155 37.59 51 15.50 Exercised................ (176) 8.22 (432) 9.91 (10) 7.60 Forfeited................ (3) 35.00 (33) 35.00 (44) 32.84 ----- ----- ----- Outstanding at end of year.................. 3,572 15.01 3,324 16.98 5,826 18.48 ===== ===== ===== Options exercisable at year end................ 2,853 9.97 2,799 13.55 2,841 13.76 Weighted-average fair value of options granted during year: At market............... -- -- $ 8.53 Exceeding market........ 16.02 16.98 12.49 Below market............ -- 17.47 7.99
105 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (15) MANAGEMENT COMPENSATION AND INCENTIVE PLANS -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996 1997 1998 ---- ---- ---- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ------ ----- ------ ----- ------ ----- (Shares in thousands) Performance vesting options: Outstanding at beginning of year................. 1,984 $7.60 1,508 $ 7.60 1,174 $ 7.60 Granted.................. -- -- -- -- -- -- Exercised................ (476) 7.60 (284) 7.60 (45) 7.60 Forfeited................ -- -- (50) 7.60 (191) 7.60 ----- ----- ----- Outstanding at end of year.................. 1,508 7.60 1,174 7.60 938 7.60 ===== ====== ===== Options exercisable at year end................ 714 7.60 842 7.60 566 7.60
The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for grants in 1996, 1997 and 1998, respectively: dividend yield of 0.0% for all years; expected volatility of 30% in 1996 and 1997, and 35% in 1998; risk-free interest rates of 5.7% in 1996, 6.4% in 1997 and 4.9% in 1998; and expected lives of eight years in 1996 and seven years in 1997 and 1998. The following table summarizes information about stock options outstanding at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------- ------------------- WEIGHTED- AVERAGE WEIGHTED- WEIGHTED- REMAINING AVERAGE AVERAGE RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE EXERCISE PRICES OUTSTANDING LIFE PRICES EXERCISABLE PRICES --------------- ----------- ---- ------ ----------- ------ (Shares in thousands) Time vesting options: $7.60 2,199 8 years $ 7.60 2,199 $ 7.60 $15.50 to $17.06 1,930 9 years 17.02 17 15.50 $29.22 to $40.38 1,697 7 years 33.94 625 35.36 ----- --- --- 5,826 8 years 18.39 2,841 13.76 ===== ===== Performance vesting options: $7.60 938 8 years 7.60 566 7.60 ====== ===
106 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (16) CONTINGENCIES ANTITRUST INVESTIGATIONS On June 5, 1997, the Company was served with subpoenas to produce documents to a grand jury convened by the U.S. Department of Justice (the "DOJ") and a related search warrant in connection with a criminal investigation as to whether there has been any violation of U.S. federal antitrust laws by producers of graphite electrodes. Concurrently, the antitrust enforcement authorities of the European Union (the "EU authorities") visited offices of the Company's French subsidiary for purposes of gathering information in connection with an investigation as to whether there has been any violation of the antitrust law of the European Union by those producers. In October 1997, the Company was served with subpoenas by the DOJ to produce documents relating to, among other things, its carbon electrode and bulk graphite businesses. In December 1997, UCAR's Board of Directors appointed a special committee of outside directors to exercise the power and authority of UCAR's Board of Directors in connection with antitrust investigations and related lawsuits and claims. On March 13, 1998, the then Chairman of the Board, President and Chief Executive Officer and the then Senior Vice President and Chief Operating Officer retired and resigned from all positions with the Company. On April 7, 1998, pursuant to a plea agreement between the DOJ and UCAR, the DOJ charged UCAR and unnamed co-conspirators with participating from at least July 1992 until at least June 1997 in an international conspiracy involving meetings and conversations in the Far East, Europe and the United States resulting in agreements to fix prices and allocate market shares in the United States and elsewhere, to restrict co-conspirators' capacity and to restrict non-conspiring producers' access to manufacturing technology for graphite electrodes. On April 24, 1998, pursuant to the plea agreement, UCAR pled guilty to a one-count charge of violating U.S. federal antitrust laws in connection with the sale of graphite electrodes and was sentenced to pay a non-interest-bearing fine in the aggregate amount of $110 million. The fine is payable in six annual installments of $20 million, $15 million, $15 million, $18 million, $21 million and $21 million, commencing July 23, 1998. The agreement was approved by the court and, as a result, under the plea agreement, the Company will not be subject to prosecution by the DOJ with respect to any other violations of the U.S. federal antitrust laws occurring prior to April 24, 1998. The payment due July 23, 1998 was timely made. In April 1998, the Company became aware that the Canadian Competition Bureau (the "Competition Bureau") had commenced a criminal investigation as to whether there has been any violation of Canadian antitrust laws by producers of graphite electrodes. On January 29, 1999, pursuant to a plea agreement with the Competition Bureau, the Company's Canadian subsidiary agreed to plead guilty to a one count charge of violating Canadian antitrust laws in connection with the sale of graphite electrodes and to pay a fine of Cdn.$11 million. Under the plea agreement, which is subject to court approval, the Company will not be subject to prosecution by the Competition Bureau with respect to any antitrust violations occurring prior to 107 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (16) CONTINGENCIES -- (CONTINUED) the date of the plea agreement. The plea agreement will be submitted for court approval. Although the Company does not expect such an outcome, it is possible that the court could reject the plea agreement. In such event, it is possible that the Company could be required to either defend any charges which could be brought or enter into a less favorable plea agreement. The guilty plea and plea agreements have made it more difficult for the Company to defend against other investigations as well as civil lawsuits and claims. In June 1998, the Company became aware that the Japanese antitrust enforcement authorities had commenced an investigation as to whether there has been any violation of Japanese antitrust laws by producers and distributors of graphite electrodes. On January 14, 1999, the Company received a request from these authorities to explain, in writing, the purpose of various alleged meetings which took place between the Company and other producers of graphite electrodes during the period from 1992 to the present. The Company believes that, among other things, it has good defenses to any claim that it is subject to the jurisdiction of these authorities and does not intend to comply with this request. The independent distributor of the Company's products in Japan has been required to produce documents and witnesses to these authorities. The Company has been vigorously protecting, and intends to continue to vigorously protect, its interests in connection with the investigations described above. The Company may, however, at any time settle any possible unresolved charges. The Company is cooperating with the EU authorities in its investigation and with the DOJ and the Competition Bureau in their investigation of other producers of graphite electrodes. It is possible that antitrust investigations seeking, among other things, to impose fines and penalties against the Company could be initiated by authorities in other jurisdictions. ANTITRUST LAWSUITS In 1997, UCAR and other producers of graphite electrodes were served with complaints commencing various antitrust class action lawsuits. Subsequently, the complaints were either withdrawn without prejudice to refile or consolidated into a single complaint (the "antitrust class action lawsuit"). The plaintiffs allege that the defendants violated U.S. federal antitrust laws in connection with the sale of graphite electrodes and seek, among other things, an award of treble damages resulting from such alleged violations. In August 1998, the court certified a class of plaintiffs consisting of all persons who purchased graphite electrodes in the United States (the "class") directly from the defendants during the period from July 1, 1992 through June 30, 1997 (the "class period"). 108 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (16) CONTINGENCIES -- (CONTINUED) In 1998, UCAR and other producers of graphite electrodes were served with a complaint by 27 steelmakers in the United States commencing a separate civil antitrust lawsuit (the "opt-out lawsuit"). The plaintiffs allege that the defendants violated U.S. federal antitrust laws in connection with the sale of graphite electrodes and seek, among other things, an award of treble damages resulting from such alleged antitrust violations. In 1998, the Company, other producers of graphite electrodes, Union Carbide Corporation and Mitsubishi Corporation were served with a complaint by Nucor Corporation and an affiliate commencing a civil antitrust and fraudulent transfer lawsuit (the "Nucor lawsuit"). The plaintiffs allege that the defendants violated U.S. federal antitrust laws in connection with the sale of graphite electrodes and that Union Carbide Corporation and Mitsubishi Corporation violated applicable state fraudulent transfer laws and seek, among other things, an award of treble damages resulting from such alleged antitrust violations and an order to have payments made by UCAR to Union Carbide Corporation and Mitsubishi Corporation in connection with the Company's leveraged recapitalization in January 1995 declared to be fraudulent conveyances and returned to UCAR for purposes of enabling UCAR to satisfy any judgments resulting from such alleged antitrust violations. In 1998, the Company and other producers of graphite electrodes were served with a petition by Chaparral Steel Company commencing a separate civil antitrust lawsuit (the "Texas lawsuit"). The plaintiff alleges that the defendants violated Texas antitrust laws in connection with the sale of graphite electrodes and seeks, among other things, an award of treble damages resulting from such alleged violations. Certain other steelmakers in the United States and Canada have also served the Company and other producers of graphite electrodes with complaints commencing five separate civil antitrust lawsuits (four in the United States and one in Canada) in various courts (the "other lawsuits"). The plaintiffs allege that the defendants violated applicable antitrust laws (and applicable conspiracy laws, in the case of the lawsuit in Canada) in connection with the sale of graphite electrodes and seek, among other things, an award of treble damages (in the case of lawsuits in the United States) or actual and punitive damages (in the case of the lawsuit in Canada) resulting from such alleged violations. In February 1999, the Company and other producers of graphite electrodes were served with a complaint by 23 steelmakers and related parties outside the United States commencing a separate civil antitrust lawsuit in the United States (the "foreign customer lawsuit"). The plaintiffs allege that the defendants violated U.S. federal antitrust laws in connection with the sale of graphite electrodes sold or sourced from the United States and those sold and sourced outside the United States. The plaintiffs seek, among other things, an award of treble damages resulting from such alleged antitrust violations. The Company believes that, among other things, it has strong defenses against claims alleging that purchases of graphite electrodes outside the United States are actionable under U.S. federal antitrust laws. 109 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (16) CONTINGENCIES -- (CONTINUED) Certain steelmakers in other countries who purchased graphite electrodes from the Company, and certain customers who purchased other products from the Company, have threatened to commence antitrust lawsuits against the Company in the United States and other jurisdictions. Through February 26, 1999, the Company has settled the antitrust class action lawsuit, the opt-out lawsuit, the Nucor lawsuit and all of the other lawsuits (in Canada as well as in the United States), certain of the threatened lawsuits and certain antitrust claims by certain other steelmakers who negotiated directly with the Company. The settlements cover virtually all of the actual and potential claims against the Company (but not other defendants) by steelmakers in the United States and Canada arising out of alleged antitrust violations occurring prior to the date of the respective settlements in connection with the sale of graphite electrodes. The only material exceptions are the Texas lawsuit, the foreign customer lawsuit and possible claims by customers in the United States and Canada whose aggregate purchases do not constitute a material portion of the Company's sales in those countries. Although each settlement is unique, in the aggregate they consist primarily of current and deferred cash payments with some product credits and discounts. Through December 31, 1998, all payments due, an aggregate of $145 million, have been timely made. As of December 31, 1998 and based on information known to the Company at February 26, 1999, the aggregate amount remaining due under these settlements is approximately $29 million, most of which is payable in 1999. Amounts due under the settlement of the antitrust class action may be increased if additional claims are filed by members of the class or if it is determined that steelmakers outside the United States who purchased graphite electrodes sourced within the United States are members of the class and such steelmakers file claims thereunder. The Texas lawsuit and the foreign customer lawsuit have not been settled and are still in their early stages. The Company has been vigorously defending, and intends to continue to vigorously defend, against the Texas lawsuit and the foreign customer lawsuit as well as all threatened lawsuits and possible claims, including those mentioned above. The Company may at any time, however, settle the Texas lawsuit and the foreign customer lawsuit as well as any threatened lawsuits and possible claims and is actively negotiating settlements with customers who are not parties to any lawsuit to settle certain of these claims. It is possible that additional civil antitrust lawsuits seeking, among other things, to recover damages could be commenced against the Company in the United States and other jurisdictions. The Company recorded a charge of $340 million against results of operations for 1997 as a reserve for potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. Actual liabilities and expenses could be materially higher than $340 million. To the extent that the Company's liabilities and expenses are reasonably estimable, at February 26, 1999, the Company believes that $340 million represents the best estimate of such 110 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (16) CONTINGENCIES -- (CONTINUED) potential liabilities and expenses. The fines and settlements described above are within the amounts used by the Company to evaluate the $340 million charge. SHAREHOLDER DERIVATIVE LAWSUIT In March 1998, UCAR was served with a complaint commencing a shareholder derivative lawsuit. Certain former and current directors and officers are named as defendants. UCAR is named as a nominal defendant. The plaintiff alleges that the defendants breached their fiduciary duties in connection with alleged non-compliance by the Company and its employees with antitrust laws and that certain of the defendants sold common stock while in possession of materially adverse non-public information relating to such non-compliance with antitrust laws and seeks recovery for UCAR of damages to the Company resulting from these alleged breaches and sales. In May 1998, UCAR and the individual defendants filed a motion to dismiss the complaint on the grounds that plaintiff failed to make a demand upon UCAR's Board of Directors prior to commencing the lawsuit and to sufficiently allege that such a demand would have been futile. In response to the motion, plaintiff obtained court permission to file an amended complaint. The amended complaint was served in July 1998. In August 1998, UCAR and the individual defendants moved to dismiss the complaint on the same grounds. The motion has been fully briefed. This lawsuit is still in its early stages. This lawsuit is being pursued for recovery from the individual defendants on behalf of (and payable to) UCAR and any indemnification obligations which UCAR may have to the individual defendants would result from judgments or settlements in favor of UCAR. As a result, the Company believes that UCAR's ultimate exposure in this lawsuit is limited to defense costs and possibly reimbursement of certain plaintiff's attorneys' fees. SECURITIES CLASS ACTION LAWSUIT. In April and May 1998, UCAR was served with complaints commencing securities class actions. The complaints have been consolidated into a single complaint and a consolidated amended complaint was served in September 1998. The defendants named in the consolidated amended complaint are UCAR and certain former and current directors and officers . The proposed class consists of all persons (other than the defendants) who purchased common stock during the period from August 1995 through March 1998. The plaintiffs allege that, during such period, the defendants violated U.S. federal securities laws in connection with purchases and sales of common stock by making material misrepresentations and omissions regarding alleged violations of antitrust laws and seek, among other things, to recover damages resulting from such alleged violations. UCAR and each of the individual defendants has filed a motion to dismiss. This lawsuit is still in its early stages and no evaluation of liability or exposure related to this lawsuit can yet be made. As mentioned above, the guilty plea and plea agreements have made it more difficult for UCAR to defend against claims asserted against it. 111 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (17) EARNINGS PER SHARE Basic and diluted earnings per share are calculated based upon the provisions of SFAS 128, adopted in 1997, using the following share data: 1996 1997 1998 ---- ---- ---- Weighted-average common shares outstanding for basic calculation 46,273,820 45,963,407 44,971,598 Add: Effect of stock options...... 2,195,365 -- -- ----------- --------- --------- Weighted-average common shares outstanding, adjusted for diluted calculation...................... 48,469,185 45,963,407 44,971,598 ========== ========== ========== No outstanding options were considered in the 1997 and 1998 calculation of weighted-average common shares outstanding for the diluted calculation as they are all antidilutive due to net losses in the respective periods. The calculation of weighted-average common shares outstanding excludes the consideration of performance options for 794,000 shares in 1996 because the exercise of these options would not have been dilutive for 1996. (18) STOCKHOLDER RIGHTS PLAN Effective August 7, 1998, UCAR adopted a Stockholder Rights Plan (the "Rights Plan"). Under the Rights Plan, one preferred stock purchase right (a "Right") was distributed as a dividend on each outstanding share of common stock. Each share of common stock issued after the distribution is accompanied by a Right. 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 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 at 50% of the price at which the common stock traded prior to the acquisition or announcement. In addition, if UCAR is acquired after the Rights become exercisable, the Rights will entitle those holders to buy the acquiring company's shares at a similar discount. 112 UCAR INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) (18) STOCKHOLDER RIGHTS PLAN -- (CONTINUED) UCAR is entitled to redeem the Rights for one cent per Right under certain circumstances. If not redeemed, the Rights will expire on August 7, 2008. For stockholders who owned more than 15% of the outstanding shares of common stock on August 7, 1998, the thresholds described above are 22.5% (and not 15%) of the outstanding shares of common stock. The preferred stock issuable upon exercise of Rights consists of Series A Junior Participating Preferred Stock, par value $.01 per share, of UCAR. In general, each share of that preferred stock will be entitled to a minimum preferential 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. (19) IMPAIRMENT LOSS During August 1998, the Russian economic and business climate experienced significant adverse change. This change, when considered in conjunction with the current and historical operating and cash flow losses of the Company's manufacturing operations in Vyazma, Russia, indicated the need for assessing the recoverability of the long-lived and intangible assets of these operations. The Company estimated future undiscounted flows expected to result from the use of these assets and concluded they were less than the carrying amount of these assets. Accordingly, the Company recorded an impairment loss of $60 million ($58 million after tax) for the unrecoverable portion of these assets, effectively writing down the carrying value of these assets to their fair value of $2 million. The impairment loss affected the graphite electrode business segment and consisted of $55 million of long-lived assets and $5 million of goodwill. Fair value was calculated on the basis of discounted estimated future cash flow. Estimates of the discounted future cash flows are subject to significant uncertainties and assumptions. Accordingly, actual results could vary significantly from such estimates. 113 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEMS 10 TO 13 (INCLUSIVE). The information required by Items 10, 11, 12 and 13 will appear in the UCAR International Inc. Proxy Statement for the Annual Meeting of Stockholders to be held May 11, 1999, 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). In addition, the information set forth below is provided as required by Item 10. EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth information with respect to our current executive officers and directors. NAME AGE* POSITION EXECUTIVE OFFICERS Robert D. Kennedy.......... 66 Chairman of the Board Gilbert E. Playford........ 51 President, Chief Executive Officer and Director Corrado F. De Gasperis..... 33 Controller Peter B. Mancino........... 56 Vice President, General Counsel and Secretary Craig S. Shular............ 45 Vice President and Chief Financial Officer DIRECTORS R. Eugene Cartledge........ 69 Director Alec Flamm................. 72 Director John R. Hall............... 66 Director Thomas Marshall............ 70 Director Michael C. Nahl............ 56 Director KEY EMPLOYEES Petrus J. Barnard.......... 49 Director, Electrodes of the Americas Luiz R. Beling............. 48 Director, International Specialties Business W. David Cate.............. 52 Director, Pipeline Management Hermanus L. Pretorius...... 48 Director, Electrodes of Europe and South Africa - ------------------------ * As of March 1, 1999 114 EXECUTIVE OFFICERS ROBERT D. KENNEDY became a director in June 1990. He was elected Chairman of the Board in March 1998 and served as Chief Executive Officer from March 1998 to June 1998. Mr. Kennedy joined Union Carbide in 1955 and held various marketing and management positions in the United States and Europe. He was a Senior Vice President of Union Carbide from 1981 to 1985. In 1985, Mr. Kennedy was elected a director and President of Union Carbide. In 1986, he was elected Chief Executive Officer and Chairman of the Board of Union Carbide. Mr. Kennedy retired as Chief Executive Officer and President of Union Carbide in April 1995 and as Chairman of the Board (but not as a director) of Union Carbide in December 1995. Mr. Kennedy is also a director of Union Camp Corporation, Sun Company, Inc., K-Mart Corp., LionOre Mining International Ltd. and General Signal Corp. Mr. Kennedy is a member of the Nominating Committee of UCAR's Board of Directors. GILBERT E. PLAYFORD became President and Chief Executive Officer in June 1998. From 1996 until June 1998, Mr. Playford was President, Chief Executive Officer and a director of LionOre Mining International Ltd. Mr. Playford served in various positions, including most recently Vice President, Treasurer and Principal Financial Officer, of Union Carbide from 1972 until 1996. He is a director of LionOre Mining International Ltd. CORRADO F. DE GASPERIS became Controller in June 1998. From 1987 through June 1998, he was with KPMG LLP, who had announced his admittance into their partnership as a partner. Prior to this announcement, he served as a Senior Assurance Manager in the Manufacturing, Retail and Distribution Practice. PETER B. MANCINO joined the Law Department of Union Carbide in 1975 and became Division Counsel of the Industrial Gases and Carbon Products Divisions in 1980. In 1989, he became General Counsel of the UCAR Group. Mr. Mancino has been a Vice President and the Secretary since 1991. CRAIG S. SHULAR became a Vice President and Chief Financial Officer in January 1999. From 1976 through 1998, he held various finance and auditing positions in various divisions of Union Carbide, including the Carbon Products Division from 1976 to 1979. DIRECTORS R. EUGENE CARTLEDGE became a director in February 1996. From 1986 until his retirement in 1994, he 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. He is a director of Union Camp Corporation, Chase Brass Industries, Inc., Sun Company, Inc., Delta Air Lines, Inc. and Blount, Inc. Mr. Cartledge is a member of the Organization, Compensation and Pension Committee of UCAR's Board of Directors. ALEC FLAMM became a director in April 1998. From January 1982 to August 1985, Mr. Flamm served as President and Chief Operating Officer of Union 115 Carbide. Mr. Flamm joined Union Carbide in 1949 and held various marketing and management positions. He retired as a Vice Chairman and a director of Union Carbide in March 1986. Mr. Flamm served Union Carbide as Vice Chairman from August 1985 and as a director from 1981. Mr. Flamm is Chairman of the Audit Committee and the Nominating Committee of UCAR's Board of Directors. JOHN R. HALL became a director in November 1995. Since July 1997, he has been the non-employee Chairman of Arch Coal, Inc. He retired as Chairman effective January 31, 1997 and as Chief Executive Officer effective October 1, 1996 of Ashland Inc., which positions he had held since 1981. Mr. Hall served in various engineering and managerial capacities at Ashland Inc. since 1957. Mr. Hall is a director of Banc One Corporation, Canada Life Assurance Company, CSX Corporation, Humana Inc., Reynolds Metals Company, Arch Coal Inc., and USEC Inc. Mr. Hall is Chairman of the Organization, Compensation and Pension Committee of UCAR's Board of Directors. THOMAS MARSHALL became a director in June 1998. He retired in 1995 as Chairman of the Board and Chief Executive Officer of Aristech Chemical Corporation, a spinoff of USX Corp., which positions he had held since 1986. Mr. Marshall had previously served in various positions, including Executive Vice President and Chief Operating Officer - Manufacturing, Fabricating and Chemicals, for the former U.S. Steel Corp. Mr. Marshall is a member of the Audit Committee and the Organization, Compensation and Pension Committee of UCAR's Board of Directors. MICHAEL C. NAHL became a director in January 1999. He is Senior Vice President and Chief Financial Officer of Albany International Corp. He joined Albany International Corp. as a Corporate Group Vice president and was appointed to his present position in 1983. He is a member of the Chase Regional Advisory Board. Mr. Nahl is a member of the Audit Committee and Nominating Committee of UCAR's Board of Directors. KEY EMPLOYEES PETRUS J. BARNARD joined our South African subsidiary in 1972. Since then, he has held various management positions in our South African subsidiary and in the Carbon Products Division of Union Carbide in the United States. He became Director of Operations for Europe and South Africa in 1994, General Manager of the Graphite Electrode Business for Europe and South Africa in 1995, and has been Vice President, Electrodes for the Americas in 1997 and Director, Electrodes for the Americas in 1998. LUIZ R. BELING joined our Brazilian subsidiary in 1975. He held various sales and management positions in our Brazilian subsidiary, including President and Managing Director, until August 1997. He became General Manager, Specialties Business Worldwide, in 1997 and Director, International Specialties Business, in 1998. W. DAVID CATE joined Union Carbide in 1969 and held various manufacturing and management positions in the Carbon Products Division. He became General Manager for Graphite Specialties and Flexible Graphite in 1991, General Manager 116 for North America in 1994, Vice President, Electrodes for Europe and South Africa, in 1997 and Director, Pipeline Management, in 1998. HERMANUS L. PRETORIUS joined our South African subsidiary in 1977. Since then, he has held various management positions in our South African subsidiary and our Swiss subsidiary. He became Director, Electrodes of Europe and South Africa, in 1998. 117 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) Financial Statements See Index to Consolidated Financial Statements at page 66 of this Report. (2) Financial Statement Schedules None. (b) Reports on Form 8-K No Reports on Form 8-K were filed during the year for which this Report is filed. (c) Exhibits The exhibits listed in the following table have been filed as part of this Report. EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 2.1(1) - Recapitalization and Stock Purchase and Sale Agreement dated as of November 14, 1994 among Union Carbide Corporation, Mitsubishi Corporation, UCAR International Inc. and UCAR 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(2) - Amended and Restated Stockholders' Agreement dated as of February 29, 1996 2.3 - [omitted] 2.4(3) - Form of Management Pledge and Security Agreement, together with form of Promissory Note 2.5(2) - Amendment, Waiver and Release in connection with such Management Common Stock Subscription Agreements, Management Pledge and Security Agreements and Promissory Notes 2.6(1) - Indemnification Agreement dated as of January 26, 1995 among Mitsubishi Corporation, Union Carbide Corporation and UCAR International Inc. 2.7* - Form of Letters dated April 16, 1996 and April 28, 1997 Amending Repayment and Collateral Terms for Investor Notes 2.8 - [omitted] 2.9 - [omitted] 2.10 - [omitted] 2.11 - [omitted] 2.12 - [omitted] 2.13 - [omitted] 118 2.14 - [omitted] 2.15(1) - Exchange Agreement dated as of December 15, 1993 by and among Union Carbide Corporation, Union Carbide Chemicals and Plastics Company Inc., Mitsubishi Corporation and UCAR International Inc. 2.16(1) - Stock Purchase and Sale Agreement dated as of November 9, 1990 among Mitsubishi Corporation, Union Carbide Corporation and UCAR Carbon Company Inc. 2.17(1) - Letter Agreement dated January 26, 1995 with respect to termination of the Stockholders' Agreement dated as of November 9, 1990 among Mitsubishi Corporation, Union Carbide Corporation and UCAR Carbon Company Inc. 2.18(1) - Settlement Agreement dated as of November 30, 1993 among Mitsubishi Corporation, Union Carbide Corporation and UCAR Carbon Company Inc. 2.19(1) - Transfer Agreement dated January 1, 1989 between Union Carbide Corporation and UCAR Carbon Company Inc. 2.20(1) - Amendment No. 1 to such Transfer Agreement dated December 31, 1989 2.21(1) - Amendment No. 2 to such Transfer Agreement dated July 2, 1990. 2.22(1) - Amendment No. 3 to such Transfer Agreement dated as of February 25, 1991 2.23(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 2.24(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 2.25(1) - Amendment No. 1 to such Environmental Management Services and Liabilities Allocation Agreement dated as of June 4, 1992 2.26 - [omitted] 2.27 - [omitted] 2.28(4) - Trade Name and Trademark License Agreement dated March 1, 1996 between Union Carbide Corporation and UCAR Carbon Technology Corporation 2.29(1) - Employee Benefit Services and Liabilities Agreement dated January 1, 1990 between Union Carbide Corporation and UCAR Carbon Company Inc. 2.30(1) - Amendment to such Employee Benefit Services and Liabilities Agreement dated January 15, 1991 2.31 - Supplemental Agreement to such Employee Benefit Services and Liabilities Agreement dated February 25, 1991 2.32(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 2.33(8) - Stock Repurchase Agreement among UCAR International, Inc., Blackstone Capital Partners II Merchant Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., Blackstone Family Investment Partnership II L.P. and Chase Equity Associates, L.P. 119 2.34(9) - Share Sale Agreement between Samancor Limited and UCAR Carbon Company Inc. dated April 21, 1997. 3.1(3) - Amended and Restated Certificate of Incorporation of UCAR International Inc. 3.1(a)* - Certificate of Designations of Series A Junior Participating Preferred Stock 3.2(3) - Amended and Restated By-Laws of UCAR International Inc. 3.2(a)* - Amendment to By-Laws 4.1(1) - Indenture dated as of January 15, 1995 among UCAR International Inc., UCAR Global Enterprises Inc. and the United States Trust Company of New York, as Trustee 4.2(12) - First Supplemental Indenture dated as of November 12, 1998 among UCAR International Inc., UCAR Global Enterprises Inc. and United States Trust Company of New York, as Trustee 4.3* - Rights Agreement dated as of August 7, 1998 between UCAR International Inc. and The Bank of New York, as Rights Agent 10.1* - Credit Agreement dated as of October 19, 1995 among UCAR International Inc., UCAR Global Enterprises Inc., the other Credit Parties named therein, the Lenders named therein, the Fronting Banks named therein and The Chase Manhattan Bank, as Administrative Agent and Collateral Agent, amended and restated as of March 19, 1997 and November 10, 1998 10.1(a)* - Credit Agreement dated as of November 10, 1998 among UCAR International Inc., UCAR Global Enterprises Inc., UCAR S.A., the Lenders (as defined therein), The Chase Manhattan Bank, as Administrative Agent and Collateral Agent, Credit Suisse First Boston, as Syndication Agent, and Morgan Guaranty Trust Company of New York, as Syndication Agent 10.2* - Parent Guarantee Agreement dated as of October 19, 1995 made by UCAR International Inc. and UCAR Global Enterprises Inc. in favor of Chemical Bank as Collateral Agent for the Secured Parties named therein, amended as of November 10, 1998 10.3* - Subsidiary Guarantee Agreement dated as of October 19, 1995 executed and delivered by each U.S. Subsidiary of UCAR Global Enterprises Inc. in favor of Chemical Bank as Collateral Agent for the Secured Parties named therein, amended as of November 10, 1998 10.4* - Indemnity, Subrogation and Contribution Agreement dated as of October 19, 1995 among UCAR Global Enterprises Inc., the U.S. Subsidiaries of UCAR Global Enterprises Inc. and Chemical Bank as Collateral Agent for the Secured Parties named therein, amended as of November 10, 1998 10.5* - Pledge Agreement dated October 19, 1995 among UCAR International Inc., UCAR Global Enterprises Inc., certain U.S. Subsidiaries of UCAR Global Enterprises Inc. and Chemical Bank as Collateral Agent for the Secured Parties named therein, amended as of November 10, 1998 10.6* - Intellectual Property Security Agreement dated as of April 22, 1998, amended and restated as of November 10, 1998, among UCAR International Inc., UCAR Global Enterprises Inc. and the U.S. Subsidiaries of UCAR Global Enterprises Inc. in favor of The Chase Manhattan Bank, as Collateral Agent 120 10.7* - Security Agreement dated as of October 19, 1995 among UCAR International Inc., UCAR Global Enterprises Inc., the U.S. Subsidiaries of UCAR Global Enterprises Inc. and Chemical Bank as Collateral Agent for the Secured Parties named therein, amended as of November 10, 1998 10.8* - 35% Pledge Agreement dated as of November 10, 1998 among UCAR Global Enterprises Inc., UCAR Carbon Company Inc., UCAR Holdings Inc., UCAR Holdings II Inc., UCAR Holdings III Inc. and UCAR International Inc. in favor of The Chase Manhattan Bank, as Collateral Agent 10.9(5) - Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Holdings S.r.l. and Chemical Bank, Milan Branch, as Administrative Agent 10.9(a)* - Amendment dated as of November 10, 1998 to Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Holdings S.r.l. and Chemical Bank, Milan Branch, as Administrative Agent 10.10(5) - Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Electrodos S.L. and Chemical Bank, Madrid Branch, as Administrative Agent 10.10(a)* - Amendment dated as of November 10, 1998 to Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Electrodos S.L. and Chemical Bank, Madrid Branch, as Administrative Agent 10.11(5) - Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Holdings S.A. and Chemical Bank, Paris Branch, as Administrative Agent 10.11(a)* - Amendment dated as of November 10, 1998 to Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Holdings S.A. and Chemical Bank, Paris Branch, as Administrative Agent 10.12(5) - Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Inc. and Chemical Bank of Canada, as Administrative Agent 10.12(a)* - Amendment dated as of November 10, 1998 to Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Inc. and Chemical Bank of Canada, as Administrative Agent 10.13(1) - Tax Sharing Agreement made as of January 26, 1995 among UCAR International Inc. and certain of its subsidiaries 10.14 - [omitted] 10.15 - [omitted] 10.16(l) - Employment Agreement dated as of January 26, 1995 between UCAR International Inc. and Robert P. Krass 10.17(1) - Employment Agreement dated as of January 26, 1995 between UCAR International Inc. and Robert J. Hart 10.18(1) - Employment Agreement dated as of January 26, 1995 between UCAR International Inc. and Peter B. Mancino 10.19(1) - Employment Agreement dated as of January 26, 1995 between UCAR International Inc. and William P. Wiemels 10.20(1) - Employment Agreement dated as of January 26, 1995 between UCAR International Inc. and Fred C. Wolf 10.21(1) - Form of Non-Qualified Stock Option Agreement (Original Version) 10.22* - UCAR International Inc. Management Stock Option Plan as amended and restated through September 29, 1998 121 10.22(a)* UCAR International Inc. Management Stock Option Plan effective as of September 29, 1998 (Senior Management Version) 10.23(12) - Employment Agreement dated as of June 22, 1998 between UCAR International Inc. and Gilbert E. Playford 10.24* - Form of Non-Qualified Stock Option Agreement (Standard Option Version and Directors Version) 10.25(1) - UCAR International Inc. Bonus II Plan effective as of January 26, 1995 10.25(a)(6)- First Amendment to such Bonus II Plan dated May 7, 1996 10.26(5) - UCAR International Inc. Compensation Deferral Program amended and restated effective November 6, 1995 10.27(1) - First Amendment to such Compensation Deferral Program effective as of January 1, 1995 10.28(2) - Second Amendment to such Compensation Deferral Program effective as of March 15, 1996 10.29(6) - Third Amendment to such Compensation Deferral Program effective as of January 1, 1996 10.30(10) - Fourth Amendment to such Compensation Deferral Plan effective as of January 1, 1997 10.31(6) - Amended and Restated UCAR International Inc. Officers' Incentive Plan dated May 7, 1996 10.32 - [omitted] 10.33* - UCAR International Inc. Executive Employee Stock Purchase Program (Senior Management Version) 10.34* - UCAR International Inc. Executive Employee Loan Program 10.35 - [omitted] 10.36* - UCAR Carbon Company Inc. Equalization Benefit Plan amended and restated as of January 1, 1997 10.37* - Amendment to Equalization Benefit Plan 10.38* - UCAR Carbon Company Inc. Supplemental Retirement Income Plan amended and restated as of January 1, 1997 10.39* - UCAR Carbon Company Inc. Enhanced Retirement Income Plan effective as of January 1, 1997 10.40* - Form of Severance Compensation Agreement (U.S. Version and International Version) 10.41(3) - UCAR International Inc. Benefits Protection Trust effective as of July 27, 1995 10.41(a)(10) - First Amendment to such Benefits Protection Trust effective as of July 27, 1995 10.42(7) - Second Amendment to such Benefits Protection Trust effective as of January 1, 1996 10.42(a)(14) - Third Amendment to such Benefits Protection Trust effective as of January 1, 1997 10.43(3) - UCAR International Inc. 1995 Equity Incentive Plan effective as of August 15, 1995 10.43(a)(6)- First Amendment to such Equity Incentive Plan dated July 29, 1996 122 10.44(3) - UCAR International Inc. 1995 Directors Stock Plan effective as of August 15, 1995 10.45(5) - First Amendment to such Directors Stock Plan effective September 1, 1995 10.45(a)(6)- Second Amendment to such Directors Stock Plan dated July 29, 1996 10.45(b)(14) - Third Amendment to such Directors Stock Plan effective September 8, 1997 10.45(c)(14) - Fourth Amendment to such Directors Stock Plan effective April 8, 1997 10.46(5) - UCAR International Inc. 1996 Mid-Management Equity Incentive Plan effective as of February 6, 1996 10.47(6) - Amendment to such Mid-Management Equity Incentive Plan dated July 29, 1996 10.48 - [omitted] 10.49(13) - Plea Agreement between the United States of America and UCAR International Inc. executed April 7, 1998 18.1* - Letter re: change in accounting principle 21.1* - List of subsidiaries of UCAR International Inc. 23.1* - Consent of KPMG LLP 24.1* - Powers of Attorney (included on signature pages) 27.1* - Financial Data Schedule for fiscal 1998 (for Commission use only) 27.2* - Restated Financial Data Schedule for fiscal 1997 and 1996 (for SEC use only) - --------------- * Filed herewith. (1) Incorporated by reference to the Registration Statement of UCAR International Inc. and UCAR Global Enterprises Inc. on Form S-1 (File No. 33-84850). (2) Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 1995. (3) Incorporated by reference to the Registration Statement of the registrant on Form S-1 (File 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. (5) Incorporated by reference to the Registration Statement of the registrant on Form S-1 (File No. 333-1090). (6) Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended June 30, 1996. (7) Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended September 30, 1996. (8) Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended March 31, 1997. (9) Incorporated by reference to the Quarterly Report of the registrant on Form l0-Q for the quarter ended September 30, 1997. (10)Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 1996. (11)Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended June 30, 1997. 123 (12)Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended September 30, 1998. (13)Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended March 31, 1998. (14)Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 1997. 124 SIGNATURE 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. UCAR INTERNATIONAL INC. March 26, 1999 By: /S/ CORRADO F. DE GASPERIS ------------------------------ Corrado F. De Gasperis Title: CONTROLLER (PRINCIPAL ACCOUNTING OFFICER) Know All Men By These Presents, that each individual whose signature appears below hereby constitutes and appoints Gilbert E. Playford, Craig S. Shular, Peter B. Mancino, Corrado F. De Gasperis and Karen G. Narwold, and each of them individually, his true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him and in his 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, (iii) act on, sign and file any and all such certificates, 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 might or could do in person, hereby approving, ratifying and confirming all that such agents, proxies and attorneys-in-fact, any of them or any of his or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. 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/ GILBERT E. PLAYFORD President, Chief March 26, 1999 - ---------------------------- Executive Officer and Gilbert E. Playford Director (Principal Executive Officer) /S/ CRAIG S. SHULAR Vice President and Chief March 26, 1999 - ---------------------------- Financial Officer Craig S. Shular (Principal Financial Officer) 125 /S/ CORRADO F. DE GASPERIS Controller (Principal March 26, 1999 - ---------------------------- Accounting Officer) Corrado F. De Gasperis /S/ ROBERT D. KENNEDY Chairman of the Board March 26, 1999 - ---------------------------- Robert D. Kennedy /S/ R. EUGENE CARTLEDGE Director March 26, 1999 - ---------------------------- R. Eugene Cartledge /S/ ALEC FLAMM Director March 26, 1999 - ---------------------------- Alec Flamm /S/ JOHN R. HALL Director March 26, 1999 - ---------------------------- John R. Hall /S/ THOMAS MARSHALL Director March 26, 1999 - ---------------------------- Thomas Marshall /S/ MICHAEL C. NAHL Director March 26, 1999 - ---------------------------- Michael C. Nahl 126 EXHIBIT INDEX Exhibit NUMBER DESCRIPTION PAGE NO. 2.7* - Form of Letters dated April 16, 1996 and April 28, 1997 Amending Repayment and Collateral Terms of Investor Notes 3.1(a)* - Certificate of Designations of Series A Junior Participating Preferred Stock 3.2(a)* - Amendment to By-Laws 4.3* - Rights Agreement dated as of August 7, 1998 between UCAR International Inc. and The Bank of New York, as Rights Agent 10.1* - Credit Agreement dated as of October 19, 1995 among UCAR International Inc., UCAR Global Enterprises Inc., the other Credit Parties named therein, the Lenders named therein, the Fronting Banks named therein and The Chase Manhattan Bank, as Administrative Agent and Collateral Agent, amended and restated as of March 19, 1997 and November 10, 1998 10.1(a)* - Credit Agreement dated as of November 10, 1998 among UCAR International Inc., UCAR Global Enterprises Inc., UCAR S.A., the Lenders (as defined therein), The Chase Manhattan Bank, as Administrative Agent and Collateral Agent, Credit Suisse First Boston, as Syndication Agent, and Morgan Guaranty Trust Company of New York, as Syndication Agent 10.2* - Parent Guarantee Agreement dated as of October 19, 1995 made by UCAR International Inc. and UCAR Global Enterprises Inc. in favor of Chemical Bank as Collateral Agent for the Secured Parties named therein, amended as of November 10, 1998 10.3* - Subsidiary Guarantee Agreement dated as of October 19, 1995 executed and delivered by each U.S. Subsidiary of UCAR Global Enterprises Inc. in favor of Chemical Bank as Collateral Agent for the Secured Parties named therein, amended as of November 10, 1998 10.4* - Indemnity, Subrogation and Contribution Agreement dated as of October 19, 1995 among UCAR Global Enterprises Inc., the U.S. Subsidiaries of UCAR Global Enterprises Inc. and Chemical Bank as Collateral Agent for the Secured Parties named therein, amended as of November 10, 1998 127 10.5* - Pledge Agreement dated October 19, 1995 among UCAR International Inc., UCAR Global Enterprises Inc., certain U.S. Subsidiaries of UCAR Global Enterprises Inc. and Chemical Bank as Collateral Agent for the Secured Parties named therein, amended as of November 10, 1998 10.6* - Intellectual Property Security Agreement dated as of April 22, 1998, amended and restated as of November 10, 1998, among UCAR International Inc., UCAR Global Enterprises Inc. and the U.S. Subsidiaries of UCAR Global Enterprises Inc. in favor of The Chase Manhattan Bank, as Collateral Agent 10.7* - Security Agreement dated as of October 19, 1995 among UCAR International Inc., UCAR Global Enterprises Inc., the U.S. Subsidiaries of UCAR Global Enterprises Inc. and Chemical Bank as Collateral Agent for the Secured Parties named therein, amended as of November 10, 1998 10.8* - 35% Pledge Agreement dated as of November 10, 1998 among UCAR Global Enterprises Inc., UCAR Carbon Company Inc., UCAR Holdings Inc., UCAR Holdings II Inc., UCAR Holdings III Inc. and UCAR International Inc. in favor of The Chase Manhattan Bank, as Collateral Agent 10.9(a)* - Amendment dated as of November 10, 1998 to Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Holdings S.r.l. and Chemical Bank, Milan Branch, as Administrative Agent 10.10(a)* - Amendment dated as of November 10, 1998 to Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Electrodos S.L. and Chemical Bank, Madrid Branch, as Administrative Agent 10.11(a)* - Amendment dated as of November 10, 1998 to Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Holdings S.A. and Chemical Bank, Paris Branch, as Administrative Agent 10.12(a)* - Amendment dated as of November 10, 1998 to Local Facility Credit Agreement dated as of October 19, 1995 between UCAR Inc. and Chemical Bank of Canada, as Administrative Agent 128 10.22* - UCAR International Inc. Management Stock Option Plan amended and restated through September 29, 1998 10.22(a)* - UCAR International Inc. Management Stock Option Plan effective as of September 29, 1998 (Senior Management Version) 10.24* - Form of Non-Qualified Stock Option Agreement (Standard Option Version and Directors Version) 10.33* - UCAR International Inc. Executive Employee Stock Purchase Program (Senior Management Version) 10.34* - UCAR International Inc. Executive Employee Loan Program 10.36* - UCAR Carbon Company Inc. Equalization Benefit Plan amended and restated as of January 1, 1997 10.37* - Amendment to Equalization Benefit Plan 10.38* - UCAR Carbon Company Inc. Supplemental Retirement Income Plan amended and restated as of January 1, 1997 10.39* - UCAR Carbon Company Inc. Enhanced Retirement Income Plan amended and restated as of January 1, 1997 10.40* - Form of Severance Compensation Agreement (U.S. Version and International Version) 18.1* - Letter re: change in accounting principle 21.1* - List of subsidiaries of UCAR International Inc. 23.1* - Consent of KPMG LLP 24.1* - Powers of Attorney (included on signature pages) 27.1* - Financial Data Schedule for fiscal 1998 (for Commission use only) 27.2* - Restated Financial Data Schedule for fiscal 1997 and 1996 (for Commission use only) - --------------- * Filed herewith. 129 EX-2.7 2 EXHIBIT 2.7 April 16, 1996 - ------------------------ - ------------------------ - ------------------------ Subject: REDUCTION IN REPAYMENT TERMS OF INVESTOR NOTE Dear ________________: As you know, UCAR made a loan to you relating to the shares of UCAR Common Stock you purchased, and the matched shares you received, on January 26, 1995 in connection with the Recapitalization. This loan is evidenced by your Investor Note. The Board of Directors recently changed the repayment provision of your loan so that only 20% of the net proceeds from the sale of option shares or previously purchased (or matched) shares must be used to pay down your loan obligation, RATHER THAN 100% of such proceeds as previously required by the terms of your loan. As you do your cashless transactions in the future, 20% of the net proceeds will be automatically deducted from the amount due to you up to the face amount of your Investor Note. You may, of course, choose to prepay your note at any time. You should contact me to coordinate the arrangements for a prepayment if you wish to do so. This letter will evidence your acceptance of such change and will be attached to your Investor Note. Please sign the enclosed copy of this letter and return it to me. Very truly yours, Peter B. Mancino ACCEPTED: _________________________ Signature - April 28, 1997 - ---------------------------- - ---------------------------- - ---------------------------- Re: UCAR EQUITY OWNERSHIP PROGRAM AND RELATED LOANS Dear ______________: In connection with the recently completed Public Offering of shares of UCAR common stock by the Blackstone Group, various restrictions in the Equity Ownership have been changed as described below: Collateral for your Loan will no longer include any options granted under the management Stock Option Plan (Your 1995 Time and Performance Stock Options with a $7.60 option price, or the shares purchased on exercise of those options). This means that when you sell any of these shares, UCAR will no longer take any portion of the proceeds from the sale for Loan repayment. In addition, collateral for your Loan will now consist solely of a portion of shares of UCAR common stock (your Purchased and Matched Shares) that you acquired under the Equity Ownership Program. Currently, the Company holds ALL of these Purchased and Matched Shares as collateral for your Loan. From now on, only that number of these shares with an aggregate value (at $35.00 per share) equal to your Loan balance will be retained as collateral for your Loan. The balance of the shares will soon be transferred to you on an unrestricted basis. If, however, the market price of the UCAR common stock falls below $35.00 per share, you will be required to deliver to UCAR additional shares so that the value of the collateral is always at least equal to your Loan balance. The Loan must be repaid when you retire or your employment with UCAR otherwise terminates or when any of the shares held as collateral are sold. When you decide to sell the shares held as collateral (most likely at retirement) contact my office and we will make the necessary arrangements for the Loan repayment. One simple method would be for you to write a check made out to UCAR Global Enterprises Inc. to cover the outstanding Loan and for the Company to release the collateral shares to you along with your cancelled Investor Note. Your current Loan balance is $______________. The Company has _______ original pledged shares held as collateral and will release _________ unrestricted shares to you as soon as possible. _______ shares will then be retained as collateral by the Company. Please sign the letter to The Bank of New York (BNY) attached to this memo and return to me. I will see to it that these documents are forwarded to BNY for processing. Sincerely, Peter B. Mancino Attachment P.S. In addition to the above mentioned stock transaction there will be the usual paperwork, e.g., a modified Loan Agreement and Pledge and Security Agreement. These will be sent to you in due time. EX-3.1(A) 3 EXHIBIT 3.1(a) CERTIFICATE OF DESIGNATIONS of SERIES A JUNIOR PARTICIPATING PREFERRED STOCK of UCAR INTERNATIONAL INC. The undersigned hereby certifies that he is Vice President, General Counsel and Secretary of UCAR INTERNATIONAL INC. (the "Corporation"), that the Corporation is a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Law") and that, pursuant to authority vested in the Board of Directors of the Corporation in accordance with the provisions of the Amended and Restated Certificate of Incorporation of the Corporation, the following resolution was duly adopted by the Board of Directors of the Corporation as required by Section 151 of the Law at a meeting duly called and held on August 7, 1998: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the Corporation in accordance with the provisions of the Amended and Restated Certificate of Incorporation of the Corporation, the Board of Directors of the Corporation hereby creates a series of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the Corporation and hereby states the designation and number of shares, and fixes the voting and other powers, preferences and relative, participating, optional or other rights thereof and the qualifications, limitations and restrictions thereon, as follows: Section I. DESIGNATION AND AMOUNT. There shall be a series of Preferred Stock designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 1,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; PROVIDED, HOWEVER, that no decrease shall reduce the number of shares to a number less than the number of shares then outstanding plus the number of shares then reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion or exchange of outstanding securities issued by the Corporation convertible into or exchangeable for Series A Preferred Stock. Section II. DIVIDENDS AND DISTRIBUTIONS. A. Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $.01 per share, of the Corporation (the "Common Stock") or shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the 15th day of April, July, October and January in each year (each such date being called as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10.00 or (b) the Adjustment Number (as defined below) times the aggregate per share amount of all cash dividends, plus the fair value, as determined by the Board of Directors upon the advice of a nationally recognized investment banking firm selected in good faith by the Board of Directors, of all non-cash dividends and other distributions (other than dividends payable in shares of Common Stock) declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. The "Adjustment Number" shall initially be 1,000. In the event the Corporation shall at any time after August 20, 1998 (the "Rights Declaration Date") (i) declare and pay any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding shares of Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (References herein to the Adjustment Amount shall mean the Adjustment Amount as in effect at the relevant time. B. The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section 2 immediately after it declares a dividend or distribution on Common Stock (other than a dividend payable in shares of Common Stock); PROVIDED, that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series A Preferred Stock shall nevertheless be declared for payment on such subsequent Quarterly Dividend Payment Date. C. Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of first issuance of any shares of Series A Preferred Stock such shares, unless the date of issuance of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on shares of Series A Preferred Stock shall begin to accrue from the date of issuance thereof, or unless the date of issuance of such shares is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which cases dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section III. VOTING RIGHTS. The holders of shares of Series A Preferred Stock shall have the following voting rights: A. Subject to the provision for adjustment set forth herein, each share of Series A Preferred Stock shall entitle the holder thereof to a number of votes equal to the Adjustment Number (as then adjusted) on all matters submitted to a vote of the holders of Common Stock. B. Except as otherwise provided herein or required by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of holders of Common Stock. C. Except as otherwise set forth herein or required by law, the holders of Series A Preferred Stock shall have no voting or approval rights separate or apart from their right to vote with holders of shares of Common Stock as set forth herein. Section IV. CERTAIN RESTRICTIONS. A. Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on the Series A Preferred Stock shall have been paid in full, the Corporation shall not: 1. declare or pay dividends, or make any other distributions, on any shares of Common Stock or other stock ranking junior (either as to dividends or upon liquidation or dissolution) to the Series A Preferred Stock; 2. declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation or dissolution) with the Series A Preferred Stock, except dividends paid ratably on Series A Preferred Stock and shares of such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; 3. redeem, purchase or otherwise acquire shares of any Common Stock or other stock ranking junior (either as to dividends or upon liquidation or dissolution) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any other stock of the Corporation ranking junior (both as to dividends and upon dissolution or liquidation) to the Series A Preferred Stock; or 4. redeem, purchase or otherwise acquire any shares of Series A Preferred Stock or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made to the holders of all such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. B. The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section V. REACQUIRED SHARES. Any shares of Series A Preferred Stock redeemed, purchased or otherwise acquired by the Corporation or any subsidiary of the Corporation in any manner shall be promptly retired. All such shares shall upon their retirement become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock created in accordance with the Amended and Restated Certificate of Incorporation and the Law. Section VI. LIQUIDATION OR DISSOLUTION. (A) Upon any liquidation or dissolution of the Corporation (which terms include a winding up of the Corporation, voluntary or otherwise), no distribution shall be made on any shares of stock ranking junior (either as to dividends or upon liquidation or dissolution) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received an amount per share (the "Series A Liquidation Preference") equal to the greater of (i) $110,000 plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment or (ii) the Adjustment Number times the per share amount of all cash and other property to be distributed on the Common Stock upon such liquidation or dissolution. (B) If there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other classes and series of stock of the Corporation that rank on a parity with the Series A Preferred Stock in respect thereof, then the assets available for such distribution shall be distributed ratably to the holders of the Series A Preferred Stock and the holders of such parity stock in proportion to their respective liquidation preferences. (C) Neither the merger or consolidation of the Corporation into or with another corporation (or other entity) nor the merger or consolidation of another corporation (or other entity) into or with the Corporation shall be deemed to be a liquidation or dissolution of the Corporation within the meaning of this Section 6. Section VII. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which shares of Common Stock are exchanged for or changed into other stock, securities, cash and/or other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share equal to the Adjustment Number times the aggregate amount of stock, securities, cash and/or other property, as the case may be, into which or for which each share of Common Stock is changed or exchanged. Section VIII. NO REDEMPTION. The shares of Series A Preferred Stock shall not be redeemable. Section IX. RANKING. The Series A Preferred Stock shall, with respect to payments of dividends and rights upon liquidation or dissolution, rank (a) senior and prior to (i) the Common Stock and (ii) any series of preferred stock of the Corporation which is stated to be junior to the Series A Preferred Stock; (b) PARI PASSU with (i) any series of preferred stock of the Corporation which is not stated to be senior to or junior to the Series A Preferred Stock; and (c) junior and subordinate to any series of preferred stock of the Corporation which is stated to be senior to the Series A Preferred Stock. Determination as to whether any such statements has shall be made by reference to the Certificate of Incorporation of the Corporation, as then in effect. Section X. AMENDMENT. At any time that shares of Series A Preferred Stock are outstanding, the Certificate of Incorporation of the Corporation as then in effect shall not be amended in any manner which would materially alter or change the powers, preferences or rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. Section XI. FRACTIONAL SHARES. Series A Preferred Stock may be issued in fractions of a share that shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock. Section XII. MISCELLANEOUS. The rights of holders of Series A Preferred Stock shall, to the extent not inconsistent with this resolution, be the same as those of holders of Common Stock. IN WITNESS WHEREOF, this Certificate of Designations has been executed by this 7th day of August, 1998. By: /S/ PETER B. MANCINO ----------------------------------- Title: Vice President, General Counsel & Secretary EX-3.2(A) 4 EXHIBIT 3.2(a) Amendment to the UCAR International Inc. Amended and Restated By-Laws: RESOLVED, that the By-laws be, and they hereby are, amended so that, after the annual meeting of stockholders for 1999: (i) the fourth sentence of Section 8(a) shall be and read as follows: "To be timely, such notice must be delivered or mailed to, and received at, the principal executive office of the Corporation not less than one hundred five (105) days prior to the meeting; provided, however, that if less than one hundred five (105) days' notice or prior public disclosure of the date of such meeting is given to stockholders or made, such notice must be so delivered or mailed, and received, not later than the close of business on the tenth (10th) day following the day on which notice or public disclosure of the date of such meeting is given to stockholders or made (except that this proviso shall not apply if such meeting is an annual meeting which will be held on the date specified in clause (i) of Section 2 of Article I or within thirty (30) days thereafter)"; and (ii) the fourth sentence of Section 8(b) shall be and read as follows: "To be timely, such notice must be delivered or mailed to, and received at, the principal executive office of the Corporation not less than one hundred five (105) days prior to such meeting; provided, however, that if less than one hundred five (105) days' notice or prior public disclosure of the date of such meeting is given to stockholders or made, such notice must be so delivered or mailed, and received, not later than the close of business on the tenth (10th) day following the day on which notice or public disclosure of the date of such meeting is given to stockholders or made (except that this proviso shall not apply if such meeting is an annual meeting which will be held on the date specified in clause (i) of Section 2 of Article I or within thirty (30) days thereafter)"[.] Dated: December 18, 1998 EX-4.3 5 EXHIBIT 4.3 - -------------------------------------------------------------------------------- UCAR INTERNATIONAL INC. and THE BANK OF NEW YORK, as Rights Agent AGREEMENT Dated as of August 7, 1998 - -------------------------------------------------------------------------------- TABLE OF CONTENTS Section 1. Certain Definitions...............................................1 Section 2. Appointment of Rights Agent.......................................7 Section 3. Issue of Right Certificates.......................................7 Section 4. Form of Right Certificates.......................................10 Section 5. Countersignature and Registration................................10 Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates...............................................11 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights...........................................................12 Section 8. Cancellation of Right Certificates...............................14 Section 9. Availability of Preferred Shares.................................15 Section 10 Preferred Shares Record Date.....................................17 Section 11. Adjustment of Purchase Price, Number and Kind of Shares and Number of Rights.............................................17 Section 12. Certificate of Adjusted Purchase Price or Number of Shares.......30 Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power....................................................31 Section 14. Fractional Rights and Fractional Shares..........................36 Section 15. Rights of Action.................................................38 Section 16. Agreement of Right Holders.......................................39 Section 17. Right Certificate Holder not Deemed a Stockholder................40 Section 18. Concerning the Rights Agent......................................40 Section 19. Merger or Consolidation or Change of Name of Rights Agent........41 Section 20. Duties of Rights Agent...........................................42 Section 21. Change of Rights Agent...........................................46 Section 22. Issuance of New Right Certificates...............................47 Section 23. Redemption.......................................................48 Section 24. Exchange.........................................................49 Section 25. Notice of Certain Events.........................................51 Section 26. Notices..........................................................52 Section 27. Supplements and Amendments.......................................53 Section 28. Successors.......................................................54 Section 29. Benefits of this Agreement.......................................54 -i- TABLE OF CONTENTS (continued) Section 30. Determinations and Actions by the Board of Directors.............54 Section 31. Severability.....................................................55 Section 32. Governing Law....................................................55 Section 33. Counterparts.....................................................55 Section 34. Descriptive Headings.............................................55 -ii- RIGHTS AGREEMENT RIGHTS AGREEMENT, dated as of August 7, 1998, between UCAR International Inc., a Delaware corporation (the "Company"), and The Bank of New York, a New York banking corporation as Rights Agent (the "Rights Agent"). The Board of Directors of the Company has authorized and declared a dividend of one Preferred Share Purchase Right (a "Right") for each Common Share (as hereinafter defined) of the Company outstanding as of the Close of Business (as hereinafter defined) on August 20, 1998 (the "Record Date"), each Right representing the right to purchase (subject to adjustment as provided herein) one one-thousandth of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions set forth herein, and has further authorized and directed the issuance of one Right (subject to adjustment as provided herein) with respect to each Common Share that shall become outstanding between the Record Date (as hereinafter defined) and the earliest of the Distribution Date (as hereinafter defined) and the Expiration Date (as hereinafter defined); PROVIDED, HOWEVER, that Rights may be issued with respect to Common Shares that become outstanding after the Distribution Date and prior to the Expiration Date in accordance with Section 22. Accordingly, in consideration of the premises and the mutual agreements set forth herein, the parties hereby agree as follows: Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person (as hereinafter defined) who or which, together with all Affiliates and Associates (as hereinafter defined) of such Person, shall be the Beneficial Owner (as hereinafter defined) of 15% or more of the Common Shares then outstanding, but shall not include an Exempt Person (as hereinafter defined). Notwithstanding the foregoing; (i) if (based on reports filed with the Securities and Exchange Commission and delivered to the Company prior to the date hereof) any Person would, but for this sentence, be an "Acquiring Person," then such Person shall not be or become an "Acquiring Person" unless and until such time as such Person together with all Affiliates and Associates of such Person shall be or become the Beneficial Owner of 22.5% or more of the outstanding Common Shares (other than pursuant to a dividend or distribution in Common Shares paid or made by the Company on the outstanding Common Shares or pursuant to a split or subdivision of the outstanding Common Shares), PROVIDED, HOWEVER, that this clause (i) shall cease to apply to such Person at and after such time as such Person together with its Affiliates and Associates ceases to be the Beneficial Owner of 15% or more of the Common Shares then outstanding; and (ii) no Person shall be or become an "Acquiring Person" as the result of an acquisition of Common Shares by the Company which, by reducing the number of Common Shares outstanding, increases the proportionate number of Common Shares beneficially owned by such Person together with its Affiliates and Associates to 15% or more of the Common Shares then outstanding; PROVIDED, HOWEVER, that if a Person together with all Affiliates and Associates of such Person shall be or become the Beneficial Owner of 15% or more of the Common Shares then outstanding by reason of such an acquisition and such Person or its Affiliates or Associates shall, after such an acquisition, become the Beneficial Owner of any additional Common Shares (other than pursuant to a dividend or distribution in Common Shares paid or made by the Company on the outstanding Common Shares or pursuant to a split or subdivision of the outstanding Common Shares), then such Person shall be deemed to be an "Acquiring Person," unless, upon becoming the Beneficial Owner of such additional Common Shares, such Person together with all Affiliates and Associates of such Person is not the Beneficial Owner of 15% or more of the Common Shares then outstanding. Notwithstanding the foregoing, if the Board of Directors determines in good faith that a Person who would otherwise be an "Acquiring Person," as defined pursuant to the foregoing provisions of this Section 1(a), has become such inadvertently and without any intention of changing or influencing control of the Company and if such Person divests itself as promptly as practicable of Beneficial Ownership of a sufficient number of Common Shares so that such Person would no longer be an Acquiring Person," as defined pursuant to the foregoing provisions of this Section 1(a), then such 2 Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement. For all purposes of this Agreement, any calculation of the number of Common Shares outstanding at any particular time, including for purposes of determining the particular percentage of outstanding Common Shares of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof. (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date hereof. (c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to have "Beneficial Ownership" of and shall be deemed to "beneficially own" any securities: (i) which such Person or any of such Person's Affiliates or Associates is deemed to beneficially own, directly or indirectly, within the meaning of Rule 13d-3 of the General Rules and Regulations under the Exchange Act as in effect on the date hereof; (ii) which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon 3 the exercise of any conversion rights, exchange rights, rights, warrants or options, or otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, (x) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange, (y) securities which such Person has a right to acquire upon the exercise of Rights at any time prior to the time that any Person becomes an Acquiring Person or (z) securities issuable upon the exercise of Rights from and after the time that any Person becomes an Acquiring Person if such Rights were acquired by such Person or any of such Person's Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 ("Original Rights") or pursuant to Section 11(i) or Section 11(n) with respect to an adjustment to Original Rights; or (B) the right to vote pursuant to any agreement, arrangement or understanding; PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security by reason of such agreement, arrangement or understanding if the agreement, arrangement or understanding to vote such security (l) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person and with respect to which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(c) (ii) (B)) or disposing of any securities of the Company; 4 PROVIDED, HOWEVER, that no Person who is an officer, director or employee of an Exempt Person shall be deemed, solely by reason of such Person's status or authority as such, to be the "Beneficial Owner" of, to have "Beneficial Ownership" of or to "beneficially own" any securities that are "beneficially owned" (as defined in this Section 1(c)), including, without limitation, in a fiduciary capacity, by an Exempt Person or by any other such officer, director or employee of an Exempt Person. (d) "Board of Directors" shall mean the members of the Company's Board of Directors at the relevant time. (e) "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York or the city in which the principal stock transfer office of the Rights Agent is located are authorized or obligated by law or executive order to close. (f) "Close of Business" on any given date shall mean 5:00 P.M., City of New York time, on such date; PROVIDED, HOWEVER, that if such date is not a Business Day it shall mean 5:00 P.M. City of New York time, on the next succeeding Business Day. (g) "Common Shares" when used with reference to the Company shall mean shares of common stock, par value $.01 per share, of the Company. (h) "Common Stock" when used with reference to any Person other than the Company shall mean the common stock (or other equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately controls or control, respectively, such first-mentioned Person. (i) "Current Value" shall have the meaning set forth in Section 11(a)(iii). (j) "Distribution Date" shall have the meaning set forth in Section 3. 5 (k) "equivalent preferred shares" shall have the meaning set forth in Section 11(b). (l) "Exempt Person" shall mean the Company or any Subsidiary (as is hereinafter defined) of the Company, in each case including, without limitation any such entity, in its fiduciary capacity, or any employee benefit plan of the Company or any Subsidiary of the Company, or any entity or trustee holding Common Shares for or pursuant to the terms of any such plan or for the purpose of funding any such plan or funding any other employee benefits for employees of the Company or any Subsidiary of the Company. (m) "Exchange Ratio" shall have the meaning set forth in Section 24. (n) "Expiration Date" shall have the meaning set forth in Section 7. (o) "Final Expiration Date" shall have the meaning set forth in Section 7. (p) "Flip-In Event" shall have the meaning set forth in Section 11. (q) "New York Stock Exchange" shall mean New York Stock Exchange, Inc. (r) "Person" shall mean any individual, firm, partnership, limited liability company, business trust, corporation or other entity and shall include any successor (by merger or otherwise) thereof. (s) "Preferred Shares" shall mean shares of Series A Junior Participating Preferred Stock, par value $.01 per share, of the Company having the rights and preferences set forth in the Form of Certificate of Designations attached to this Agreement as EXHIBIT A. (t) "Principal Party" shall have the meaning set forth in Section 13(b). (u) "Purchase Price" shall have the meaning set forth in Section 4. (v) "Redemption Date" shall have the meaning set forth in Section 7. (w) "Redemption Price" shall have the meaning set forth in Section 23. (x) "Rights Certificate" shall have the meaning set forth in Section 3. 6 (y) "Securities Act" shall mean the Securities Act of 1933, as amended. (z) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in Section 11(a)(iii). (aa) "Shares Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such or such earlier date as a majority for the Board of Directors shall become aware of the existence of an Acquiring Person. (bb) "Spread" shall have the meaning set forth in Section 11(a)(iii). (cc) "Subsidiary" of any Person shall mean any Person of which a majority of the voting power of the voting equity securities or equity interest is owned or controlled, directly or indirectly, by such Person. (dd) "Substitution Period" shall have the meaning set forth in Section 11(a)(iii). (ee) "Summary of Rights" shall have the meaning set forth in Section 3. (ff) "Trading Day" shall have the meaning set forth in Section 11(d)(i). Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable upon ten (10) days' prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-Rights Agent. Section 3. (a) ISSUE OF RIGHT CERTIFICATES. Until the Close of Business on the earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the tenth Business Day (or such later date as may be determined by action of the Board of Directors prior to such time as any Person becomes an Acquiring Person) 7 after the date of the commencement by any Person other than an Exempt Person, or of the first public announcement of the intention of any Person (other than an Exempt Person) to commence, a tender or exchange offer the consummation of which would result in any Person (other than an Exempt Person) becoming the Beneficial Owner of Common Shares aggregating 15% or more of the then outstanding Common Shares (including any such date which is after the date of this Agreement and prior to the issuance of the Rights; the earlier of such dates being herein called the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of Section 3(b)) by the certificates for Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates) and not by separate Right Certificate, and (y) the Rights will be transferable only in connection with the transfer of Common Shares. The Company shall give the Rights Agent prompt written notice of the Distribution Date. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, insured, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Distribution Date (other than any Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing one Right (subject to adjustment as provided herein) for each Common Share so held. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (b) On the Record Date, or as soon as practicable thereafter, the Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form of EXHIBIT C hereto (the "Summary of Rights"), by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Record Date (other than any Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the address of such holder 8 shown on the records of the Company. With respect to certificates for Common Shares outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with the Summary of Rights. Until the Distribution Date (or, if earlier, the Expiration Date), the surrender for transfer of any certificate for Common Shares outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. (c) Certificates issued for Common Shares (including, without limitation, certificates issued upon transfer of outstanding Common Shares, disposition of Common Shares out of treasury stock or issuance or reissuance of Common Shares out of authorized but unissued Common Shares) after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain rights as set forth in a Agreement between UCAR International Inc. (the "Company") and The Bank of New York, as Rights Agent, dated as of August 7, 1998 as the same may be amended from time to time (the "Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Agreement without charge after receipt of a written request therefor. As described in the Agreement, under certain circumstances, Rights issued to any Person who becomes an Acquiring Person (as defined in the Agreement) shall become null and void and will not be transferable. With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the Common Shares represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate, except as otherwise provided 9 herein, shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. In the event that the Company purchases or otherwise acquires any Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares which are no longer outstanding. Notwithstanding this Section 3(c), the omission of a legend shall not affect the enforceability of any part of this Agreement or the rights of any holder of the Rights. Section 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the forms of election to purchase Preferred Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as EXHIBIT B hereto (in a format that is machine printable and reasonably satisfactory to the Rights Agent) and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or as may be appropriate to conform to usage. Subject to the provisions of Sections 11, 13 and 22, the Right Certificates shall entitle the holders thereof to purchase such number of one one-thousandth of a Preferred Share as shall be set forth therein at the price per one one-thousandth of a Preferred Share set forth therein (the "Purchase Price"), but the number of such one one-thousandths of a Preferred Share and the Purchase Price shall be subject to adjustment as provided herein. Section 5. COUNTERSIGNATURE AND REGISTRATION. (a) The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or any of its Vice Presidents, either manually or by facsimile signature, shall have affixed thereto the 10 Company's seal or a facsimile thereof, and shall be attested by the Secretary or the Treasurer of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery thereof by the Company, such Right Certificates may nevertheless be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the signatory had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any individual who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such individual was not such an officer. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at an office or agency designated for such purposes, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates. Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATE; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. (a) Subject to the provisions of Sections 7(e), 11(a)(ii), 13 and 14, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have been exchanged pursuant to Section 24) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a Preferred Share as the Right Certificate or Right Certificates surrendered then 11 entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the office or agency of the Rights Agent designated for such purpose, along with a signature guarantee and other and further documentation as the Rights Agent may reasonably request. Thereupon, the Rights Agent shall countersign and deliver to the requested holder a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax (which word shall be deemed to include any other type of governmental charge) that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. (b) Subject to the provisions of Section 11(a)(ii), at any time after the Distribution Date and prior to the Expiration Date, upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS. (a) Except as otherwise provided herein, the Rights shall become exercisable on the Distribution Date and thereafter the registered holder of any Right Certificate may, subject to Section 11(a)(iii) and except as otherwise 12 provided herein, exercise the Rights evidenced thereby in whole or in part upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office or agency of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-thousandths of a share of Preferred Stock (or other securities, cash or assets, as the case may be) as to which the Rights are exercised, at any time both subsequent to the Distribution Date and prior to the time (the "Expiration Date") that is the earliest of (i) the Close of Business on August 7, 2008 (the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as provided in Section 23 (the "Redemption Date") or (iii) the time at which such Rights are exchanged as provided in Section 24. (b) The Purchase Price for each one one-thousandth of a Preferred Share purchasable upon exercise of a Right shall initially be $110. The Purchase Price and the number of one one-thousandths of a share of Preferred Stock (or other securities or property) to be acquired upon exercise of a Right shall be subject to adjustment from time to time as provided in Sections 11 and 13 and shall be payable in lawful money of the United States of America in accordance with this Section 7(b). (c) Except as otherwise provided herein, upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the Preferred Shares to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Sections 6 and 9 hereof, in cash or by certified or cashier's check or money order payable to the order of the Company, the Rights Agent shall thereupon (i) promptly (A) requisition from any transfer agent of the Preferred Shares certificates for the number of Preferred Shares to be purchased (and the Company hereby irrevocably authorizes such transfer agent to comply with all such requests) or (B) requisition from the depositary agent (if any, pursuant to Section 14) depositary receipts representing interests in such number of one 13 one-thousandths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by such transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, promptly deliver such cash to or upon the order of the registered holder of such Right Certificate. (d) Except as otherwise provided herein, in case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Sections 6 and 14. (e) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of Rights upon the occurrence of any purported transfer or exercise of Rights pursuant to Section 6 or this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of assignment or form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such transfer or exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) thereof as the Company shall reasonably request. 14 Section 8. CANCELLATION OF RIGHTS CERTIFICATES. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Right Certificates to the Company. Section 9. AVAILABILITY OF PREFERRED SHARES. (a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7. (b) So long as the Preferred Shares issuable upon the exercise of Rights may be listed or admitted to trading on the New York Stock Exchange or any other national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all Preferred Shares reserved for such issuance to be listed or admitted to trading on such exchange upon official notice of issuance upon such exercise. (c) From and after the Distribution Date, the Company shall use its best efforts, if then necessary to permit the issuance of Preferred Shares upon the exercise of Rights, to register and qualify Preferred Shares under the Securities Act and any applicable state securities or "Blue Sky" laws (to the extent exemptions therefrom are not available), cause such registration 15 statement and qualifications to become effective as soon as possible after such filing and keep such registration and qualifications effective until the earlier of the date as of which the Rights are no longer exercisable for Preferred Shares and the Expiration Date. The Company may temporarily suspend, for a period of time not to exceed 90 days, the exercisability of the Rights to prepare and file a registration statement under the Securities Act and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement that the exercisability of the Rights has been temporarily suspended as well as a public announcement at such time as the suspension is no longer in effect, in each case with simultaneous written notice to the Rights Agent. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained and until a registration statement under the Securities Act (if required) shall have been declared effective. The Rights Agent may assume that any Right exercised is permitted to be exercised under applicable law and shall have no liability for acting in reliance upon such assumption. (d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares. (e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares in a name other than that of, the registered holder of the Right 16 Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's reasonable satisfaction that no such tax is due. Section 10. PREFERRED SHARES RECORD DATE. Each Person in whose name any certificate for Preferred Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes required to be paid by the exercising holder of Rights) was made; PROVIDED, HOWEVER, that if the date of such surrender and payment is a date upon which the transfer books for Preferred Shares are closed, such Person shall be deemed to have become the record holder of such Preferred Shares on, and such certificate shall be dated, the next succeeding Business Day on which the transfer books Preferred Shares are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote or to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES AND NUMBER. The Purchase Price, the number of Preferred Shares or other securities or property purchasable upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) If the Company shall at any time after the date hereof (A) declare a dividend in Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding 17 Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the transfer books for Preferred Shares were open, the holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. (ii) Subject to Section 24, if any Person becomes an Acquiring Person (the first occurrence of such event being called the "Flip-In Event"), then (A) the Purchase Price shall be adjusted to be the Purchase Price in effect immediately prior to the Flip-In Event multiplied by the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such Flip-In Event, whether or not such Right was then exercisable, and (B) each holder of a Right, except as otherwise provided in this Section 11(a)(ii) and Section 11(a)(iii), shall thereafter have a right to receive, upon exercise thereof at a price equal to the then Purchase Price (as so adjusted), in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares as shall equal the result obtained by dividing the Purchase Price (as so adjusted) by 50% of the then current per share market price of the Common Shares (determined pursuant to Section 11(d)) on the date of such Flip-In Event; PROVIDED, HOWEVER, that the 18 Purchase Price (as so adjusted) and the number of Common Shares so receivable upon exercise of a Right shall, following the Flip-In Event, be subject to further adjustment as appropriate in accordance with this Section 11. If any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights. Notwithstanding anything in this Agreement to the contrary, however, from and after the Flip-In Event, any Rights that are beneficially owned by (x) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (y) a transferee of any Acquiring Person (or any such Affiliate or Associate) who becomes a transferee after the Flip-In Event or (z) a transferee of any Acquiring Person (or any such Affiliate or Associate) who become a transferee prior to or concurrently with the Flip-In Event pursuant to either (I) a transfer from the Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or understanding regarding the transferred Rights or (II) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding which has the purpose or effect of avoiding the provisions of this Section 11, and subsequent transferees of such Persons, shall be void without any further action and any holder of such Rights shall thereafter have no rights whatsoever with respect to such Rights under any provision of this Agreement. The Company shall use all reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are complied with, but shall have no liability to any holder of Right Certificates or other Persons as a result of its failure to make any determinations with 19 respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. From and after the Flip-In Event, no Right Certificate shall be issued pursuant to Section 3 or upon the transfer of any Rights that represents Rights that are or have become void pursuant to the preceding sentence, and any Right Certificate delivered to the Rights Agent that represents Rights that are or have become void pursuant to the preceding sentence shall be cancelled. From and after the occurrence or an event specified in Section 13(a), any Rights that theretofore have not been exercised pursuant to this Section 11(a)(ii) shall thereafter be exercisable only in accordance with Section 13 and not pursuant to this Section 11(a)(ii). (iii) The Company may at its option substitute for a Common Share issuable upon the exercise of Rights in accordance with Section 11(a)(ii), a number of Preferred Shares or fraction thereof such that the current per share market price of one Preferred Share multiplied by such number or fraction is equal to the current per share market price of one Common Share. If, after the occurrence of a Flip-In Event, there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit the exercise in full of the Rights in accordance with Section 11(a)(ii), the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exercise of the Rights. If the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional Common Shares, the Board of Directors shall, to the extent permitted any applicable law and any material agreements then in effect to which the Company is a party, (A) determine the excess (such excess being called the "Spread') of (1) the value of the Common Shares issuable upon the exercise of a Right in accordance with Section 11(a)(ii) hereof (the "Current Value") over (2) the Purchase Price (as adjusted) and (B) with respect to each Right (other than Rights which have become void), make adequate provision to substitute for the Common Shares issuable in accordance with Section 11(a)(ii), upon exercise of the Right and payment of the Purchase Price (as adjusted), (1) cash, (2) a 20 reduction in such Purchase Price, (3) Preferred Shares or other equity securities of the Company (including, without limitation, shares or fractions of preferred stock which, by virtue of having dividend, voting and liquidation rights substantially comparable to those of the Common Shares, are deemed in good faith by the Board of Directors to have substantially the same value as the Common Shares (such Preferred Shares and shares or fractions of shares of preferred stock being called "Common Share Equivalents")), (4) debt securities of the Company, (5) other assets or (6) any combination of the foregoing, having a value which, when added to the value of the Common Shares issued upon exercise of such Right, shall have an aggregate value equal to the Current Value (less the amount of any reduction in such Purchase Price), where such aggregate value has been determined by the Board of Directors upon the advice of a nationally recognized investment banking firm selected in good faith by the Board of Directors; PROVIDED, HOWEVER, that if the Company shall not make adequate provision to deliver value pursuant to clause (B) above within 30 days following the Flip-In Event (the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party, upon the surrender for exercise of a Right and without requiring payment of such Purchase Price, Common Shares (to the extent available) and then, if necessary, such number or fractions of Preferred Shares (to the extent available) and then, if necessary, cash, which Preferred Shares, Common Shares and/or cash have an aggregate value equal to the Spread. If, upon the occurrence of the Flip-In Event, the Board of Directors shall determine in good faith that it is likely that sufficient additional Common Shares could be authorized for issuance upon exercise in full of the Rights, then, if the Board of Directors so elects, the period set forth above may be extended to the extent necessary, but not more than 90 days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional Shares. 21 Such period, as it may be extended, is herein called the "Substitution Period." To the extent that the Company determines that some action need be taken pursuant to the third and/or fourth sentence of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii) and the last sentence of this Section 11(a)(iii), that such action shall apply uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period to seek any authorization of additional Shares and/or to decide the appropriate form of distribution to be made pursuant to such third sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended as well as a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the Common Shares shall be the current per share market price (as determined pursuant to Section 11(d)(i) on the Section 11(a)(ii) Trigger Date) and the per share or fractional value of any Common Share Equivalents shall be deemed to equal the current per share market price of the Common Shares. The Board of Directors may, but shall not be required to, establish procedures to allocate the right to receive Common Shares upon the exercise of the Rights among holders of the Rights pursuant to this Section 11(a)(iii). (b) In case the Company shall fix a record date for the issuance of rights, options or warrants to holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as Preferred Shares ("equivalent preferred shares")) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if it is a security convertible into Preferred Shares or equivalent preferred shares) less than the then current per share market price of the Preferred Shares (determined pursuant to Section 11(d)) on such record date, 22 then the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares and equivalent preferred shares outstanding on such record date plus the number of Preferred Shares and equivalent preferred shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares and equivalent preferred shares outstanding on such record date plus the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. Preferred Shares and equivalent preferred shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. In case such subscription or purchase price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent. Such adjustment to the Purchase Price shall be made successively whenever such a record date is fixed. If such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Company shall fix a record date for the making of a distribution to holders of Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the 23 continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those described in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then current per share market price (determined pursuant to Section 11(d)) of Preferred Shares on such record date, less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of which shall be such current per share market price of Preferred Shares; PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments to the Purchase Price shall be made successively whenever such a record date is fixed. If such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) (i) Except as otherwise provided herein, for the purpose of any computation hereunder, the "current per share market price" of any security (a "Security" for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the thirty (30) consecutive Trading Days (as hereinafter defined) immediately prior to such date; PROVIDED, HOWEVER, that if the current per share market price of such Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security 24 payable in shares of such Security or securities convertible into such shares or (B) any subdivision, combination or reclassification of such Security, and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported by the principal consolidated transaction reporting system with to the principal national securities exchange or over-the-counter market on which such Security is listed or admitted to trading or, if such Security is not listed or admitted, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date such Security is not quoted or any such system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Security selected by the Board of Directors. The term "Trading Day" shall mean a day on which the principal national securities exchange on which such Security is listed or admitted to trading is open for the transaction of business or, if such Security is not listed or admitted to trading on any national securities exchange, a Business Day. (ii) For the purpose of any computation hereunder, if the Preferred Shares are publicly traded, the "current per share market price" of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i). If Common Shares are publicly traded at a time when the Preferred Shares are not publicly traded, the "current per share market price" of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares as determined pursuant to Section 11(d)(i) 25 multiplied by then applicable Adjustment Number (as defined in and determined in accordance with the Certificate of Designation for the Preferred Shares). If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, "current per share market price" shall mean the fair value per share as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent. (e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; PROVIDED, HOWEVER, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one-hundred thousandth of a Preferred Share or one-hundredth of a Common Share or of any other share or security, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the Expiration Date. (f) If as a result of an adjustment made pursuant to Section 11(a), the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Shares, thereafter the Purchase Price and the number of such other shares so receivable upon exercise of a Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Sections 11(a), 11(b), 11(c), 11(e), 11(h), 11(i), 11(m), 11(n) and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares shall apply on like terms to any such other shares. 26 (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and 11(c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a Preferred Share (calculated to the nearest one one-hundred-thousandth of a Preferred Share) obtained by (i) multiplying (x) the number of one one-thousandths of a Preferred Share purchasable upon exercise of a Right immediately prior to such adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price pursuant to Section 11(b) or 11(c) to adjust the number of Rights, in substitution for any adjustment in the number of one one-thousandths of a Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one hundredth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment and, if known at the time, the amount of the adjustment to be made. Such record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, 27 if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company may, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14, the additional Rights to which such holders shall be entitled as a result of such adjustment or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a Preferred Share issuable upon the exercise of a Right, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-thousandths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the fraction of the Common Shares or Preferred Shares issuable upon exercise of a Right, the Company 28 shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Common Shares or Preferred Shares at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (until the occurrence of such event) issuing to the holder of any Right exercised after such record date the Common Shares, Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Common Shares, Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Common Shares, Preferred Shares and other capital stock or securities of the Company upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such adjustments in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of Preferred Shares, issuance wholly for cash of any preferred stock at less than the current market price, issuance wholly for cash of preferred stock or other securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to in Section 11(b), hereafter made by the Company to holders of Preferred Shares shall not be taxable to such holders. 29 (n) Anything in this Agreement to the contrary notwithstanding, if, at any time after the date of this Agreement and prior to the Distribution Date, the Company shall (i) declare and pay any dividend on Common Shares payable in Common Shares or (ii) effect a subdivision, combination or consolidation of Common Shares (by reclassification or otherwise than by payment of a dividend payable in Common Shares) into a greater or lesser number of Common Shares, then in each such case (A) the number of one one-thousandths of a Preferred Share purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-thousandths of a Preferred Share so purchasable immediately prior to such event by a fraction, the numerator of which is the number of Common Shares outstanding immediately before such event and the denominator of which is the number of Common Shares outstanding immediately after such event and (B) each Common Share outstanding immediately after such event shall have issued with respect to it that number of Rights which each Common Share outstanding immediately prior to such event had issued with respect to it. The adjustments provided in this Section 11(n) shall be made successively whenever such a dividend is declared and paid or such a subdivision, combination or consolidation is effected. (o) The Company agrees that, after the earlier of the Distribution Date or the Shares Acquisition Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or eliminate the benefits intended to be afforded by the Rights. Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever an adjustment is made as provided in Section 11 or 13, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) file with the 30 Rights Agent and with the transfer agents for each of the Common Shares and the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of such adjustment unless and until it shall have received such certificate. Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER. (a) If directly or indirectly, at any time after a Flip-In Event, (x) the Company shall consolidate with, or merge with and into, any other Person, (y) any Person shall merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or of the Company) or cash or any other property or (z) the Company (or one or more of its Subsidiaries) shall sell or otherwise transfer, in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person (other than the Company or one or more wholly-owned Subsidiaries of the Company), then, and in each such case, proper provision shall be made so that (i) each holder of a Right (other than Rights which have become void pursuant to Section 11(a)(ii)) shall thereafter have the right to receive, upon the exercise thereof at the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii)), in accordance with the terms of this Agreement and in lieu of Preferred Shares or Common Shares, such number of validly authorized and issued, fully paid, non-assessable and freely tradable shares of Common Stock of the Principal Party not subject to liens, encumbrances, rights of first refusal or other adverse claims, as shall equal the result obtained by dividing the Purchase Price (as 31 adjusted pursuant to Section 11(a)(ii)) by 50% of the then current per share market price of the Common Stock of such Principal Party (determined pursuant to Section 11(d)) on the date of consummation of such consolidation, merger, sale or transfer; PROVIDED, HOWEVER, that the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof) and the number of shares of Common Stock of such Principal Party so receivable upon exercise of a right shall be subject to further adjustment as appropriate in accordance with this Section 13 to reflect any events occurring in respect of the Common Stock of such Principal Party after the occurrence of such consolidation, merger, sale or transfer; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party; and (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock in accordance with Section 9) in connection with such consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as practicable, in relation to the Common Stock of such Principal Party thereafter deliverable upon the exercise of the Rights; PROVIDED, that, upon the subsequent occurrence of any consolidation, merger, sale or transfer of assets or other extraordinary transaction in respect of such Principal Party, each holder of a Right shall thereupon be entitled to receive, upon exercise of a Right and payment of the Purchase Price as provided in this Section 13(a), such cash, shares, rights, warrants and other property which such holder would have been entitled to receive had such holder, at the time of such transaction, owned the Common Stock of the Principal Party receivable upon the exercise of a Right pursuant to this Section 13(a), and such Principal Party shall take such steps (including, but not limited to, reservation of shares of stock) as may be necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants and other property. 32 (b) "Principal Party shall mean: (i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a): (A) the Person that is the issuer of the securities into which the Common Shares are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer of the shares of Common Stock which have the greatest aggregate market value of shares outstanding or (B) if no securities are so issued, (x) the Person that is the other party to the merger, if such Person survives such merger or, if there is more than one such Person, the Person the shares of Common Stock of which have the greatest aggregate market value of shares outstanding or (y) if the Person that is the other party to the merger does not survive such merger, the Person that does survive such merger (including the Company, if it survives) or (z) the Person resulting from such consolidation; and (ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions or, if each Person that is a party to such transaction or transactions receives the same portion of the assets or earning power so transferred or if the Person receiving the greatest portion of the assets or earning power cannot be determined, whichever of such Persons is the issuer of Common Stock having the greatest aggregate market value of shares outstanding; PROVIDED, HOWEVER, that in any case described in the foregoing clause (b)(i) or (b)(ii), if the Common Stock of such Persons is not at such time or has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been 33 so registered, the term "Principal Party" shall refer to such other Person, or (2) if such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stock of all of which is and has been so registered, the term "Principal Party" shall refer to whichever of such Persons is the issuer of Common Stock having the greatest aggregate market value of shares outstanding or (3) if such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the provisions set forth in clauses (1) and (2) above shall apply to each of the owners having an interest in the venture as if the Person owned by the joint venture was a Subsidiary of both or all of such joint venturers and the Principal Party in each case shall bear the obligations set forth in this Section 13 in the same ratio as its interest in such Person bears to the total of such interests. (c) The Company shall not consummate any consolidation, merger, sale or transfer described to in Section 13(a) unless prior thereto the Company and the Principal Party involved therein shall have executed and delivered to the Rights Agent an agreement confirming that the requirements of Sections 13(a) and 13(b) shall promptly be performed in accordance with their terms and that such consolidation, merger, sale or transfer of assets shall not result in a default by the Principal Party under this Agreement as the same shall have been assumed by the Principal Party pursuant to Sections 13(a) and 13(b) and that, as soon as practicable after executing such agreement pursuant to this Section 13, the Principal Party will: (i) prepare and file a registration statement under such Securities Act, if necessary, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date and similarly comply with applicable state securities laws; 34 (ii) use its best efforts, if the Common Stock of such Principal Party shall be listed or admitted to trading on the New York Stock Exchange or on another national securities exchange, to list or admit to trading (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on the New York Stock Exchange or such other national securities exchange or, if the Common Stock of such Principal Party shall not be listed or admitted to trading on the New York Stock Exchange or a national securities exchange, to cause the Rights and the securities receivable upon exercise of the Rights to be authorized for quotation on NASDAQ or some other similar system then in use; (iii) deliver to holders of Rights historical financial statements for such Principal Party which comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act; and (iv) obtain waivers of any rights of first refusal or preemptive rights in respect of the Common Stock of such Principal Party subject to purchase upon exercise of outstanding Rights; (d) In case such Principal Party has a provision in any of its authorized securities or in its certificate of incorporation or by-laws or other instrument governing its corporate affairs which would have the effect of (i) causing such Principal Party to issue (other than to holders of Rights pursuant to this Section 13), in connection with or as a consequence of, the consummation of a transaction described to in this Section 13, shares of Common Stock of such Principal Party or other equity securities of such Principal Party (including, without limitation, shares or fractions of preferred stock, which by virtue of having dividend, voting or liquidation rights substantially comparable to those of the Common Stock of such Principal Party are deemed in good faith by the Board of Directors to have substantially the same value as the Common Stock of such Principal Party) at less than such then current market price or (ii) providing for any special payment, tax or similar provision in connection with 35 the issuance of the Common Stock of such Principal Party pursuant to the provisions of this Section 13, then the Company hereby agrees with each holder of Rights that it shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that such provision shall have been cancelled, waived or amended, or that the authorized securities shall be redeemed, so that such provision will have no effect in connection with or as a consequence of the consummation of the proposed transaction. (e) The Company covenants and agrees that it shall not, at any time after the Flip-In Event, enter into any transaction of the type described in clauses (x), (y) and (z) of Section 13(a) if (i) at the time of or immediately after such consolidation, merger, sale, transfer or other transaction, there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights, (ii) prior to, simultaneously with or immediately after such consolidation, merger, sale, transfer or other transaction, the stockholders of the Person who constitutes or would constitute such Principal Party for purposes of Section 13(b) shall have received a distribution of Rights previously owned by such Person or any of its Affiliates or Associates or (iii) the form or nature of organization of such Principal Party would preclude or limit the exercisability of the Rights. Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights except prior to the Distribution Date in accordance with Section 11(n). In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current 36 market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the principal national securities exchange or over-the-counter market on which the Rights are listed or admitted to trading or, if the Rights are not so listed or admitted to trading, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market as reported by NASDAQ or some other similar system then in use or, if on any such date the Rights are not quoted on any such system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors shall be used. (b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-thousandth of a Preferred Share) upon exercise or exchange of Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-thousandth of a Preferred Share). Interests in fractions of Preferred Shares in integral multiples of one one-thousandth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts pursuant to an appropriate agreement between the Company and a depositary selected by it; PROVIDED, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as Beneficial Owners of the Preferred Shares represented by such depositary receipts. In lieu of 37 fractional Preferred Shares that are not integral multiples of one one-thousandth of a Preferred Share, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Preferred Shares would otherwise be issuable at the time such Rights are exercised or exchanged as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share. For the purposes of this Section 14(b), the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to Section 11(d)(i)) for the Trading Day immediately prior to the date of such exercise. (c) The Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares upon the exercise or exchange of Rights. In lieu of such fractional Common Shares, the Company shall pay to the registered holders of the Rights Certificates with regard to which such fractional Common Shares would otherwise be issuable at the time such Rights are exercised or exchanged as herein provided an amount in cash equal to the same fraction of the current market value of a Common Share (as determined in accordance with Section 14(a)) for the Trading Day immediately prior to the date of such exercise or exchange. (d) The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as otherwise provided in this Section 14). Section 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18, are vested in the respective registered holders of Right Certificates (and, prior to the Distribution Date, the registered holders of Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of any Common Shares), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the 38 Distribution Date, of any other Common Shares), on his own behalf and for his own benefit, may enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder's right to exercise the Rights evidenced by such Right Certificate (or prior to the Distribution Date, such Common Shares), in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to holders of Rights, it is specifically acknowledged that holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement. Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, Rights will be transferable only in connection with the transfer of Common Shares; (b) after the Distribution Date, Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office or agency of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer; (c) the Company and the Rights Agent may deem and treat the Person in whose name a Right Certificate (or, prior to the Distribution Date, a certificate for Common Shares) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on such Right Certificates or such certificate for Common Shares made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary; and 39 (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission or of any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligation; PROVIDED, that the Company shall use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares, Common Shares or other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised or exchanged in accordance with the provisions hereof. 40 Section 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to pay to the Rights Agent such compensation as shall be agreed in writing between the Company and the Rights Agent for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and its reasonable counsel fees and counsel disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim (whether asserted by the Company, a holder of a Right Certificate or any other Person) of liability arising therefrom, directly or indirectly. The provisions of this Section 18(a) shall survive the expiration of the Rights and the termination of this Agreement. (b) The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, opinion, certificate, statement or other paper or document believed by it to be genuine and to be signed by the proper Person or Persons, and, where necessary, to be verified or acknowledged or otherwise upon the advice of counsel as set forth in Section 20. Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to all or substantially all of the stock transfer or corporate trust powers of the 41 Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; PROVIDED, that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and obligations expressly imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound: 42 (a) The Rights Agent may consult with legal counsel of its own selection (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof), nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate, nor shall it 43 be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii)) or any adjustment in the terms of the Rights provided in Sections 3, 11, 13, 23 and 24 or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after the Rights Agent's actual receipt of a certificate furnished pursuant to Section 12, describing such change or adjustment) nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares or other securities to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares or other securities will, when issued, be validly authorized and issued, fully paid and nonassessable, nor shall the Rights Agent be responsible for the legality of the terms hereof in its capacity as an administrative agent. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Secretary or the Treasurer of the Company and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be 44 liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company, or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company, or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. (j) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or the form of election to purchase set forth on the reverse thereof, as the case may be, has not been completed to certify the holder is not an Acquiring Person (or an Affiliate or Associate thereof), the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company. 45 (k) No implied duties or obligations shall be read into this Agreement against the Rights Agent. No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (l) In addition to the foregoing, the Rights Agent shall be protected and shall incur no liability for, or in respect of, any action taken or omitted by it in connection with its administration of this Agreement if such acts or omissions are in reliance upon (i) the proper execution of the certification concerning beneficial ownership appended to the form of assignment and the form of election to purchase attached hereto unless the Rights Agent shall have actual knowledge that, as executed, such certification is untrue or (ii) the non-execution of such certification is including, without limitation, any refusal to honor any otherwise permissible assignment or election by reason of such non-execution. (m) The Company agrees to give the Rights Agent prompt written notice of any event or ownership known to it which would prohibit the exercise or transfer of the right Certificates. Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' 46 notice in writing mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the Rights Agent or the registered holder of any Right Certificate may, at the expense of the Company, apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or any state of the United States or the District of Columbia, in good standing, having an office in the State of New York, authorized under such laws to exercise corporate trust or stock transfer powers and subject to supervision or examination by federal or state authority, and having at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares or Preferred Shares, and following the Distribution Date mail a notice thereof in writing to the registered holders of Right Certificates. Failure to give any notice provided in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. 47 Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such forms as may be approved by the Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable upon exercise of the Rights made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of Common Shares following the Distribution Date and prior to the Expiration Date, the Company may with respect to Common Shares so issued or sold pursuant to (i) the exercise of stock options, (ii) under any employee plan or arrangement, (iii) upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company or (iv) a contractual obligation of the Company, in each case existing prior to the Distribution Date, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale. Section 23. REDEMPTION. (a) The Board of Directors may, at any time prior to the Flip-In Event, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (the redemption price being called the "Redemption Price"). The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. The Redemption Price shall be payable, at the option of the Company, in cash, Common Shares or such other form of consideration as the Board of Directors shall determine. 48 (b) Immediately upon the action of the Board of Directors ordering the redemption of the Rights pursuant to this Section 23 (or at such later time as the Board of Directors may establish for the effectiveness of such redemption), and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice, with simultaneous written notice to the Rights Agent, of any such redemption; PROVIDED, HOWEVER, that the failure to give, or any defect in, any such notice shall not effect the validity of such redemption. Within 10 days after the action of the Board of Directors ordering the redemption of the Rights (or such later time as the Board of Directors may establish for the effectiveness of such redemption), the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed to have been duly given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 or other than in connection with the purchase of Common Shares prior to the Distribution Date. Section 24. EXCHANGE. (a) The Board of Directors may, at its option, at any time after the Flip-In Event, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares or Common Stock Equivalents at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any stock split, stock divided or similar transaction 49 occurring after the date hereof (such amount per Right being called the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after an Acquiring Person shall have become the Beneficial Owner of Common Shares aggregating 50% or more of the Common Shares then outstanding. From and after the occurrence of an event specified in Section 13(a), any Rights that theretofore have not been exchanged pursuant to this Section 24(a) shall thereafter be exercisable only in accordance with Section 13 and may not be exchanged pursuant to this Section 24(a). The exchange of the Rights by the Board of Directors may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. (b) Immediately upon the effectiveness of the action of the Board of Directors ordering the exchange of any Rights pursuant to this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of Rights shall be to receive that number of Common Shares or Common Share Equivalents equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice, with simultaneous written notice to the Rights Agent, of any such exchange; PROVIDED, HOWEVER, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall promptly mail a notice of any such exchange to all of the holders of the Rights so exchanged at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed to have been duly given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares or Common Share Equivalents for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights. 50 (c) If there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exchange of the Rights. If the Company shall, after good faith effort, be unable to take all such action as may be necessary to authorize such additional Common Shares, the Company shall substitute, to the extent of the insufficiency, for each Common Share that would otherwise be issuable upon exchange of a Right, a number of Preferred Shares or fraction thereof (or equivalent preferred shares, as such term is defined in Section 11(b)) such that the current per share market price (determined pursuant to Section 11(a)) of one Preferred Share or equivalent preferred share multiplied by such number or fraction is equal to the current per share market price (determined pursuant to Section 11(a)) of one Common Share as of the date of such exchange. Section 25. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall at any time after the earlier of the Distribution Date or the Shares Acquisition Date propose (i) to pay any dividend payable in stock of any class to the holders of Preferred Shares or to make any other distribution to the holders of Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of Preferred Shares (other than a reclassification involving only the subdivision or combination of outstanding Preferred Shares), (iv) to effect the liquidation, dissolution or winding up of 51 the Company or (v) to pay any dividend on Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of Common Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of Common Shares and/or Preferred Shares for purposes of such action, and in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Shares and/or Preferred Shares, whichever shall be the earlier. (b) In case any event described in Section 11(a)(ii) or Section 13 shall occur, then the Company shall as soon as practicable thereafter give to each holder of a Right Certificate (or, if occurring prior to the Distribution Date, each holder of Common Shares), in accordance with Section 26, a notice of the occurrence of such event, which notice shall describe such event and the consequences to holders of Rights of such event under Section 11(a)(ii) and Section 13. Section 26. NOTICES. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: 52 UCAR International Inc. 39 Old Ridgebury Road Danbury, Connecticut 06817 Attention: Corporate Secretary Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: The Bank of New York 101 Barclay Street Floor 12 West New York, New York 10286 Attention: Stock Transfer Department Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the relevant registry books. Section 27. SUPPLEMENTS AND AMENDMENTS. Except as provided in the penultimate sentence of this Section 27, for so long as the Rights are then redeemable, the Company may in its sole discretion, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Agreement in any respect without the approval of any holders of the Rights. At any time when the Rights are no longer redeemable, except as provided in the penultimate sentence of this Section 27, the Company may, and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights to (i) cure any ambiguity, (ii) correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, (iii) shorten or lengthen any time period hereunder or (iv) change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable; PROVIDED, that, no such supplement or amendment 53 shall adversely affect the interests of the holders of Rights, as such (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person), and no such amendment may cause the Rights again to become redeemable or cause this Agreement again to become amendable other than in accordance with this sentence. Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment shall be made which changes the Redemption Price. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Notwithstanding any other provision hereof, the Rights Agent's consent must be obtained regarding any amendment or supplement pursuant to this Section 27 which alters the Rights Agent's rights or duties. Section 28. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns. Section 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of Right Certificates (and, prior to the Distribution Date, Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of Right Certificates (and, prior to the Distribution Date, Common Shares). Section 30. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS. The Board of Directors shall have the exclusive power and authority to administer this Agreement and to exercise the rights and powers specifically granted to the Board of Directors or to the Company, or as may be necessary or advisable in the 54 administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations necessary or advisable for the administration of this Agreement (including, without limitation, a determination to redeem or not to redeem the Rights or to amend this Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) that are done or made by the Board of Directors in good faith shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of Rights, as such, and all other parties and (y) not subject the Board of Directors to any liability to the holders of Rights. Section 31. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 32. GOVERNING LAW. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed entirely within the State of Delaware, provided, however, that the rights and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York. Section 33. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 55 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. UCAR INTERNATIONAL INC. By /S/ PETER B. MANCINO ----------------------------------- Title: Vice President THE BANK OF NEW YORK, as Rights Agent By /S/ ROBERT DRITZ ----------------------------------- Title: Vice President 57 EX-10.1 6 EXHIBIT 10.1 CONFORMED COPY ------------------------------------------------------------ CREDIT AGREEMENT Dated as of October 19, 1995, As Amended and Restated as of March 19, 1997, and November 10, 1998 Among UCAR INTERNATIONAL INC., UCAR GLOBAL ENTERPRISES INC., THE SUBSIDIARY BORROWERS PARTY HERETO, THE LENDERS PARTY HERETO, THE FRONTING BANKS PARTY HERETO, and THE CHASE MANHATTAN BANK, as Administrative Agent and Collateral Agent ---------------------------- CHASE SECURITIES INC., as Lead Arranger ------------------------------------------------------------ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms............................................... 2 SECTION 1.02. Terms Generally............................................. 37 ARTICLE II THE CREDITS SECTION 2.01. Commitments................................................. 38 SECTION 2.02. Loans....................................................... 41 SECTION 2.03. Borrowing Procedure......................................... 43 SECTION 2.04. Evidence of Debt; Repayment of Loans........................ 43 SECTION 2.05. Fees........................................................ 44 SECTION 2.06. Interest on Loans........................................... 45 SECTION 2.07. Default Interest............................................ 46 SECTION 2.08. Alternate Rate of Interest.................................. 46 SECTION 2.09. Termination and Reduction of Commitments.................... 46 SECTION 2.10. Conversion and Continuation of Borrowings................... 47 SECTION 2.11. Repayment of Term Borrowings and Reduction of the Tranche A Exposure; Reallocation of the Tranche A Exposure...................................... 49 SECTION 2.12. Prepayment.................................................. 52 SECTION 2.13. Reserve Requirements; Change in Circumstances............................................... 55 SECTION 2.14. Change in Legality.......................................... 57 SECTION 2.15. Indemnity................................................... 58 SECTION 2.16. Pro Rata Treatment.......................................... 59 SECTION 2.17. Sharing of Setoffs.......................................... 59 SECTION 2.18. Payments.................................................... 60 SECTION 2.19. Taxes....................................................... 60 SECTION 2.20. Letters of Credit........................................... 64 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Organization; Powers........................................ 73 SECTION 3.02. Authorization............................................... 74 SECTION 3.03. Enforceability.............................................. 74 SECTION 3.04. Governmental Approvals...................................... 74 SECTION 3.05. Financial Statements........................................ 75 SECTION 3.06. No Material Adverse Change.................................. 75 SECTION 3.07. Title to Properties; Possession Under Leases................ 75 SECTION 3.08. Subsidiaries................................................ 76 SECTION 3.09. Litigation; Compliance with Laws............................ 76 SECTION 3.10. Agreements.................................................. 76 SECTION 3.11. Federal Reserve Regulations................................. 77 SECTION 3.12. Investment Company Act; Public Utility Holding Company Act....................................... 77 SECTION 3.13. Use of Proceeds............................................. 77 SECTION 3.14. Tax Returns................................................. 77 SECTION 3.15. No Material Misstatements................................... 78 SECTION 3.16. Employee Benefit Plans...................................... 78 SECTION 3.17. Environmental Matters....................................... 79 SECTION 3.18. Capitalization of UCAR and the Borrower..................... 80 SECTION 3.19. Security Documents.......................................... 80 SECTION 3.20. Labor Matters............................................... 81 SECTION 3.21. No Foreign Assets Control Regulation Violation................................................. 82 SECTION 3.22. Insurance................................................... 82 SECTION 3.23. Location of Real Property and Leased Premises.................................................. 82 SECTION 3.24. Litigation Liabilities...................................... 82 SECTION 3.25. Year 2000................................................... 83 ARTICLE IV CONDITIONS SECTION 4.01. Effective Date.............................................. 83 SECTION 4.02. Each Credit Event........................................... 85 ARTICLE V AFFIRMATIVE COVENANTS SECTION 5.01. Existence; Businesses and Properties........................ 87 SECTION 5.02. Insurance................................................... 87 SECTION 5.03. Taxes....................................................... 89 SECTION 5.04. Financial Statements, Reports, etc.......................... 89 SECTION 5.05. Litigation and Other Notices................................ 91 SECTION 5.06. Employee Benefits........................................... 92 SECTION 5.07. Maintaining Records; Access to Properties and Inspections........................................... 92 SECTION 5.08. Use of Proceeds............................................. 93 SECTION 5.09. Compliance with Environmental Laws.......................... 93 SECTION 5.10. Preparation of Environmental Reports........................ 93 SECTION 5.11. Further Assurances.......................................... 93 SECTION 5.12. Significant Subsidiaries.................................... 93 SECTION 5.13. Fiscal Year................................................. 94 SECTION 5.14. Dividends................................................... 94 SECTION 5.15. Interest/Exchange Rate Protection Agreements................ 94 SECTION 5.16. Corporate Separateness...................................... 94 ARTICLE VI NEGATIVE COVENANTS SECTION 6.01. Indebtedness................................................ 94 SECTION 6.02. Liens....................................................... 98 SECTION 6.03. Sale and Lease-Back Transactions............................ 101 SECTION 6.04. Investments, Loans and Advances............................. 101 SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions.............................................. 103 SECTION 6.06. Dividends and Distributions................................. 106 SECTION 6.07. Transactions with Affiliates................................ 107 SECTION 6.08. Business of UCAR, the Borrower and the Subsidiaries.............................................. 108 SECTION 6.09. Indebtedness and Other Material Agreements................................................ 108 SECTION 6.10. Capital Expenditures........................................ 109 SECTION 6.11. Interest Coverage Ratio..................................... 109 SECTION 6.12. Leverage Ratio.............................................. 110 SECTION 6.13. Capital Stock of the Subsidiaries........................... 110 ARTICLE VII EVENTS OF DEFAULT......................................................... 110 ARTICLE VIII THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT.................................................... 114 ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices...................................................... 117 SECTION 9.02. Survival of Agreement........................................ 117 SECTION 9.03. Binding Effect............................................... 118 SECTION 9.04. Successors and Assigns....................................... 118 SECTION 9.05. Expenses; Indemnity.......................................... 122 SECTION 9.06. Right of Setoff.............................................. 125 SECTION 9.07. Applicable Law............................................... 125 SECTION 9.08. Waivers; Amendment........................................... 125 SECTION 9.09. Interest Rate Limitation..................................... 127 SECTION 9.10. Entire Agreement............................................. 127 SECTION 9.11. Waiver of Jury Trial......................................... 127 SECTION 9.12. Severability................................................. 127 SECTION 9.13. Counterparts................................................. 128 SECTION 9.14. Headings..................................................... 128 SECTION 9.15. Jurisdiction; Consent to Service of Process.................. 128 SECTION 9.16. Conversion of Currencies..................................... 128 SECTION 9.17. Confidentiality ............................................. 129 SECTION 9.18. Release of Liens and Guarantees.............................. 129 SECTION 9.19 Subsidiary Borrowers......................................... 130 EXHIBITS AND SCHEDULES Exhibit A Form of Administrative Questionnaire Exhibit B Form of Assignment and Acceptance Exhibit C Form of Borrowing Request Exhibit D Form of Indemnity, Subrogation and Contribution Agreement Exhibit E Form of Local Facility Credit Agreement Exhibit F Form of Parent Guarantee Agreement Exhibit G Form of Domestic Pledge Agreement Exhibit H Form of Subsidiary Guarantee Agreement Exhibit I Form of Tranche A Letter of Credit Exhibit J Form of Domestic Security Agreement Exhibit K Form of Intellectual Property Security Agreement Exhibit L Form of Subsidiary Borrower Agreement Exhibit M Form of Subsidiary Borrower Termination Exhibit N-1 Form of Opinion of Kelley Drye & Warren LLP Exhibit N-2 Form of Opinion of General Counsel Exhibit N-3 Forms of Opinion of Local Counsel Schedule A Adjustments Schedule 2.01(a) Lenders, Commitments and Outstanding Loans on date hereof Schedule 2.01(b) Lenders, Commitments and Outstanding Loans on Effective Date Schedule 2.20 Fronting Banks, Tranche A Letters of Credit and Credit Parties Schedule 3.08 Subsidiaries and outstanding subscriptions, options, warrants, etc. Schedule 3.09 Litigation Schedule 3.14 Taxes Schedule 3.17 Environmental Matters Schedule 3.18 Capitalization Schedule 3.20 Labor Matters Schedule 3.23(a) Location of Real Property and Mortgages Schedule 3.23(b) Location of Leased Premises Schedule 4.01 Local Jurisdictions Where Opinion Required Schedule 6.01 Indebtedness Schedule 6.02 Liens Schedule 6.04 Investments Schedule 6.07 Transactions with Affiliates Schedule 6.09 Restrictive Agreements Schedule 9.01 Notice Information for Fronting Banks and Credit Parties (other than the Borrower) CREDIT AGREEMENT (this "AGREEMENT") dated as of October 19, 1995, as amended and restated as of March 19, 1997, and November 10, 1998, among UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation (the "BORROWER"), the SUBSIDIARY BORROWERS party hereto, the LENDERS party hereto, the FRONTING BANKS party hereto and THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT") and as collateral agent (in such capacity, the "COLLATERAL AGENT"). The parties hereto have entered into a Credit Agreement dated as of October 19,1995, as amended and restated as of March 19, 1997 (the "EXISTING CREDIT AGREEMENT"). The parties hereto have agreed that, effective on the Effective Date (such term, and each other capitalized term used and not otherwise defined herein, having the meaning assigned to it in Article I), the Existing Credit Agreement will be amended in the form of and replaced with two credit agreements, consisting of (a) this Agreement and (b) the Tranche C Facility Credit Agreement, under which the Lenders or lenders under the Tranche C Facility Credit Agreement, as applicable, will maintain existing credit and extend new credit to the Borrower and certain Subsidiaries in an aggregate original principal amount as of the Effective Date of $819,400,000. From and after the Effective Date, (a) this Agreement will govern (i) the Tranche A Term Loans, (ii) the Tranche A Letters of Credit and Tranche A Reimbursement Loans, (iii) the Tranche B Term Loans and (iv) the Revolving Credit Commitments, Revolving Loans and Swingline Loans and (b) the Tranche C Facility Credit Agreement will govern the Tranche C Term Loans. On the Second Closing Date, the Lenders extended credit to the relevant Credit Parties in the form of (a) Tranche A Term Loans, the aggregate outstanding principal amount of which is $20,467,843.22 on the date hereof, (b) Tranche A Letters of Credit supporting Local Facilities, the aggregate outstanding stated amount of which is $219,532,156.78 on the date hereof, and (c) Tranche B Term Loans, the aggregate outstanding principal amount of which is $119,400,000 on the date hereof. The proceeds of the Term Loans and the Local Facilities were used to provide funding for the refinancing of all the outstanding term loans and letters of credit under this Agreement and local facilities on the Second Closing Date and the payment of related fees, expenses and other transaction costs. The Tranche A Letters of Credit were, and will continue to be, used to support Indebtedness under the Local Facilities. The Lenders extended, and, subject to the terms and conditions set forth herein, will continue to extend, credit to the relevant Credit Parties in the form of (a) Revolving Loans and Swingline Loans from time to time during the Revolving Availability Period, in an aggregate principal amount at any time 2 outstanding not in excess of $250,000,000 less the Revolving L/C Exposure at such time, (b) Revolving Letters of Credit from time to time during the Revolving Availability Period, in an aggregate stated amount at any time outstanding not in excess of the lesser of (i) $200,000,000 and (ii) $250,000,000 less the principal amount of outstanding Revolving Loans and Swingline Loans at such time and (c) Tranche A Letters of Credit and Tranche A Reimbursement Loans issued or made as described in Section 2.11(b) from time to time prior to the Tranche A Maturity Date, in an aggregate principal and stated amount that will not result in the Tranche A Exposure exceeding $219,532,156.78, subject to increases in the stated amount of Tranche A Letters of Credit effected pursuant to Section 2.11(b)(iii) and resulting from the proportionate repayment of Tranche A Term Borrowings. The Revolving Letters of Credit and the proceeds of Revolving Loans and Swingline Loans have been, and will continue to be, used for general corporate purposes of the Borrower and its Subsidiaries, including the financing of Litigation Payments. The Lenders are willing to extend such credit to the Credit Parties and the Fronting Banks are willing to issue Letters of Credit for the account of the Credit Parties, in each case on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings specified below: "ABR BORROWING" shall mean a Borrowing comprised of ABR Loans. "ABR LOAN" shall mean any ABR Term Loan, ABR Tranche A Reimbursement Loan, ABR Revolving Loan or Swingline Loan. "ABR REVOLVING LOAN" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "ABR TERM LOAN" shall mean any Term Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "ABR TERM OR REIMBURSEMENT BORROWING" shall mean a Borrowing comprised of ABR Term Loans or a Borrowing comprised of ABR Tranche A Reimbursement Loans, as applicable. "ABR TERM, REIMBURSEMENT OR REVOLVING BORROWING" shall mean a Borrowing comprised of ABR Term Loans, a Borrowing comprised of ABR Tranche A Reimbursement Loans or a Borrowing comprised of ABR Revolving Loans, as applicable. 3 "ABR TRANCHE A REIMBURSEMENT LOAN" shall mean any Tranche A Reimbursement Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "ADJUSTED LIBO RATE" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves. "ADMINISTRATIVE AGENT FEES" shall have the meaning given such term in Section 2.05(c). "ADMINISTRATIVE QUESTIONNAIRE" shall mean an Administrative Questionnaire in the form of Exhibit A. "AFFILIATE" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified. "AGENT LETTER" shall mean the letter agreement dated October 9, 1998, between the Borrower and The Chase Manhattan Bank. "AGGREGATE REVOLVING CREDIT EXPOSURE" shall mean the aggregate amount of the Lenders' Revolving Credit Exposures. "ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate, including the failure of the Federal Reserve Bank of New York to publish rates or the inability of the Administrative Agent to obtain quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "APPLICABLE PERCENTAGE" of any Tranche A Lender or Revolving Credit Lender at any time shall mean the percentage of the Total Tranche A Reimbursement Commitment or the Total Revolving Credit Commitment, as applicable, represented by such Lender's Tranche A Reimbursement Commitment or Revolving Credit Commitment, as applicable. In the event the Tranche A Reimbursement Commitments or the Revolving Credit Commitments shall have expired or been terminated, the Applicable Percentages shall be determined on the basis of the Tranche A Reimbursement Commitments or the Revolving Credit Commitments, as applicable, 4 most recently in effect, but giving effect to any assignments pursuant to Section 9.04. "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent and the Borrower, in the form of Exhibit B or such other form as shall be approved by the Administrative Agent. "BOARD" shall mean the Board of Governors of the Federal Reserve System of the United States. "BORROWING" shall mean (a) a group of Loans of a single Class and Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect or (b) a Swingline Loan. "BORROWING REQUEST" shall mean a request by a Credit Party in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C. "BRAZIL" shall mean UCAR Carbon S.A., a Brazilian corporation and the direct or indirect owner of virtually all of the business of the Borrower and the Subsidiaries in Brazil. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; PROVIDED, HOWEVER, that when used in connection with a Eurodollar Loan, the term "BUSINESS DAY" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "CAPITAL EXPENDITURES" shall mean, for any person in respect of any period, the sum of (a) the aggregate of all expenditures by such person during such period that, in accordance with GAAP, are or should be included in "additions to property, plant or equipment" or similar items reflected in the statement of cash flows of such person and (b) to the extent not covered by clause (a) above, the aggregate of all expenditures by such person to acquire by purchase or otherwise the business or fixed assets of, or stock or other evidence of beneficial ownership of, any other person (other than the Borrower or any person that is a Wholly Owned Subsidiary prior to such acquisition); PROVIDED, HOWEVER, that Capital Expenditures for the Borrower and the Subsidiaries shall not include (i) expenditures made to make any acquisition constituting a Specified Permitted Transaction or Permitted Other Acquisition, (ii) expenditures to the extent they are made (A) with the proceeds of the issuance of Capital Stock of UCAR after the Original Closing Date (to the extent not previously used to prepay Indebtedness (other than Revolving Loans or Swingline Loans), make any investment or capital expenditure or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any fiscal year) or (B) with funds that if not so spent would constitute Net Proceeds under clause (a) of the definition of "NET PROCEEDS" (subject to the limitation set forth in the second proviso to such clause (a)), (iii) expenditures of proceeds of insurance settlements, condemnation awards and other settlements in respect of lost, destroyed, damaged or condemned 5 assets, equipment or other property to the extent such expenditures are made to replace or repair such lost, destroyed, damaged or condemned assets, equipment or other property or otherwise to acquire assets or properties useful in the business of the Borrower and the Subsidiaries within 12 months of receipt of such proceeds, (iv) expenditures that are accounted for as capital expenditures of such person and that actually are paid for by a third party (excluding UCAR or any subsidiary thereof) and for which neither UCAR nor any subsidiary thereof has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such third party or any other person (whether before, during or after such period), (v) the book value of any asset owned by such person prior to or during such period to the extent that such book value is included as a capital expenditure during such period as a result of such person reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period; PROVIDED that any expenditure necessary in order to permit such asset to be reused shall be included as a Capital Expenditure during the period that such expenditure actually is made and such book value shall have been included in Capital Expenditures when such asset was originally acquired or (vi) expenditures made in respect of closures of the Welland, Canada and Berlin, Germany facilities in an aggregate amount not in excess of $11,000,000 (as evidenced by a certificate of the Borrower signed by a Responsible Officer of the Borrower). "CAPITAL LEASE OBLIGATIONS" of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP and, for purposes hereof, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "CAPITAL STOCK" of any person shall mean any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such person, including any preferred stock, any limited or general partnership interest and any limited liability company membership interest, but excluding any debt securities convertible into such equity. "CASH INTEREST EXPENSE" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis for any period, Interest Expense for such period less the sum of (a) pay-in-kind Interest Expense, (b) to the extent included in Interest Expense, the amortization of fees paid by UCAR, the Borrower or any Subsidiary on or prior to the Original Closing Date in connection with the transactions consummated on such date, on or prior to the Second Closing Date in connection with the transactions consummated on such date or on or prior to the Effective Date in connection with the Transactions and (c) the amortization of debt discounts, if any, or fees in respect of Interest/Exchange Rate Protection Agreements. 6 "CERCLA" shall have the meaning given such term in the definition of "ENVIRONMENTAL LAW". A "CHANGE IN CONTROL" shall be deemed to have occurred if (a) UCAR should fail to own directly, beneficially and of record, free and clear of any and all Liens (other than Liens in favor of the Collateral Agent pursuant to the Domestic Pledge Agreement), 100% of the issued and outstanding capital stock of the Borrower; (b) any person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the Effective Date), other than members of management of UCAR or the Borrower holding voting stock of UCAR or options to acquire such stock on the Effective Date (collectively, the "DESIGNATED PERSONS"), shall own beneficially, directly or indirectly, shares representing more than 25% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of UCAR at a time when Designated Persons fail to own beneficially, directly or indirectly, shares representing at least a majority of the aggregate ordinary voting power represented by the issued and outstanding capital stock of UCAR; (c) a majority of the seats (excluding vacant seats) on the board of directors of UCAR shall at any time after the Effective Date be occupied by persons who were neither (i) nominated by any one or more Designated Persons or by a majority of the board of directors of UCAR, nor (ii) appointed by directors so nominated; or (d) a change in control with respect to UCAR or the Borrower (or similar event, however denominated) shall occur under and as defined in the Senior Subordinated Indenture or the Refinancing Note Indenture (in each case so long as any Indebtedness for borrowed money is outstanding thereunder) or in any other indenture or agreement in respect of Indebtedness in an aggregate outstanding principal amount in excess of $7,500,000 to which UCAR, the Borrower or any Subsidiary is party. For purposes of clause (b) of this definition, the term "DESIGNATED PERSON" shall be deemed to include any other holder or holders of shares of UCAR having ordinary voting power if UCAR shall have the power to vote (or cause to be voted at its discretion), pursuant to contract, irrevocable proxy or otherwise, the shares held by such holder. "CLASS", when used in reference to any Borrowing, refers to whether the Loans comprising such Borrowing are Revolving Loans, Tranche A Term Loans, Tranche A Reimbursement Loans, Tranche B Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Credit Commitment, Tranche A Term Loan Commitment, Tranche A Reimbursement Commitment, Tranche B Term Loan Commitment or Swingline Loan Commitment. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. "COLLATERAL" shall mean all the "Collateral" as defined in any Security Document. "COLLATERAL REQUIREMENT" shall mean, at any time, that: (a)(i) the Domestic Pledge Agreement (or a supplement thereto) shall have been duly executed and delivered by UCAR, the 7 Borrower and each domestic Subsidiary existing at such time and directly owning any outstanding Capital Stock or Indebtedness of any other Subsidiary, and there shall have been duly and validly pledged to the Collateral Agent thereunder, for the ratable benefit of the Secured Parties, as security for all the Obligations, (A) all the outstanding Capital Stock of or other equity interests in each domestic Subsidiary owned directly by UCAR, the Borrower or any domestic Subsidiary and (B) 65% of the outstanding Capital Stock of or other equity interests in (or, in each case, such lesser percentages as shall be owned by UCAR, the Borrower and the domestic Subsidiaries) each foreign Subsidiary owned in whole or in part directly by UCAR, the Borrower or any domestic Subsidiary and (C) all Indebtedness in excess of $10,000,000 of UCAR, the Borrower or any Subsidiary owed to UCAR, the Borrower or any domestic Subsidiary; (ii) one or more other Pledge Agreements shall have been duly executed and delivered by each foreign Credit Party that has borrowed (or will at such time borrow) Revolving Loans or that has had (or will at such time have) a Revolving Letter of Credit issued for its account, and by each foreign Subsidiary that is required pursuant to the terms hereof to Guarantee the Obligations of such foreign Credit Party in respect of such Revolving Loans or Revolving Letters of Credit, and there shall have been duly and validly pledged thereunder, for the ratable benefit of the Secured Parties holding Obligations of such foreign Credit Party or foreign Guarantor in respect of such Revolving Loans, Revolving Letters of Credit or Guarantees, as security for all such Obligations of such foreign Credit Party or foreign Guarantor (but not as security for the Obligations of the Borrower or any other Subsidiary) (A) all the outstanding Capital Stock of or other equity interests in any Subsidiary that is at such time directly owned by such foreign Credit Party or foreign Guarantor, (B) all the outstanding Capital Stock of or other equity interests in such foreign Credit Party or foreign Guarantor, and of any Subsidiary directly or indirectly owning any outstanding Capital Stock of or other equity interests in such foreign Credit Party or foreign Guarantor that shall not have been pledged pursuant to the Domestic Pledge Agreement and (C) all Indebtedness in excess of $10,000,000 of UCAR, the Borrower or any Subsidiary owed to such foreign Credit Party or foreign Guarantor; (iii) one or more other Pledge Agreements shall have been duly executed and delivered by each domestic Guarantor directly owning any Capital Stock of a foreign Credit Party or a foreign Guarantor referred to in clause (ii) above, and there shall have been duly and validly pledged thereunder, for the ratable benefit of the Secured Parties holding Obligations of such foreign Credit Party or foreign Guarantor in respect of such Revolving Loans, Revolving Letters of Credit or Guarantees, as security for all such Obligations of such foreign Credit Party or foreign Guarantor (but not as security for the Obligations of the Borrower or any other Subsidiary) all the outstanding Capital Stock of or other equity interests in such foreign Credit Party or foreign Guarantor that shall not have been pledged pursuant to the Domestic Pledge Agreement; (iv) one or more other Pledge Agreements shall have been duly executed and delivered by each domestic Guarantor directly owning any Capital Stock of (A) a foreign Credit Party that has borrowed (or will at such time borrow) under a Local Facility or that has had (or will at such time have) a Tranche A Letter of Credit issued for its account and (B) any foreign 8 Guarantor of the Obligations of such foreign Credit Party described in (A) above, and there shall have been duly and validly pledged thereunder, for the ratable benefit of the Secured Parties holding Obligations of such foreign Credit Party or foreign Guarantor in respect of such loans under a Local Facility, Tranche A Letters of Credit or Guarantees, as security for all such Obligations of such foreign Credit Party or foreign Guarantor (but not as security for the Obligations of the Borrower or any other Subsidiary) all the outstanding Capital Stock of or other equity interests in such foreign Credit Party or foreign Guarantor that shall not have been pledged pursuant to the Domestic Pledge Agreement; and (v) certificates or other instruments representing the shares or Indebtedness pledged under the Pledge Agreements, accompanied by stock powers or other instruments of transfer endorsed in blank, shall be in the actual possession of the Collateral Agent and all other steps required under applicable law or requested by the Collateral Agent to ensure that the Pledge Agreements create valid, first priority, perfected Liens on all the Collateral subject thereto shall have been taken; (b)(i) the Domestic Security Agreement (or a supplement thereto) shall have been duly executed and delivered by UCAR, the Borrower and each domestic Subsidiary existing at such time, and the Domestic Security Agreement shall create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, as security for all the Obligations, perfected security interests in (subject only to the Liens permitted by Section 6.02 and by the Tranche C Facility Credit Agreement) all the Collateral (as such term is defined in the Domestic Security Agreement) owned by UCAR, the Borrower and each domestic Subsidiary; (ii) one or more other Security Agreements shall have been duly executed and delivered by each foreign Credit Party that has borrowed (or will at such time borrow) Revolving Loans or that has had (or will at such time have) a Revolving Letter of Credit issued for its account, and by each foreign Subsidiary that is required pursuant to the terms hereof to Guarantee the Obligations of such foreign Credit Party in respect of such Revolving Loans or Revolving Letters of Credit, and such Security Agreements shall create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties holding Obligations of such foreign Credit Party or foreign Guarantor in respect of such Revolving Loans, Revolving Letters of Credit or Guarantees, as security for all such Obligations of such foreign Credit Party or foreign Guarantor (but not as security for the Obligations of the Borrower or any other Subsidiary), perfected security interests in (subject only to Liens permitted by Section 6.02 and by the Tranche C Facility Credit Agreement) all the Collateral (as such term is defined in such Security Agreements) owned by such foreign Credit Party or foreign Guarantor; and (iii) all steps required under applicable law or requested by the Collateral Agent to ensure that the Security Agreements create valid, first priority, perfected Liens (subject only to the Liens permitted by Section 6.02 and the Tranche C Facility Credit Agreement) on all the Collateral subject thereto shall have been taken; (c)(i) all real properties owned or leased directly by UCAR, the Borrower or any domestic Subsidiary are Mortgaged Properties, and all steps required under applicable law or 9 requested by the Collateral Agent to ensure that the Mortgages on such Mortgaged Properties create in favor of the Collateral Agent for the benefit of the Secured Parties, as security for all the Obligations, perfected Liens on and security interests in (subject only to the Liens permitted by Section 6.02 and by the Tranche C Facility Credit Agreement) (A) such Mortgaged Properties and (B) all proceeds thereof shall have been taken; and (ii) all real properties owned or leased directly by any foreign Credit Party that has borrowed (or will at such time borrow) Revolving Loans or that has had (or will at such time have) a Revolving Letter of Credit issued for its account, and by each foreign Subsidiary that is required to Guarantee the Obligations of such foreign Credit Party in respect of such Revolving Loans or Revolving Letters of Credit, are Mortgaged Properties, and all steps required under applicable law or requested by the Collateral Agent to ensure that the Mortgages on such Mortgaged Properties create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties holding Obligations of such foreign Credit Party or foreign Guarantor in respect of such Revolving Loans, Revolving Letters of Credit or Guarantees, as security for all such Obligations of such foreign Credit Party or foreign Guarantor (but not as security for the Obligations of the Borrower or any other Subsidiary), perfected Liens on and security interests in (subject only to the Liens permitted by Section 6.02 and by the Tranche C Facility Credit Agreement) (A) such Mortgaged Properties and (B) all proceeds thereof shall have been taken; PROVIDED that, notwithstanding the foregoing, it is understood that leasehold mortgages will not be obtained in respect of any real property leased by a Loan Party unless the Collateral Agent, in its discretion, shall request that a leased property become a Mortgaged Property (in which case any such Mortgage shall be subject to such limitations as may be contained in the lease relating to such real property); and (d) the Intellectual Property Security Agreement (or a supplement thereto) shall have been duly executed and delivered by UCAR, the Borrower and each domestic Subsidiary existing at such time, and that all steps required under applicable law or requested by the Collateral Agent to ensure that the Intellectual Property Security Agreement creates in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, as security for all the Obligations, perfected security interests in (subject only to the Liens permitted by Section 6.02 and by the Tranche C Facility Credit Agreement) all the Collateral (as such term is defined in the Intellectual Property Security Agreement) owned by UCAR, the Borrower and each domestic Subsidiary shall have been taken; PROVIDED that a Collateral Requirement with respect to a foreign Credit Party or foreign Subsidiary shall not be required to be satisfied hereunder to the extent that (i) satisfaction of such Collateral Requirement is not permitted under applicable law or (ii) the Administrative Agent determines that the expense, tax consequences or difficulty of satisfying such Collateral Requirement does not justify satisfying such Collateral Requirement. 10 "COMMITMENTS" shall mean, with respect to any Lender, such Lender's Revolving Credit Commitment, Tranche A Reimbursement Commitment, Tranche A Term Loan Commitment, Tranche B Term Loan Commitment and Swingline Loan Commitment and, with respect to any Fronting Bank, its Tranche A L/C Commitment and its Revolving L/C Commitment. "COMMITMENT FEE" shall have the meaning given such term in Section 2.05(a). "CONTROL" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and "CONTROLLING" and "CONTROLLED" shall have meanings correlative thereto. "CREDIT EVENT" shall have the meaning given such term in Section 4.02. "CREDIT PARTIES" shall mean the Borrower and the Subsidiary Borrowers. "CURRENT ASSETS" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis at any date of determination, all assets (other than cash and Permitted Investments or other cash equivalents) which would, in accordance with GAAP, be classified on a consolidated balance sheet of UCAR, the Borrower and the Subsidiaries as current assets at such date of determination. "CURRENT LIABILITIES" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis at any date of determination, all liabilities which would, in accordance with GAAP, be classified on a consolidated balance sheet of UCAR, the Borrower and the Subsidiaries as current liabilities at such date of determination, other than (a) the current portion of long term debt, (b) accruals of Interest Expense (excluding Interest Expense which is due and unpaid), (c) Revolving Loans or Swingline Loans classified as current and (d) accruals prior to the Effective Date of any costs or expenses related to severance or termination of employees. "DEBT SERVICE" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis for any period, Interest Expense for such period PLUS scheduled principal amortization of Total Debt for such period (whether or not such payments are made). "DEFAULT" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. "DESIGNATED LENDERS" shall mean, at any time, Lenders having Loans (other than Swingline Loans), Letter of Credit Exposures, Swingline Exposures and unused Commitments (excluding commitments to issue Letters of Credit or make Swingline Loans) representing at least 66-2/3% of the sum of all Loans (other than Swingline Loans) outstanding, Letter of Credit Exposures, 11 Swingline Exposures and unused Commitments (except commitments to issue Letters of Credit or make Swingline Loans) at such time. "DOLLAR EQUIVALENT" shall mean, with respect to any amount in a currency other than Dollars on any date, the equivalent in Dollars of such amount, determined by the Administrative Agent as provided in the applicable Local Facility Credit Agreement. "DOLLARS" or "$" shall mean lawful money of the United States of America. "DOMESTIC PLEDGE AGREEMENT" shall mean the Pledge Agreement dated as of October 19, 1995, as amended and restated as of November 10, 1998, substantially in the form of Exhibit G, among UCAR, the Borrower, certain domestic Subsidiaries and the Collateral Agent for the benefit of the Secured Parties. "DOMESTIC SECURITY AGREEMENT" shall mean the Security Agreement dated as of April 22, 1998, as amended and restated as of November 10, 1998, substantially in the form of Exhibit J, among UCAR, the Borrower and the domestic Subsidiaries and the Collateral Agent for the benefit of the Secured Parties. "DOMESTIC SUBSIDIARY BORROWER" shall have the meaning given such term in Section 2.19(f). "EBITDA" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis for any period, the consolidated net income of UCAR, the Borrower and the Subsidiaries for such period PLUS, to the extent deducted in computing such consolidated net income, without duplication, the sum of (a)(i) income tax expense and (ii) withholding tax expense incurred in connection with cross border transactions involving non-domestic subsidiaries, (b) interest expense, (c) depreciation and amortization expense, (d) any special charges (including, without limitation, any non-cash fees or expenses incurred in connection with the Recapitalization, the redemption of subordinated notes in September 1995, the refinancing effected on October 19, 1995, the refinancing effected on March 19, 1997 or the Transactions) and any extraordinary or non-recurring losses, (e) other noncash items reducing consolidated net income and (f) noncash exchange, translation or performance losses relating to any foreign currency hedging transactions or currency fluctuations, MINUS, to the extent added in computing such consolidated net income, without duplication, (i) interest income, (ii) extraordinary or non-recurring gains, (iii) other noncash items increasing consolidated net income and (iv) noncash exchange, translation or performance gains relating to any foreign currency hedging transactions or currency fluctuations. "EFFECTIVENESS AGREEMENT" shall mean the Effectiveness Agreement dated as of March 17, 1997, among UCAR, the Borrower, the Lenders, the Departing Lenders (as defined therein), the Fronting Banks, the Administrative Agent and the Collateral Agent. 12 "EFFECTIVE DATE" shall mean the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.08). "ENVIRONMENT" shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, the workplace or as otherwise defined in any Environmental Law. "ENVIRONMENTAL CLAIM" shall mean any written accusation, allegation, notice of violation, claim, demand, order, directive, cost recovery action or other cause of action by, or on behalf of, any Governmental Authority or any person for damages, injunctive or equitable relief, personal injury (including sickness, disease or death), Remedial Action costs, tangible or intangible property damage, natural resource damages, nuisance, pollution, any adverse effect on the environment caused by any Hazardous Material, or for fines, penalties or restrictions, resulting from or based upon: (a) the threat, the existence, or the continuation of the existence of a Release (including sudden or non-sudden, accidental or non-accidental Releases); (b) exposure to any Hazardous Material; (c) the presence, use, handling, transportation, storage, treatment or disposal of any Hazardous Material; or (d) the violation or alleged violation of any Environmental Law or Environmental Permit. "ENVIRONMENTAL LAW" shall mean any and all applicable present and future treaties, laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the treatment, storage, disposal, Release or threatened Release of any Hazardous Material or to human health or safety, including the Hazardous Materials Transportation Act, 49 U.S.C. ss.ss. 1801 ET seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601 ET seq. ("CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. ss.ss. 6901, ET seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. ss.ss. 1251 ET seq., the Clean Air Act of 1970, as amended 42 U.S.C. ss.ss. 7401 ET seq., the Toxic Substances Control Act of 1976, 15 U.S.C. ss.ss. 2601 ET seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss. 11001 ET seq., the National Environmental Policy Act of 1975, 42 U.S.C. ss.ss. 4321 ET SEQ., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. ss.ss. 300(F) ET seq., and any similar or implementing state or foreign law, and all amendments or regulations promulgated thereunder. "ENVIRONMENTAL PERMIT" shall mean any permit, approval, authorization, certificate, license, variance, filing or permission required by or from any Governmental Authority pursuant to any Environmental Law. 13 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA AFFILIATE" shall mean any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414 of the Code. "EURODOLLAR BORROWING" shall mean a Borrowing comprised of Eurodollar Loans. "EURODOLLAR LOAN" shall mean any Eurodollar Term Loan, Eurodollar Tranche A Reimbursement Loan or Eurodollar Revolving Loan. "EURODOLLAR REVOLVING LOAN" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. "EURODOLLAR TERM LOAN" shall mean any Term Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. "EURODOLLAR TERM OR REIMBURSEMENT BORROWING" shall mean a Borrowing comprised of Eurodollar Term Loans or a Borrowing comprised of Eurodollar Tranche A Reimbursement Loans, as applicable . "EURODOLLAR TERM, REIMBURSEMENT OR REVOLVING LOAN" shall mean a Borrowing comprised of Eurodollar Term Loans, a Borrowing comprised of Eurodollar Tranche A Reimbursement Loans or a Borrowing comprised of Eurodollar Revolving Loans, as applicable. "EURODOLLAR TRANCHE A REIMBURSEMENT LOAN" shall mean any Tranche A Reimbursement Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. "EUROPEAN HOLDING COMPANY STRATEGY" shall have the meaning given such term in Section 6.04(m). "EVENT OF DEFAULT" shall have the meaning given such term in Article VII. "EXCESS CASH FLOW" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis for any fiscal year, EBITDA of UCAR, the Borrower and the Subsidiaries on a consolidated basis for such fiscal year, MINUS, without duplication, (a) Debt Service for such fiscal year, (b) permitted Capital Expenditures by the Borrower and the Subsidiaries on a consolidated basis during such fiscal year which are paid in cash, (c) taxes paid in cash by UCAR, the Borrower and the Subsidiaries on a consolidated basis during such fiscal year, including income tax expense and withholding tax expense incurred in connection with cross border transactions involving non-domestic Subsidiaries, (d) an amount equal to any increase in Working 14 Capital of UCAR, the Borrower and the Subsidiaries for such fiscal year, (e) Permitted Other Acquisitions and acquisitions constituting Specified Foreign Transactions during such fiscal year to the extent paid in cash, (f) cash expenditures made in respect of Interest/Exchange Rate Protection Agreements during such fiscal year, to the extent not reflected in the computation of EBITDA or Interest Expense, (g) permitted dividends or repurchase of its Capital Stock paid in cash by UCAR or the Borrower during such fiscal year and permitted dividends paid by any Subsidiary to any person other than the Borrower or any of its other Subsidiaries during such fiscal year, in each case in accordance with Section 6.06, (h) amounts paid in cash during such fiscal year on account of items that were accounted for as noncash reductions of consolidated net income of UCAR, the Borrower and the Subsidiaries in the current or a prior period, (i) special charges or any extraordinary or non-recurring loss paid in cash during such fiscal year, (j) to the extent not deducted in the computation of Net Proceeds in respect of any asset disposition or condemnation giving rise thereto, mandatory prepayments of Indebtedness (other than Indebtedness created hereunder or under any other Loan Document), (k) cash Restricted Debt Payments made pursuant to the first proviso contained in Section 6.09(b)(i) and (l) to the extent included in determining EBITDA, all items which did not result from a cash payment to UCAR, the Borrower and the Subsidiaries on a consolidated basis during such fiscal year PLUS, without duplication, (i) an amount equal to any decrease in Working Capital for such fiscal year, (ii) all proceeds received during such fiscal year of Capital Lease Obligations, purchase money Indebtedness, Sale and Lease-Back Transactions pursuant to Section 6.03(a) and any other Indebtedness to the extent used to finance any Permitted Other Acquisition, acquisition constituting a Specified Permitted Transaction or Capital Expenditure (other than Indebtedness under this Agreement or the Tranche C Facility Agreement to the extent there is no corresponding deduction to Excess Cash Flow above in respect of the use of such Indebtedness) and all proceeds received during such fiscal year of Sale and Lease-Back Transactions pursuant to Section 6.03(b), (iii) all amounts referred to in (b) and (e) above to the extent funded with the proceeds of the issuance of Capital Stock of UCAR after the Original Closing Date (to the extent not previously used to prepay Indebtedness (other than Revolving Loans or Swingline Loans), make any investment or capital expenditure or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any fiscal year) or any amount that would have constituted Net Proceeds under clause (a) of the definition of "NET PROCEEDS" if not so spent, in each case to the extent there is a corresponding deduction to Excess Cash Flow above, (iv) cash payments received in respect of Interest/Exchange Rate Protection Agreements during such fiscal year to the extent not (A) included in the computation of EBITDA or (B) reducing Interest Expense, (v) any extraordinary or non-recurring gain realized in cash during such fiscal year (except to the extent such gain is subject to Section 2.12(d) of this Agreement or the Tranche C Facility Credit Agreement), (vi) to the extent deducted in the computation of EBITDA, interest income and (vii) to the extent subtracted in determining EBITDA, all items which did not result from a cash payment by UCAR, the Borrower and the Subsidiaries on a consolidated basis during such fiscal year. 15 "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "FEES" shall mean the Commitment Fees, the L/C Participation Fees, the Fronting Bank Fees and the Administrative Agent Fees. "FINANCIAL OFFICER" of any corporation shall mean the chief financial officer, principal accounting officer, Treasurer, Assistant Treasurer or Controller of such corporation. "FOREIGN CURRENCY COMPONENT" shall mean, with respect to (a) any portion of the stated amount of a Tranche A Letter of Credit issued in respect of borrowings under a Local Facility denominated in a currency other than Dollars, the difference between (i) the amount of such portion and (ii) the quotient obtained by dividing the amount of such portion by 1.0526, and (b) the principal amount of any Local Facility denominated in a currency other than Dollars, an amount in Dollars equal to 5.00% of the Dollar Equivalent of such amount as of the date of issuance of the applicable Tranche A Letter of Credit. "FRONTING BANKS" shall mean the persons listed on Schedule 2.20 and any other person that may become a Fronting Bank hereunder from time to time, each in its capacity as the issuer of Letters of Credit hereunder and its successors in such capacity. "FRONTING BANK FEES" shall have the meaning given to such term in Section 2.05(b). "GAAP" shall mean generally accepted accounting principles in effect from time to time in the United States applied on a consistent basis or, when reference is made to another jurisdiction, generally accepted accounting principles in effect from time to time in such jurisdiction applied on a consistent basis. "GOVERNMENTAL AUTHORITY" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body or, in the case of references to "Governmental Authority" in Article II and Section 9.17, the National Association of Insurance Commissioners. "GUARANTEE" of or by any person shall mean (a) any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, and including any obligation of such person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness 16 (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay or otherwise) or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or (iv) entered into for the purpose of assuring in any other manner the holders of such Indebtedness of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such person securing any Indebtedness of any other person, whether or not such Indebtedness is assumed by such person; PROVIDED, HOWEVER, that the term "GUARANTEE" shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Effective Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement. "GUARANTEE AGREEMENTS" shall mean (a) the Parent Guarantee Agreement, (b) the Subsidiary Guarantee Agreement and (c) any other guarantee agreements or similar agreements with respect to the Obligations or a Local Facility in form and substance reasonably satisfactory to the Collateral Agent. "GUARANTEE REQUIREMENT" shall mean, at any time, that (a) the Parent Guarantee Agreement shall have been duly executed by UCAR and the Borrower, shall have been delivered to the Collateral Agent and shall be in full force and effect; (b) the Subsidiary Guarantee Agreement (or a supplement thereto) shall have been duly executed by each domestic Subsidiary existing at such time, shall have been delivered to the Collateral Agent and shall be in full force and effect; (c) in the event that any foreign Credit Party has borrowed or obtained (or will at such time borrow or obtain) Revolving Loans or Revolving Letters of Credit, a Guarantee Agreement shall have been duly executed (i) by each foreign Subsidiary existing at such time that is a direct or indirect parent of such foreign Credit Party and (ii) by each other foreign Subsidiary, shall have been delivered to the Collateral Agent and shall be in full force and effect; and (d) the Indemnity, Subrogation and Contribution Agreement (or a supplement thereto) shall have been executed by UCAR, the Borrower and each Subsidiary party to the Subsidiary Guarantee Agreement or the Domestic Pledge Agreement, shall have been delivered to the Collateral Agent and shall be in full force and effect ; PROVIDED that a Guarantee Requirement with respect to a foreign Credit Party or foreign Subsidiary shall not be required to be satisfied hereunder to the extent that (i) satisfaction of such Guarantee Requirement is not permitted under applicable law or (ii) the Administrative Agent determines that the expense, tax consequences or difficulty of satisfying such Guarantee Requirement does not justify satisfying such Guarantee Requirement. "GUARANTORS" shall mean UCAR, the Borrower and the Subsidiary Guarantors. 17 "HAZARDOUS MATERIAL" shall mean any material meeting the definition of a "hazardous substance" in CERCLA 42 U.S.C. ss.9601(14) and all explosive or radioactive substances or wastes, toxic substances or wastes, pollutants, solid, liquid or gaseous wastes, including petroleum, petroleum distillates or fractions or residues, asbestos or asbestos containing materials, polychlorinated biphenyls ("PCBS") or materials or equipment containing PCBs in excess of 50 ppm, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law, or that reasonably could form the basis of an Environmental Claim. "INDEBTEDNESS" of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person upon which interest charges are customarily paid (other than trade payables incurred in the ordinary course of business), (d) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (g) all Guarantees by such person of Indebtedness of others, (h) all Capital Lease Obligations of such person, (i) all payments that such person would have to make in the event of an early termination, on the date Indebtedness of such person is being determined, in respect of outstanding interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements and (j) all obligations of such person as an account party in respect of letters of credit and bankers' acceptances. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the liability of such person in respect thereof; PROVIDED that, if the sole asset of such person is its general partnership interest in such partnership, the amount of such Indebtedness shall be deemed equal to the value of such general partnership interest and the amount of any Indebtedness in respect of any Guarantee of such partnership Indebtedness shall be limited to the same extent as such Guarantee may be limited. "INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT" shall mean the Indemnity, Subrogation and Contribution Agreement dated as of October 15, 1995, as amended and restated as of November 10, 1998, substantially in the form of Exhibit D, among UCAR, the Borrower, the Subsidiary Guarantors and the Collateral Agent. "INFORMATION MEMORANDUM" shall have the meaning given such term in Section 3.15. 18 "INSTALLMENT DATE" shall have the meaning given such term in Section 2.11(a). "INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall mean the Intellectual Property Security Agreement dated as of April 22, 1998, as amended and restated as of November 10, 1998, substantially in the form of Exhibit K, among UCAR, the Borrower, the domestic Subsidiaries and the Collateral Agent for the benefit of the Secured Parties. "INTEREST COMPONENT" shall mean, with respect to (a) any portion of the stated amount of a Tranche A Letter of Credit issued in respect of borrowings under a Local Facility denominated in Dollars, the difference between (i) the amount of such portion and (ii) the quotient obtained by dividing the amount of such portion by 1.0103, and (b) the principal amount of any Local Facility or any Tranche A Reimbursement Loan or Tranche A Term Loan, an amount equal to 1.03% of such principal amount. "INTEREST COVERAGE RATIO" shall have the meaning given such term in Section 6.11. "INTEREST EXPENSE" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis for any period, the sum of (a) gross interest expense of UCAR, the Borrower and the Subsidiaries for such period on a consolidated basis, including (i) the amortization of debt discounts, (ii) the amortization of all fees (including fees with respect to interest rate protection agreements) payable in connection with the incurrence of Indebtedness to the extent included in interest expense and (iii) the portion of any payments or accruals with respect to Capital Lease Obligations allocable to interest expense and (b) capitalized interest of UCAR, the Borrower and the Subsidiaries on a consolidated basis. For purposes of the foregoing, gross interest expense shall be determined after giving effect to any net payments made or received by the Borrower and the Subsidiaries with respect to interest rate protection agreements. "INTEREST PAYMENT DATE" shall mean, (a) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months' duration been applicable to such Borrowing, and, in addition, the date of any refinancing or conversion of such Borrowing with or to a Borrowing of a different Type and (b) with respect to any ABR Loan, the last day of each calendar quarter. "INTEREST PERIOD" shall mean as to any Eurodollar Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as the case may be, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the applicable Credit Party may elect, and the date any Eurodollar Borrowing is converted to an 19 ABR Borrowing in accordance with Section 2.10 or repaid or prepaid in accordance with Section 2.11 or 2.12; PROVIDED, HOWEVER, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "INTEREST/EXCHANGE RATE PROTECTION AGREEMENT" shall mean any interest rate or currency hedging agreement or arrangement approved by the Administrative Agent (such approval not to be unreasonably withheld) entered into by the Borrower or a Subsidiary and designed to protect against fluctuations in interest rates or currency exchange rates. "L/C DISBURSEMENTS" shall mean Tranche A L/C Disbursements and Revolving L/C Disbursements. "L/C PARTICIPATION FEE" shall have the meaning given such term in Section 2.05(b). "LENDERS" shall mean the persons listed on Schedule 2.01 and any other person that shall have become a Lender hereunder pursuant to an Assignment and Acceptance, other than any person that ceases to be a Lender hereunder pursuant to an Assignment and Acceptance. Unless the context otherwise requires, the term "Lenders" shall include the Swingline Lender. "LETTER OF CREDIT COMMITMENT" shall mean, with respect to any Fronting Bank, such Fronting Bank's Tranche A L/C Commitment and Revolving L/C Commitment. "LETTER OF CREDIT EXPOSURE" shall mean, with respect to any Lender at any time, such Lender's Tranche A L/C Exposure and Revolving L/C Exposure at such time. "LETTERS OF CREDIT" shall mean Tranche A Letters of Credit and Revolving Letters of Credit. "LEVERAGE RATIO" shall have the meaning given such term in Section 6.12. "LIBO RATE" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits approximately equal in principal amount to the Administrative Agent's portion of such Eurodollar Borrowing and for a maturity comparable to such Interest Period are offered to the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "LIEN" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a 20 vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "LITIGATION LIABILITIES" shall mean liabilities and expenses of UCAR, the Borrower and the Subsidiaries associated with (a) antitrust investigations and related lawsuits, settlements and claims of the type described in UCAR's Annual Report on Form 10-K for the year ended December 31, 1997, and UCAR's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998 (together, the "SEC REPORTS"), (b) shareholder derivative lawsuits and claims of the type described in the SEC Reports and (c) securities lawsuits and claims of the type described in the SEC Reports and any investigations that may arise relating to the subject matter of such securities lawsuits and claims. "LITIGATION PAYMENTS" shall mean payments, credits, discounts, transfers of assets and any other transfers of value made in respect of Litigation Liabilities which are or would be applied against the Reserves in accordance with GAAP. "LOAN DOCUMENTS" shall mean this Agreement, the Tranche C Facility Credit Agreement, the Notes, if any, the notes, if any, issued under the Tranche C Facility Credit Agreement, the Guarantee Agreements, the Security Documents, the Indemnity, Subrogation and Contribution Agreement, the Local Facility Loan Documents and the Letters of Credit. "LOAN PARTIES" shall mean the Borrower, the other Credit Parties, the Guarantors and the Pledgors. "LOANS" shall mean the Revolving Loans, the Term Loans, and the Swingline Loans. "LOCAL FACILITY" shall mean each loan facility permitting borrowings by a Credit Party located outside the United States (a) which are made pursuant to a Local Facility Credit Agreement and supported by a Tranche A Letter of Credit or (b) which are supported by the Guarantee of any Guarantor or a pledge of or a security interest in any Collateral or in any assets of such Credit Party and the existence and terms of which (including the existence and terms of any such Guarantee, pledge or security interest) have been submitted for approval to the Administrative Agent by the Borrower and approved in writing by the Administrative Agent. "LOCAL FACILITY CREDIT AGREEMENT" shall mean each credit agreement between a foreign Credit Party and one or more lenders in substantially the form of Exhibit E, with such changes therefrom as shall in the reasonable judgment of the Administrative Agent be necessary or advisable under applicable law. "LOCAL FACILITY LENDERS" shall mean each lender under a Local Facility. 21 "LOCAL FACILITY LOAN DOCUMENTS" shall mean each agreement or instrument evidencing or securing any obligation of a borrower under, guarantor of, or grantor of collateral to secure, any Local Facility that does not also evidence, guarantee or secure any other Obligation. "MARGIN STOCK" shall have the meaning given such term in Regulation U. "MATERIAL ADVERSE EFFECT" shall mean (a) a materially adverse effect on the assets, business, properties, financial condition or results of operations of UCAR, the Borrower and the Subsidiaries, taken as a whole, (b) a material impairment of the ability of UCAR, the Borrower or any Subsidiary to perform any of its material obligations under any Loan Document (other than the Local Facility Loan Documents) to which it is or will be a party or (c) an impairment of the validity or enforceability of, or a material impairment of the material rights, remedies or benefits available to the Lenders, the Fronting Banks, the Administrative Agent or the Collateral Agent under any Loan Document (other than Local Facility Loan Documents). "MOODY'S" shall mean Moody's Investors Service, Inc. "MORTGAGE" shall mean a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien on any Mortgaged Property or interest therein to secure all or a portion of the Obligations. Each Mortgage shall be reasonably satisfactory in form and substance to the Collateral Agent. "MORTGAGED PROPERTIES" shall mean, initially, each parcel of real property and improvements thereto owned by a Loan Party and identified on Schedule 3.23(a), and shall include each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.11. "MULTIEMPLOYER PLAN" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "NET PROCEEDS" shall mean (a) 100% of the cash proceeds actually received by UCAR, the Borrower or any Subsidiary (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation awards, but only as and when received), net of (i) attorneys' fees, accountants' fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, required debt payments (other than pursuant hereto or pursuant to the Tranche C Facility Credit Agreement), other customary expenses and brokerage, consultant and other customary fees actually incurred in connection therewith and (ii) taxes paid or payable as a result 22 thereof (including withholding taxes incurred in connection with cross-border transactions, if applicable, and including taxes estimated by the Borrower to be payable as a result thereof or as a result of such transactions), from any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition (including any sale and leaseback of assets and any lease of real property) to any person of any asset or assets of UCAR, the Borrower or any Subsidiary (other than those pursuant to Sections 6.03, 6.05(a), 6.05(b), 6.05(e), 6.05(f)and 6.05(h) or any other financing subject to clause (ii) of the definition of "EXCESS CASH FLOW"); PROVIDED HOWEVER that if the Borrower shall deliver a certificate of the Borrower signed by a Responsible Officer of the Borrower to the Administrative Agent promptly following receipt of any such proceeds setting forth the Borrower's intention to use any portion of such proceeds to purchase assets useful in the business of the Borrower and the Subsidiaries (including by way of a purchase of Capital Stock of any person holding such assets) within 12 months of such receipt, such portion of such proceeds shall not constitute Net Proceeds except to the extent not so used within such 12-month period; PROVIDED that the aggregate amount of net proceeds that may be excluded from Net Proceeds pursuant to the immediately preceding proviso shall not exceed 25% of the book value of Total Assets set forth in UCAR's and its subsidiaries' June 30, 1998 quarterly consolidated financial statements (which book value equals $1,273,000,000); and PROVIDED FURTHER that (x) no proceeds realized in a single transaction or series of related transactions shall constitute Net Proceeds unless such proceeds shall exceed $75,000 and (y) no such proceeds shall constitute Net Proceeds in any fiscal year until the aggregate amount of all such proceeds in such fiscal year shall exceed $1,000,000 or the aggregate of all such proceeds received after the Effective Date shall exceed $3,000,000, (b) 100% of the cash proceeds from the incurrence, issuance or sale by UCAR, the Borrower or any Subsidiary of any Indebtedness (other than Indebtedness permitted pursuant to Section 6.01), net of all taxes (including withholding taxes incurred in connection with cross-border transactions, if applicable, and including taxes estimated by the Borrower to be payable as a result thereof or as a result of such transactions) and fees (including investment banking fees), commissions, costs and other expenses incurred in connection with such incurrence, issuance or sale and (c) 50% of the cash proceeds from the issuance or the sale by UCAR of any equity security of UCAR (other than sales of Capital Stock of UCAR to directors, officers or employees of UCAR, the Borrower or any Subsidiary in connection with permitted employee compensation and incentive arrangements), net of all taxes and fees (including investment banking fees), commissions, costs and other expenses incurred in connection with such issuance or sale. For purposes of calculating "NET PROCEEDS", fees, commissions and other costs and expenses payable to UCAR or the Borrower or any Affiliate of either of them shall be disregarded. "NOTES" shall mean any promissory note of the Borrower or any Credit Party issued pursuant to this Agreement. "OBLIGATIONS" shall mean (a) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in this Agreement after the maturity of the Loans and interest accruing at the then applicable rate provided in this Agreement after the filing of any petition in 23 bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (b) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Tranche C Facility Credit Agreement after the maturity of the loans thereunder and interest accruing at the applicable rate provided in the Tranche C Facility Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any borrower thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the loans under the Tranche C Facility Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (c) each payment required to be made by any Credit Party under this Agreement, when and as due, including payments in respect of reimbursements of L/C Disbursements, interest thereon and obligations to provide cash collateral, (d) each payment required to be made by any borrower party to the Tranche C Facility Credit Agreement, when and as due, and (e) all other obligations and liabilities of every nature of the Credit Parties and the borrowers under the Tranche C Facility Credit Agreement from time to time owed to the Secured Parties or any of them, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), which may arise under, out of, or in connection with, this Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document or any other Loan Document and any obligation of the Borrower to a Lender or a lender under the Tranche C Facility Credit Agreement under an Interest/Exchange Rate Protection Agreement or under any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by UCAR, a Credit Party or a borrower under the Tranche C Facility Credit Agreement pursuant to the terms of this Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document, any other Loan Document or any Interest/Exchange Rate Protection Agreement with a Lender or a lender under the Tranche C Facility Credit Agreement). "ORIGINAL CLOSING DATE" shall mean October 19, 1995. "PARENT GUARANTEE AGREEMENT" shall mean the Parent Guarantee Agreement dated as of October 19, 1995, as amended and restated as of November 10, 1998, substantially in the form of Exhibit F, made by UCAR and the Borrower in favor of the Collateral Agent for the benefit of the Secured Parties. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. 24 "PERMITTED BUSINESS ACQUISITION" shall mean any acquisition of all or substantially all the assets of, or shares or other equity interests in, a person or division or line of business of a person (or any subsequent investment made in a previously acquired Permitted Business Acquisition) and any investment in Brazil if immediately after giving effect thereto: (a) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (b) all transactions related thereto shall be consummated in accordance with applicable laws, (c) at least 90% of the outstanding Capital Stock of any acquired or newly formed corporation, partnership, association or other business entity are owned directly by the Borrower or a domestic Wholly Owned Subsidiary (unless there is a material tax or legal or other economic disadvantage in not having a foreign Subsidiary hold such Capital Stock, in which case such Capital Stock may be held directly by a foreign Subsidiary) and all actions required to be taken, if any, with respect to such acquired or newly formed Subsidiary under Section 5.11 shall have been taken, (d) UCAR shall be in compliance, on a PRO FORMA basis after giving effect to such acquisition or formation, with the covenants contained in Sections 6.11 and 6.12 recomputed as at the last day of the most recently ended fiscal quarter of UCAR as if such acquisition had occurred on the first day of each relevant period for testing such compliance, and the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower to such effect, together with all relevant financial information for such subsidiary or assets, (e) the Total Revolving Credit Commitment shall exceed the Aggregate Revolving Credit Exposure by at least $75,000,000 following such acquisition and payment of all related costs and expenses, (f) the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower representing that in the Borrower's good faith judgment, based on such analysis as it shall deem appropriate, it will have liquidity it deems adequate following such acquisition or formation, and (g) any acquired or newly formed subsidiary shall not be liable for any Indebtedness (except for Indebtedness permitted by Section 6.01). "PERMITTED FOREIGN TRANSFER" shall mean (a) any Specified Permitted Transaction or (b) the transfer by means of Indebtedness, investment or otherwise (PROVIDED that each transfer of cash (other than a transfer pursuant to clause (iii) below) shall be made by means of intercompany Indebtedness (which shall be pledged to the extent required under the Pledge Agreements if no material tax disadvantage shall result therefrom) unless there is a material tax or other economic or legal disadvantage in structuring the transfer as Indebtedness instead of as an equity investment) from the Borrower or any Subsidiary to any foreign Subsidiary at least 90% of the outstanding Capital Stock of which is owned by the Borrower or a Wholly Owned Subsidiary of (i) inventory and equipment in the ordinary course of business consistent with past practice; (ii) cash to fund (A) working capital needs and capital expenditures, in each case in accordance with the strategic plan described in the Information Memorandum or in the ordinary course of business consistent with past practice, and (B) debt service on Indebtedness permitted under this Agreement paid in the ordinary course of business, and, in the case of any transaction under clause (A) or 25 clause (B), solely to the extent internally generated funds of the applicable transferee are insufficient for such purposes and the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower to such effect; and (iii) any cash borrowed in one jurisdiction and transferred to another to repay Indebtedness under any Local Facility or this Agreement as a direct consequence of any reallocation made pursuant to Section 2.11(b). "PERMITTED INVESTMENTS" shall mean: (a) direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof; (b) time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits aggregating in excess of $250,000,000 (or the foreign currency equivalent thereof) and whose long-term debt, or whose parent holding company's long-term debt, is rated A at the time of deposit (or such similar equivalent rating or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act of 1933, as amended)); (c) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above; (d) commercial paper, maturing not more than 180 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Borrower) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moody's, or A-1 (or higher) according to S&P; (e) securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by S&P or A2 by Moody's; (f) in the case of any Subsidiary organized in a jurisdiction outside the United States: (i) direct obligations of the sovereign nation (or any agency thereof) in which such Subsidiary is organized and is conducting business or in obligations fully and uncondi tionally guaranteed by such sovereign nation (or any agency thereof); PROVIDED that such obligations have a rating of at least A by S&P or A2 by Moody's (or the equivalent thereof from comparable foreign rating agencies), (ii) investments of the type and maturity described in clauses (a) through (e) above of foreign obligors, which investments or obligors (or the parents of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies or (iii) investments of the type and maturity described in clauses (a) through (e) above of foreign obligors (or the parents of such obligors), which investments or obligors (or the parents of such obligors) are not rated as provided in such clauses or in clause (ii) above but which are, in the reasonable judgment of the Borrower, comparable in investment quality to such investments and obligors (or the parents of such obligors); PROVIDED that the aggregate face amount outstanding at any time of such investments of all foreign Subsidiaries made 26 pursuant to clause (iii) does not exceed $50,000,000; (g) mutual funds whose investment guidelines restrict such funds' investments to those satisfying the provisions of clauses (a) through (e) above; and (h) time deposit accounts, certificates of deposit and money market deposits in an aggregate face amount not in excess of 1/2 of 1% of Total Assets as of the end of the Borrower's most recently completed fiscal year. "PERMITTED OTHER ACQUISITIONS" shall mean acquisitions of any assets of, or any shares or other equity interests in, a person or division or line of business of any person if immediately after giving effect thereto: (a) no Default or Event of Default shall have occurred and be continuing, (b) all transactions related thereto shall be consummated in accordance with applicable laws, (c) the Borrower shall on or prior to the making of such acquisition have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower designating such acquisition as a Permitted Other Acquisition for purposes of this Agreement, (d) either (i) the acquisition shall constitute a Permitted Business Acquisition, (ii) the acquired asset shall constitute or be held in an Unrestricted Subsidiary or (iii) solely if at the time of acquisition thereof the Borrower shall not be entitled to make any additional Capital Expenditure pursuant to Section 6.11, the acquisition shall be of real property, improvements thereto or equipment; PROVIDED that if such acquisition shall be an acquisition of the type described in clause (ii) or (iii) above, (A) UCAR shall be in compliance, on a PRO FORMA basis after giving effect to such acquisition, with the covenants contained in Sections 6.11 and 6.12 recomputed as of the last day of the most recently ended fiscal quarter of UCAR as if such acquisition had occurred on the first day of each relevant period for testing such compliance, and the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower to such effect, together with all relevant information for such acquisition, (B) the Total Revolving Credit Commitment shall exceed the Aggregate Revolving Credit Exposure by at least $75,000,000 following the acquisition and the payment of all related costs and expenses, and (C) the Borrower shall have delivered a certificate of the Borrower signed by a Responsible Officer of the Borrower representing that in the Borrower's good faith judgment, based on such analysis as it shall deem adequate, it will have liquidity it deems adequate following the acquisition. "PERSON" shall mean any natural person, corporation, limited liability company, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "PLAN" shall mean any employee pension benefit plan, as defined in Section 3(2) of ERISA (other than a Multiemployer Plan), subject to the provisions of Title IV of ERISA or Section 412 of the Code and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "PLEDGE AGREEMENTS" shall mean (a) the Domestic Pledge Agreement and (b) any other pledge agreements or similar agreements 27 securing the Obligations or a Guarantee thereof in form and substance reasonably satisfactory to the Collateral Agent. "PLEDGORS" shall mean UCAR, the Borrower and each Subsidiary that becomes party to a Pledge Agreement, a Security Agreement, the Intellectual Property Security Agreement or a Mortgage. "PRIME RATE" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective. "RECAPITALIZATION" shall mean the recapitalization of UCAR on January 26, 1995, and the related transactions, as defined in the Credit Agreement of UCAR and the Borrower dated as of January 26, 1995. "REFINANCING NOTE INDENTURE" shall mean one or more indentures pursuant to which the Refinancing Notes are issued. "REFINANCING NOTES" shall mean one or more series of subordinated debentures or notes issued by the Borrower, the net proceeds of which are used by the Borrower to redeem or repurchase Senior Subordinated Notes. "REGISTER" shall have the meaning given such term in Section 9.04(d). "REGULATION D" shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "RELATED BUSINESS" shall mean any business or business activity conducted by UCAR or its subsidiaries on the date hereof and any business or business activities incidental or related thereto or incidental or related to the procurement, manufacture or sale of products or services manufactured or provided by UCAR or any of its subsidiaries on the date hereof. "RELATED FUND" shall mean, with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "RELEASE" shall have the meaning given such term in CERCLA, 42 U.S.C. ss.9601(22). 28 "REMEDIAL ACTION" shall mean (a) "remedial action" as such term is defined in CERCLA, 42 U.S.C. ss. 9601(24), and (b) all other actions, including studies and investigations, required by any Governmental Authority or voluntarily undertaken to: (i) clean up, remove, treat, abate or in any other way respond to any Hazardous Material in the environment; or (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material. "REPORTABLE EVENT" shall mean any reportable event as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414). "REQUIRED LENDERS" shall mean, at any time, Lenders having Loans (other than Swingline Loans), Letter of Credit Exposures, Swingline Exposures and unused Commitments (excluding commitments to issue Letters of Credit or make Swingline Loans) representing at least 51% of the sum of all Loans (other than Swingline Loans) outstanding, Letter of Credit Exposures, Swingline Exposures and unused Commitments (excluding commitments to issue Letters of Credit or make Swingline Loans) at such time. "REQUIRED SECURED PARTIES" shall mean, at any time, (a) the Required Lenders under this Agreement (unless all Commitments under this Agreement shall have expired or been terminated and the principal of and interest on each Loan, all Fees and other amounts payable hereunder shall have been paid in full and all Letters of Credit shall have been canceled or expired and all amounts drawn thereunder shall have been reimbursed in full) and (b) the "Required Lenders" under the Tranche C Facility Credit Agreement (unless all commitments under the Tranche C Facility Credit Agreement shall have expired or been terminated and the principal of and interest on each loan, all fees and other amounts payable under the Tranche C Facility Credit Agreement shall have been paid in full). "RESERVES" shall mean, with respect to UCAR, the Borrower and its subsidiaries on a consolidated basis at any date of determination, all reserves in respect of Litigation Liabilities which are or would be disclosed on a consolidated balance sheet of UCAR, the Borrower and its subsidiaries prepared in accordance with GAAP at such date of determination. "RESPONSIBLE OFFICER" of any corporation shall mean any executive officer or Financial Officer of such corporation and any other officer or similar official thereof responsible for the administration of the obligations of such corporation in respect of this Agreement. "RESTRICTED DEBT PAYMENTS" shall have the meaning given such term in Section 6.09(b)(i). "RESTRICTED EQUITY PAYMENTS" shall have the meaning given such term in Section 6.06. "RESTRICTED JUNIOR PAYMENT AMOUNT" shall mean, with respect to any fiscal year, an amount equal to (a) $15,000,000 for 29 the 1999 fiscal year and (b) $20,000,000 for each fiscal year thereafter. "RESTRICTED JUNIOR PAYMENTS" shall mean the collective reference to Restricted Equity Payments made pursuant to Section 6.06(c) and Restricted Debt Payments made pursuant to the first proviso contained in Section 6.09(b)(i). The amount of Restricted Equity Payments made pursuant to Section 6.06(c) shall be determined without double counting in the case of Restricted Equity Payments made to UCAR, the Borrower or any Subsidiary to the extent used by such person to make a Restricted Equity Payment. "REVOLVING AVAILABILITY PERIOD" shall mean the period from and including the Effective Date to but excluding the earlier of the Revolving Credit Maturity Date and the date of the termination of the Revolving Credit Commitments. "REVOLVING CREDIT BORROWING" shall mean a Borrowing comprised of Revolving Loans. "REVOLVING CREDIT COMMITMENT" shall mean, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans and to acquire participations in Revolving Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to Section 9.04. The initial amount of each Lender's Revolving Credit Commitment is set forth on Schedule 2.01(a), or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Revolving Credit Commitment, as applicable. "REVOLVING CREDIT EXPOSURE" shall mean, with respect to any Lender at any time, the aggregate principal amount at such time of all outstanding Revolving Loans of such Lender PLUS the amount at such time of such Lender's Revolving L/C Exposure PLUS the amount at such time of such Lender's Swingline Exposure. "REVOLVING CREDIT LENDER" shall mean a Lender with a Revolving Credit Commitment. "REVOLVING CREDIT MATURITY DATE" shall mean December 31, 2001. "REVOLVING L/C COMMITMENT" shall mean, with respect to any Fronting Bank, the commitment of such Fronting Bank to issue Letters of Credit pursuant to Section 2.20(b). "REVOLVING L/C DISBURSEMENT" shall mean a payment or disbursement made by a Fronting Bank pursuant to a Revolving Letter of Credit. "REVOLVING L/C EXPOSURE" shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Revolving Letters of Credit at such time PLUS (b) the aggregate principal amount of all Revolving L/C Disbursements that have not yet been reimbursed at such time. The Revolving L/C Exposure of any 30 Revolving Credit Lender at any time shall mean its Applicable Percentage of the aggregate Revolving L/C Exposure at such time. "REVOLVING LETTER OF CREDIT" shall mean any letter of credit issued pursuant to Section 2.20(b). "REVOLVING LOANS" shall mean the revolving loans made by the Lenders to the Credit Parties pursuant to Section 2.01(b)(i). Each Revolving Loan shall be a Eurodollar Revolving Loan or an ABR Revolving Loan. "S&P" shall mean Standard & Poor's Ratings Group. "SALE AND LEASE-BACK TRANSACTION" shall have the meaning given such term in Section 6.03. "SEC REPORTS" shall have the meaning given such term in the definition of "Litigation Liabilities". "SECOND CLOSING DATE" shall mean March 19, 1997. "SECURED PARTIES" shall mean the Lenders, the lenders under the Tranche C Facility Credit Agreement, the lenders under the Local Facility Credit Agreements, the Fronting Banks, the Administrative Agent, the administrative agent under the Tranche C Facility Credit Agreement, the administrative agent under the Local Facility Credit Agreements and the Collateral Agent. "SECURITY AGREEMENTS" shall mean (a) the Domestic Security Agreement and (b) any other security agreements or similar agreements securing the Obligations or a Guarantee thereof in form and substance reasonably satisfactory to the Collateral Agent. "SECURITY DOCUMENTS" shall mean the Security Agreements, the Intellectual Property Security Agreement, the Pledge Agreements, the Mortgages and each of the agreements and other instruments and documents executed and delivered pursuant thereto or pursuant to Section 5.11. "SENIOR SUBORDINATED GUARANTEE" shall mean the senior subordinated Guarantee by UCAR in effect on the Original Closing Date, and any subsequent senior subordinated Guarantee by UCAR on terms no less favorable to the Lenders, of the Indebtedness of the Borrower under the Senior Subordinated Notes or the Refinancing Notes. "SENIOR SUBORDINATED INDENTURE" shall mean the indenture pursuant to which the Senior Subordinated Notes were issued, dated as of January 15, 1995, among the Borrower, UCAR, as guarantor, and United States Trust Company of New York, as Trustee, as amended from time to time in accordance with Section 6.09. "SENIOR SUBORDINATED NOTES" shall mean up to $200,000,000 aggregate principal amount of Senior Subordinated Notes of the Borrower issued pursuant to the Senior Subordinated Indenture. "SIGNIFICANT SUBSIDIARY" shall mean the Borrower, any other Credit Party and any other subsidiary of UCAR that at the date 31 of any determination (a) accounts for 2.5% or more of the consolidated assets of UCAR, (b) has accounted for 2.5% or more of EBITDA for each of the two consecutive periods of four fiscal quarters immediately preceding the date of determination or (c) has been designated by the Borrower in writing to the Administrative Agent as a Significant Subsidiary and such designation has not subsequently been withdrawn. "SPECIFIED PERMITTED TRANSACTION" shall mean, if immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom: (a) any acquisition of Capital Stock of a person that (i) does not constitute a Permitted Business Acquisition solely because after giving effect thereto less than 90% of the outstanding Capital Stock of such person is owned as required under clause (b) of the definition of "Permitted Business Acquisition" but (ii) after giving effect to which at least 70% of the outstanding Capital Stock of such person is owned directly by the Borrower or a domestic Wholly Owned Subsidiary (unless there is a material tax or legal or other economic disadvantage in not having a foreign Subsidiary hold such Capital Stock, in which case such Capital Stock may be held directly by a foreign Subsidiary), (b) any acquisition of Capital Stock of a person that (i) does not constitute a Permitted Business Acquisition solely because after giving effect thereto less than 90% of the outstanding Capital Stock of such person is owned as required under clause (b) of the definition of "Permitted Business Acquisition" but (ii) after giving effect to which at least 50% of the outstanding Capital Stock of such person is owned directly by the Borrower or a domestic Wholly Owned Subsidiary (unless there is a material tax or legal or other economic disadvantage in not having a foreign Subsidiary hold such Capital Stock, in which case such Capital Stock may be held directly by a foreign Subsidiary); PROVIDED that the aggregate amount of consideration (whether cash or property, valued at the time each such investment is made) for acquisitions made in reliance on this clause (b) shall not exceed $125,000,000, (c) any acquisition (or redemption or repurchase) of additional Capital Stock of UCAR Elektroden GmbH, Carbone Savoie, UCAR Grafit OAO or any other Subsidiary acquired in a Specified Permitted Transaction by the Borrower or any Subsidiary, unless such transaction shall constitute a Permitted Business Acquisition, and (d) any advance, loan or capital contribution by the Borrower or any Subsidiary to UCAR Elektroden GmbH, Carbone Savoie, UCAR Grafit OAO or any other Subsidiary acquired in a Specified Permitted Transaction at any time prior to such person becoming a Wholly Owned Subsidiary (other than a Permitted Foreign Transfer of the type described in clause (b) of the definition thereof); PROVIDED that after giving effect to any transaction described in clause (a), (b),(c) or (d) above, (i) UCAR shall be in compliance, on a PRO FORMA BASIS after giving effect to such transaction, with the covenants contained in Sections 6.11 and 6.12 recomputed as of the last day of the most recently ended fiscal quarter of UCAR as if such acquisition had occurred on the first day of each relevant period for testing such compliance, and the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower to such effect, together with all relevant financial information for such transaction, (ii) the Total Revolving Credit Commitment shall exceed the Aggregate Revolving Credit Exposure by $75,000,000 following 32 such transaction and payment of all related costs and expenses and (iii) the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower representing that in the Borrower's good faith judgment, it will have liquidity it deems adequate following such transaction. For purposes of determining compliance with Section 6.04(k), the aggregate outstanding amount of Specified Permitted Transactions at any time shall mean the sum at such time of (i) the aggregate outstanding principal amount of advances and loans made under clause (d) of the immediately preceding sentence and (ii) the aggregate amount (net of return of capital of (but not return on) any such investment) of capital contributions made under clause (d) of the immediately preceding sentence and consideration paid in respect of acquisitions (or redemptions or repurchases) of Capital Stock made under clause (a), (b) or (c) of the immediately preceding sentence; PROVIDED that the aggregate amount of Specified Permitted Transactions in respect of any person (A) made under clause (a), (b) and (c) shall be deemed to be zero after any acquisition in respect of such person that constitutes a Permitted Business Acquisition (it being understood that the aggregate amount of all prior such transactions in respect of such person shall thereafter be treated as Permitted Other Acquisitions for purposes of Section 6.04(k)) and (B) made under clause (d) shall be zero at any time that such person is a Wholly Owned Subsidiary. "STATUTORY RESERVES" shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent is subject with respect to Eurocurrency Liabilities (as defined in Regulation D of the Board) or other categories of liabilities or deposits by reference to which the LIBO Rate is determined. Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets which may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "subsidiary" shall mean, with respect to any person (herein referred to as the "parent"), any corporation, partnership, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, directly or indirectly, owned, controlled or held, or (b) which is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" shall mean each subsidiary of the Borrower. 33 "SUBSIDIARY BORROWER" shall mean each Subsidiary that (a) was a party hereto immediately prior to the Effective Date, but only for purposes of constituting an eligible account party under a Letter of Credit issued hereunder, or (b) is a Wholly Owned Subsidiary of the Borrower designated as a Subsidiary Borrower by the Borrower pursuant to Section 9.19 and approved by the Administrative Agent that has not ceased to be a Subsidiary Borrower pursuant to such Section; PROVIDED that any such Subsidiary Borrower described under this clause (b) that is to be an account party under a Letter of Credit issued hereunder must also be approved by the applicable Fronting Bank. "SUBSIDIARY BORROWER AGREEMENT" shall mean a Subsidiary Borrower Agreement substantially in the form of Exhibit L. "SUBSIDIARY BORROWER TERMINATION" shall mean a Subsidiary Borrower Termination substantially in the form of Exhibit M. "SUBSIDIARY GUARANTEE AGREEMENT" shall mean the Subsidiary Guarantee Agreement date as of October 15, 1995, as amended and restated as of November 10, 1998, substantially in the form of Exhibit H, made by the domestic Subsidiary Guarantors in favor of the Collateral Agent for the benefit of the Secured Parties. "SUBSIDIARY GUARANTOR" shall mean any Subsidiary that is a party to a Guarantee Agreement. "SWINGLINE EXPOSURE" shall mean at any time the aggregate principal amount of all outstanding Swingline Loans at such time. The Swingline Exposure of any Revolving Credit Lender at any time shall mean its Applicable Percentage of the aggregate Swingline Exposure at such time. "SWINGLINE LENDER" shall mean The Chase Manhattan Bank in its capacity as Swingline Lender hereunder. "SWINGLINE LOAN COMMITMENT" shall mean the commitment of the Swingline Lender to make Swingline Loans as set forth in Section 2.01(c). "SWINGLINE LOANS" shall mean the swingline loans made by the Swingline Lender to the Borrower pursuant to Section 2.01(c). "TAX SHARING AGREEMENT" means (a) that certain agreement dated January 26, 1995, between the Borrower and UCAR, and (b) any other tax allocation agreement by the Borrower or any of its Subsidiaries and the Borrower or UCAR with respect to consolidated or combined tax returns including the Borrower or any of its Subsidiaries but only to the extent that amounts payable from time to time by the Borrower or any such Subsidiary under any such agreement do not exceed the corresponding tax payments that the Borrower or such Subsidiary would have been required to make to any relevant taxing authority had the Borrower or such Subsidiary not joined in such consolidated or combined return, but instead had filed returns including only the Borrower or its Subsidiaries (PROVIDED that any such agreement may provide that, if the Borrower or any such Subsidiary ceases to be a member of the affiliated group 34 of corporations of which UCAR is the common parent for purposes of filing a consolidated federal income tax return (such cessation, a "DECONSOLIDATION EVENT"), then the Borrower or such Subsidiary will indemnify UCAR with respect to any Federal, state or local income, franchise or other tax liability (including any related interest, additions or penalties) imposed on UCAR as the result of an audit or other adjustment with respect to any period prior to such Deconsolidation Event that is attributable to the Borrower, such Subsidiary or any predecessor business thereof (computed as if the Borrower, such Subsidiary or such predecessor business, as the case may be, were a stand-alone entity that filed separate tax returns as an independent corporation), but only to the extent that any such tax liability exceeds any liability for taxes recorded on the books of the Borrower or such Subsidiary with respect to any such period). "TERM BORROWING" shall mean a Borrowing comprised of Term Loans. "TERM COMMITMENTS" shall mean the Tranche A Term Loan Commitments and the Tranche B Term Loan Commitments. "TERM LOANS" shall mean the term loans made by the Lenders to the Borrower as described in Section 2.01(a) and Section 2.01(b)(ii). Each Term Loan shall be a Eurodollar Term Loan or an ABR Term Loan. "TOTAL ASSETS" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis at any date of determination, all assets which would, in accordance with GAAP, be classified on a consolidated balance sheet of UCAR, the Borrower and the Subsidiaries as assets at such date of determination. "TOTAL DEBT" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis at any time, all Capital Lease Obligations, Indebtedness for borrowed money and Indebtedness in respect of the deferred purchase price of property or services of UCAR, the Borrower and the Subsidiaries at such time. "TOTAL REVOLVING CREDIT COMMITMENT" shall mean, at any time, the aggregate amount of the Revolving Credit Commitments, as in effect at such time. The Total Revolving Credit Commitment as of the date hereof is $250,000,000. "TOTAL TRANCHE A REIMBURSEMENT COMMITMENT" shall mean, at any time, the aggregate amount of the Tranche A Reimbursement Commitments, as in effect at such time. The Total Tranche A Reimbursement Commitment as of the date hereof is $219,532,156.78. "TRANCHE A EXPOSURE" shall mean at any time the aggregate principal amount at such time of all Tranche A Reimbursement Loans PLUS the amount at such time of the Tranche A L/C Exposure PLUS an amount equal to the aggregate amounts of the Interest Components and Foreign Currency Components held in reserve pursuant to Section 2.11(b)(ii) and not subsequently applied pursuant to Section 2.11(b)(iv). The Tranche A Exposure of any Tranche A Lender at any time shall mean its Applicable Percentage of the Tranche A Exposure at such time. 35 "TRANCHE A L/C COMMITMENT" shall mean, with respect to each Fronting Bank, the commitment of such Fronting Bank to issue Letters of Credit pursuant to Section 2.20(a). "TRANCHE A L/C DISBURSEMENT" shall mean a payment or disbursement made by a Fronting Bank pursuant to a Tranche A Letter of Credit. "TRANCHE A L/C EXPOSURE" shall mean at any time the sum of (a) the aggregate undrawn amount of all outstanding Tranche A Letters of Credit at such time PLUS (b) the aggregate principal amount of all Tranche A L/C Disbursements that have not yet been reimbursed (by the making of Tranche A Reimbursement Loans or otherwise) at such time. The Tranche A L/C Exposure of any Tranche A Lender at any time shall mean its Applicable Percentage of the aggregate Tranche A L/C Exposure at such time. "TRANCHE A LENDER" shall mean a Lender with a Tranche A Reimbursement Commitment, a Tranche A Term Loan Commitment or Tranche A Exposure. "TRANCHE A LETTER OF CREDIT" shall mean any letter of credit issued as described in Section 2.20(a). "TRANCHE A LOANS" shall mean Tranche A Term Loans and Tranche A Reimbursement Loans. "TRANCHE A MATURITY DATE" shall mean December 31, 2001. "TRANCHE A REIMBURSEMENT BORROWING" shall mean a Borrowing comprised of Tranche A Reimbursement Loans. "TRANCHE A REIMBURSEMENT COMMITMENT" shall mean, with respect to each Lender, the commitment, if any, of such Lender to make Tranche A Reimbursement Loans and to acquire participations in Tranche A Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Tranche A Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09, (b) increased from time to time pursuant to 2.11(b) and (c) reduced or increased from time to time pursuant to Section 9.04. The initial amount of each Lender's Tranche A Reimbursement Commitment is set forth on Schedule 2.01(a), or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Tranche A Reimbursement Commitment, as applicable. "TRANCHE A REIMBURSEMENT LOANS" shall mean the loans made by the Lenders to the Borrower pursuant to Section 2.01(b)(ii). Each Tranche A Reimbursement Loan shall be a Eurodollar Tranche A Reimbursement Loan or an ABR Tranche A Reimbursement Loan. "TRANCHE A TERM BORROWING" shall mean a Borrowing comprised of Tranche A Term Loans. "TRANCHE A TERM LOAN COMMITMENT" shall mean, with respect to each Lender, the commitment pursuant to which such Lender made its Tranche A Term Loan hereunder as set forth in Section 2.01(a)(i). 36 "TRANCHE A TERM LOANS" shall mean the term loans made by the Lenders to the Borrower as described in Section 2.01(a)(i). "TRANCHE B MATURITY DATE" shall mean December 31, 2002. "TRANCHE B TERM BORROWING" shall mean a Borrowing comprised of Tranche B Term Loans. "TRANCHE B TERM LOAN COMMITMENT" shall mean, with respect to each Lender, the commitment pursuant to which such Lender made its Tranche B Term Loans hereunder as set forth in Section 2.01(a)(ii). "TRANCHE B TERM LOANS" shall mean the term loans made by the Lenders to the Borrower as described in Section 2.01(a)(ii). "TRANCHE C FACILITY" shall mean the senior secured term loan facility of the Borrower and UCAR S.A., a Wholly Owned Subsidiary of the Borrower organized under the laws of Switzerland, in an aggregate principal amount of $210,000,000. "TRANCHE C FACILITY CREDIT AGREEMENT" shall mean the Credit Agreement dated as of the date hereof among UCAR, the Borrower, UCAR S.A., the lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent and Morgan Guaranty Trust Company of New York, as syndication agent. "TRANCHE C TERM LOANS" shall mean the term loans made under the Tranche C Facility Credit Agreement. "TRANSACTIONS" shall have the meaning given such term in Section 3.02. "TYPE", when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term "RATE" shall include the Adjusted LIBO Rate and the Alternate Base Rate. "UNRESTRICTED SUBSIDIARY" shall mean (a) any subsidiary of UCAR (other than the Borrower) or any other direct or indirect investment by UCAR or any such subsidiary in the Capital Stock of any other person (other than the Borrower) so long as (i) none of the Capital Stock or other ownership interests of such subsidiary or other person is owned by the Borrower or any of the Subsidiaries, (ii) UCAR shall have notified the Administrative Agent of its acquisition or creation of such subsidiary or such other investment and its ownership interest therein concurrently with such acquisition, creation or investment and the intended purposes of such subsidiary or investment, (iii) any such subsidiary (unless it is a foreign subsidiary) shall have entered into the Tax Sharing Agreement existing at the time of such acquisition or creation (or another tax sharing agreement containing terms which, in the reasonable judgment of the Administrative Agent, are customary in similar circumstances to provide an appropriate allocation of tax liabilities and benefits), (iv) except in the case of UCAR as permitted in the proviso below, none of UCAR, the Borrower and the 37 Subsidiaries shall have any contingent liability in respect of such subsidiary or investment and (v) any such subsidiary or investment shall be capitalized solely from the following sources: (A) any investment by any person other than UCAR, the Borrower and the Subsidiaries; (B) Indebtedness issued by such subsidiary or any of its subsidiaries that is nonrecourse to UCAR, the Borrower and the Subsidiaries (except in the case of UCAR as otherwise permitted by the proviso below), or proceeds thereof; (C) Capital Stock of such subsidiary or any other Unrestricted Subsidiary, or proceeds thereof; (D) proceeds of Capital Stock of UCAR issued by UCAR after the Original Closing Date remaining after making the prepayment of Obligations required under Section 2.12(d) (to the extent not previously used to prepay Indebtedness (other than Revolving Loans or Swingline Loans), make any investment or capital expenditure or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any fiscal year); and (E) investments permitted to be made in Unrestricted Subsidiaries pursuant to Section 6.04; PROVIDED that UCAR may incur a contingent liability or Indebtedness in a specified and limited amount in respect of such a subsidiary or investment if it would at the time of such incurrence be permitted to make an additional investment in such subsidiary or investment in the amount of such incurrence and the amount so incurred shall thereafter constitute an investment in such subsidiary or investment in such amount for purposes of calculating compliance with Section 6.04; and (b) any subsidiary of an Unrestricted Subsidiary. "WHOLLY OWNED SUBSIDIARY" means a Subsidiary of the Borrower, (a) at least 99% of the Capital Stock of which (other than directors' qualifying shares) is owned by the Borrower or another Wholly Owned Subsidiary or (b) solely in the case of any Subsidiary included in Brazil or UCAR Grafit OAO, at least 97% of the Capital Stock of which (other than directors' qualifying shares) is owned by the Borrower or another Wholly Owned Subsidiary. "WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. "WORKING CAPITAL" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis at any date of determination, Current Assets at such date of determination MINUS Current Liabilities at such date of determination. SECTION 1.02. TERMS GENERALLY. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time and (b) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from 38 time to time; PROVIDED, HOWEVER, that for purposes of determining compliance with the covenants contained in Section 2.12(e) and Article VI all accounting terms herein shall be interpreted and all accounting determinations hereunder (in each case, unless otherwise provided for or defined herein) shall be made in accordance with GAAP as in effect on the Effective Date and applied on a basis consistent with the application used in the financial statements referred to in Section 3.05; and PROVIDED FURTHER that if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Section 2.12(e) or Article VI or any related definition to eliminate the effect of any change in GAAP occurring after the date of this Agreement on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Section 2.12(e) or Article VI or any related definition for such purpose), then (i) the Borrower and the Administrative Agent shall negotiate in good faith to agree upon an appropriate amendment to such covenant and (ii) the Borrower's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective until such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders. For the purposes of determining compliance under Sections 6.01, 6.02, 6.04, 6.05 and 6.10 with respect to any amount in a currency other than Dollars, such amount shall be deemed to equal the Dollar equivalent thereof at the time such amount was incurred or expended, as the case may be (except that, where measurement of a financial statement amount is contemplated, such determination shall be based upon currency translation rules according to GAAP). ARTICLE II THE CREDITS SECTION 2.01. COMMITMENTS. (a) Subject to the terms and conditions and relying upon the representations and warranties of UCAR and the Borrower set forth herein as of the Second Closing Date and in the Effectiveness Agreement, as applicable, each Lender, severally and not jointly: (i) made a Tranche A Term Loan to the Borrower on the Second Closing Date, the outstanding principal amount of which as of the date hereof is set forth opposite its name on Schedule 2.01(a); and (ii) made a Tranche B Term Loan to the Borrower on the Second Closing Date, the outstanding principal amount of which as of the date hereof is set forth opposite its name on Schedule 2.01(a). (b) Subject to the terms and conditions and relying upon the representations and warranties of UCAR and the Borrower set forth herein, each Lender agrees, severally and not jointly: (i) to make U.S. dollar-denominated Revolving Loans to the Borrower and any other Credit Party from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result 39 in such Lender's Revolving Credit Exposure exceeding its Revolving Credit Commitment; and (ii) to make Tranche A Reimbursement Loans to the Borrower, as contemplated herein, at any time and from time to time on or after the Effective Date, and until the earlier of the Tranche A Maturity Date and the termination of the Tranche A Reimbursement Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not result in such Lender's Tranche A Exposure exceeding its Tranche A Reimbursement Commitment. (c) (i) The Swingline Lender hereby agrees, subject to the terms and conditions and relying upon the representations and warranties of UCAR and the Borrower herein set forth, and subject to the limitations set forth below with respect to the maximum amount of Swingline Loans permitted to be outstanding from time to time, to make a portion of the Revolving Credit Commitments available to the Borrower from time to time during the Revolving Availability Period in an aggregate principal amount not to exceed the Swingline Loan Commitment, by making Swingline Loans to the Borrower. Swingline Loans may be made notwithstanding the fact that such Swingline Loans, when aggregated with the Swingline Lender's outstanding Revolving Loans, Revolving L/C Exposure and outstanding Swingline Loans, may exceed the Swingline Lender's Revolving Credit Commitment. The original amount of the Swingline Loan Commitment is $10,000,000. The Swingline Loan Commitment shall expire on the date the Revolving Credit Commitments are terminated and all Swingline Loans and all other amounts owed hereunder with respect to Swingline Loans shall be paid in full no later than that date. The Borrower shall give the Swingline Lender telephonic, written or telecopy notice (in the case of telephonic notice, such notice shall be promptly confirmed in writing or by telecopy) not later than 12:00 (noon), New York City time, on the day of a proposed borrowing. Such notice shall be delivered on a Business Day, shall be irrevocable, shall refer to this Agreement and shall specify the requested date (which shall be a Business Day) and amount of such Swingline Loan. The Swingline Lender shall give the Administrative Agent, which shall in turn give to each Lender, prompt written or telecopy advice of any notice received from the Borrower pursuant to this paragraph. (ii) In no event shall (A) the aggregate principal amount of Swingline Loans outstanding at any time exceed the aggregate Swingline Loan Commitment in effect at such time, (B) the Aggregate Revolving Credit Exposure at any time exceed the Total Revolving Credit Commitment at such time or (C) the aggregate Swingline Loan Commitment exceed at any time the Total Revolving Credit Commitment in effect at such time. Swingline Loans may only be made as ABR Loans. (iii) With respect to any Swingline Loans which have not been voluntarily prepaid by the Borrower, the Swingline Lender (by request to the Administrative Agent) or Administrative Agent at any time may, and shall at any time Swingline Loans in an amount not less than $5,000,000 shall have been outstanding for more than 10 days, on one Business Day's notice, require each Revolving Credit 40 Lender, including the Swingline Lender, and each Lender hereby agrees, subject to the provisions of this Section 2.01(c), to make a Revolving Loan (which shall be funded as an ABR loan) in an amount equal to such Lender's Applicable Percentage of the amount of the Swingline Loans ("REFUNDED SWINGLINE LOANS") outstanding on the date notice is given which the Swingline Lender requests the Lenders to prepay; PROVIDED that so long as no Default or Event of Default shall have occurred and be continuing, the Lenders shall not be required to make such Revolving Loans if the aggregate principal amount of Swingline Loans outstanding as of the most recent Tuesday (or the first Business Day occurring after any such Tuesday if such Tuesday is not a Business Day) is less than $1,000,000. (iv) In the case of Revolving Loans made by Lenders other than the Swingline Lender under the immediately preceding paragraph (iii), each such Lender shall make the amount of its Revolving Loan available to the Administrative Agent, in same day funds, at the office of the Administrative Agent located at 270 Park Avenue, New York, New York, not later than 1:00 p.m., New York City time, on the Business Day next succeeding the date such notice is given. The proceeds of such Revolving Loans shall be immediately delivered to the Swingline Lender (and not to the Borrower) and applied to repay the Refunded Swingline Loans. On the day such Revolving Loans are made, the Swingline Lender's Applicable Percentage of the Refunded Swingline Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by the Swingline Lender and such portion of the Swingline Loans deemed to be so paid shall no longer be outstanding as Swingline Loans and shall be outstanding as Revolving Loans of Lenders. The Borrower authorizes the Administrative Agent and the Swingline Lender to charge the Borrower's account with the Administrative Agent (up to the amount available in such account) in order to pay immediately to the Swingline Lender the amount of such Refunded Swingline Loans to the extent amounts received from Lenders, including amounts deemed to be received from the Swingline Lender, are not sufficient to repay in full such Refunded Swingline Loans. If any portion of any such amount paid (or deemed to be paid) to the Swingline Lender should be recovered by or on behalf of the Borrower from the Swingline Lender in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all Lenders in the manner contemplated by Section 2.17. Subject to the compliance by the Swingline Lender with the provisions of subparagraph (vii) below, each Lender's obligation to make the Revolving Loans referred to in this paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swingline Lender, the Borrower or any other person for any reason whatsoever; (B) the occurrence or continuance of an Event of Default or a Default; (C) any adverse change in the condition (financial or otherwise) of UCAR or any of its subsidiaries; (D) any breach of this Agreement by UCAR, the Borrower, the other Credit Parties or any other Lender; or (E) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. Nothing in this Section 2.01(c) shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that the Borrower may have against any Lender as a result of any default by such Lender hereunder. 41 (v) A copy of each notice given by the Swingline Lender or the Administrative Agent pursuant to this Section 2.01(c) shall be promptly delivered by the Swingline Lender to the Administrative Agent and the Borrower. Upon the making of a Revolving Loan by a Lender pursuant to this Section 2.01(c), the amount so funded shall no longer be owed in respect of Swingline Loans. (vi) If as a result of any bankruptcy or similar proceeding Revolving Loans are not made pursuant to this Section 2.01(c) sufficient to repay any amounts owed to the Swingline Lender as a result of a nonpayment of outstanding Swingline Loans, each Lender agrees to purchase, and shall be deemed to have purchased, a participation in such outstanding Swingline Loans in an amount equal to its Applicable Percentage of the unpaid amount together with accrued interest thereon. Upon one Business Day's notice from the Swingline Lender, each Lender shall deliver to the Swingline Lender an amount equal to its respective participation in same day funds at the office of the Swingline Lender in New York, New York. In order to evidence such participation each Lender agrees to enter into a participation agreement at the request of the Swingline Lender in form and substance reasonably satisfactory to all parties. In the event any Lender fails to make available to the Swingline Lender the amount of such Lender's participation as provided in this Section 2.01(c), the Swingline Lender shall be entitled to recover such amount on demand from such Lender together with interest at the customary rate set by the Swingline Lender for correction of errors among banks in New York City for one Business Day and thereafter at the Alternate Base Rate. (vii) Notwithstanding anything herein to the contrary, the Swingline Lender shall not make any Swingline Loans at any time the Swingline Lender is aware that the conditions to the making of such Swingline Loan set forth in Section 4.02 have not been satisfied unless such conditions shall have been waived in accordance with this Agreement. (d) Within the limits set forth in paragraphs (b) and (c) above, the Credit Parties may borrow, pay or prepay and reborrow Revolving Loans and Swingline Loans. Amounts paid or prepaid in respect of Term Loans or Tranche A Reimbursement Loans may not be reborrowed, except as contemplated by Section 2.11(b) with respect to Tranche A Reimbursement Loans. SECTION 2.02. LOANS. (a) Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their Commitments of the applicable Class; PROVIDED, HOWEVER, that the failure of any Lender to make any Loan shall not relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). The Loans comprising any Borrowing shall be in an aggregate principal amount which is (i) an integral multiple of $1,000,000 (or, in the case of Swingline Loans, $500,000) and not less than $5,000,000 (or, in the case of Swingline Loans, $500,000), (ii) equal to the remaining available balance of the applicable Class of Commitments or (iii) in the case of any Tranche A Reimbursement Borrowing made pursuant to Section 2.11(b)(ii), an 42 amount not less than $2,000,000; PROVIDED that Revolving Loans used to pay Refunded Swingline Loans may be in the amount of such Refunded Swingline Loans. (b) Subject to Sections 2.08 and 2.14, each Borrowing shall be comprised entirely of ABR Loans or (except in the case of Swingline Loans) Eurodollar Loans as the applicable Credit Party may request pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; PROVIDED that any exercise of such option shall not affect the obligation of the applicable Credit Party to repay such Loan in accordance with the terms of this Agreement and such Lender shall not be entitled to any amounts payable under Section 2.13 or Section 2.19 in respect of increased costs arising as a result of such exercise (and that would not have arisen but for such exercise). Borrowings of more than one Type may be outstanding at the same time; PROVIDED, HOWEVER, that the Credit Parties shall not be entitled to request any Borrowing which, if made, would result in more than twenty Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings. (c) Subject to Section 2.10, each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer to such account as the Administrative Agent may designate in federal funds not later than 11:00 a.m., New York City time, and the Administrative Agent shall by 12:00 (noon), New York City time, (a) in the case of any Loan made to reimburse any L/C Disbursement or to refund any Swingline Loan, apply the amounts so received to effect such reimbursement or refund as contemplated by Section 2.20 or Section 2.01(c) and (b) in the case of each Loan the proceeds of which are to be received by a Credit Party, credit the amounts so received to an account designated by such Credit Party in the applicable Borrowing Request; PROVIDED, HOWEVER, that if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, the Administrative Agent shall return the amounts so received to the respective Lenders. (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and may, in reliance upon such assumption, make available to the applicable Credit Party on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the applicable Credit Party severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the applicable Credit Party until the date such amount is repaid to the Administrative Agent, at (i) in the case of the applicable Credit Party, the interest rate applicable at the time to the Loans comprising such Borrowing and 43 (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. (e) Notwithstanding any other provision of this Agreement, a Credit Party shall not be entitled to request any Tranche A Reimbursement Borrowing or Revolving Credit Borrowing if the Interest Period requested with respect thereto would end after the Tranche A Maturity Date or the Revolving Credit Maturity Date, as applicable. SECTION 2.03. BORROWING PROCEDURE. In order to request a Borrowing, a Credit Party shall hand deliver or telecopy to the Administrative Agent a duly completed Borrowing Request substantially in the form of Exhibit C (a) in the case of a Eurodollar Borrowing, not later than 12:00 (noon), New York City time, three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before a proposed Borrowing; PROVIDED, HOWEVER, that Borrowing Requests with respect to Tranche A Reimbursement Borrowings being made to reimburse any Tranche A L/C Disbursement may be delivered by no later than 12:00 (noon), New York City time, on the date of such Borrowing. Each Borrowing Request shall be irrevocable, shall be signed by or on behalf of the applicable Credit Party and shall specify the following information: (i) the name of the applicable Credit Party; (ii) whether the Borrowing then being requested is to be a Term Borrowing, a Tranche A Reimbursement Borrowing or a Revolving Credit Borrowing (and in the case of a Term Borrowing the Class of Commitments pursuant to which the Loans comprising such Borrowing are to be made), and whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing; (iii) the date of such Borrowing (which shall be a Business Day), (iv) in the case of a Borrowing the proceeds of which are to be received by the applicable Credit Party, the number and location of the account to which funds are to be disbursed (which account shall be maintained in the United States of America); (v) the amount of such Borrowing; and (vi) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto; PROVIDED, HOWEVER, that, notwithstanding any contrary specification in any Borrowing Request, each requested Borrowing shall comply with the requirements set forth in Section 2.02. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the applicable Credit Party shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall promptly (and in any event on the same day that the Administrative Agent receives such notice, if received by 1:00 p.m., New York City time, on such day) advise the applicable Lenders of any notice given pursuant to this Section 2.03 and of each Lender's portion of the requested Borrowing. SECTION 2.04. EVIDENCE OF DEBT; REPAYMENT OF LOANS. (a) The outstanding principal balance of each Loan shall be payable 44 (i) in the case of a Revolving Loan or a Swingline Loan, on the Revolving Credit Maturity Date and (ii) in the case of a Term Loan or Tranche A Reimbursement Loan, as provided in Section 2.11. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from any Credit Party to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from any Credit Party and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) and (c) of this Section 2.04 shall be prima facie evidence of the existence and amounts of the obligations therein recorded; PROVIDED, HOWEVER, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of any Credit Party to repay the Loans in accordance with their terms. (e) Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive a Note as provided in Section 9.04(h) or otherwise the interests represented by that Note shall at all times (including after any assignment of all or part of such interests pursuant to Section 9.04) be represented by one or more Notes payable to the payee named therein or its registered assigns. SECTION 2.05. FEES. (a) The Borrower agrees to pay to each Lender, through the Administrative Agent, on the last day of March, June, September and December in each year, and on the date on which the Commitments of all the Lenders shall be terminated as provided herein, a commitment fee (a "COMMITMENT FEE") on the average daily unused amount of the Commitments of such Lender during the preceding quarter (or other period commencing with the date of this Agreement or ending with the date on which the last of the Commitments of such Lender shall be terminated) at the rate of 0.50% per annum. All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as applicable. For the purpose of calculating any Lender's Commitment Fee, the outstanding Swingline Loans during the period for which such Lender's Commitment Fee is calculated shall be deemed to be zero. The Commitment Fee due to each Lender shall commence to accrue on the date of this Agreement and shall cease to accrue on the date on which the last of the Commitments of such Lender shall be terminated as provided herein. For purposes of calculating the Commitment Fee, the Tranche A Reimbursement Commitments shall be deemed to be used to the extent there are outstanding Tranche A Reimbursement Loans, Tranche A L/C Disbursements or Tranche A Letters of Credit and shall otherwise be deemed to be unused. 45 (b) The applicable Credit Party agrees to pay (i) to each Tranche A Lender and Revolving Credit Lender, through the Administrative Agent, on the last day of March, June, September and December of each year and on the date on which the Tranche A Reimbursement Commitments or the Revolving Credit Commitments, as applicable, of all the Lenders shall have been terminated as provided herein and no further Tranche A Letters of Credit or Revolving Letters of Credit, as applicable, shall be outstanding, a fee (an "L/C PARTICIPATION FEE") on such Lender's Applicable Percentage of the average daily aggregate Tranche A L/C Exposure or Revolving L/C Exposure, as applicable (excluding in each case the portion thereof attributable to unreimbursed L/C Disbursements), during the preceding quarter (or shorter period commencing with the date of this Agreement or ending with the Tranche A Maturity Date or the Revolving Credit Maturity Date, as applicable, or the date on which the Tranche A Reimbursement Commitments or the Revolving Credit Commitments, as applicable, shall be terminated) at the rate per annum effective for each day in such period as set forth on Schedule A and (ii) to each Fronting Bank, the fees separately agreed upon by the Borrower and such Fronting Bank PLUS, in connection with the issuance, amendment or transfer of any such Letter of Credit or any L/C Disbursement thereunder, each applicable Fronting Bank's customary documentary and processing charges (collectively, the "FRONTING BANK FEES"). All L/C Participation Fees and Fronting Bank Fees that are payable on a per annum basis shall be computed on the basis of the actual number of days elapsed in a year of 360 days. (c) The Borrower agrees to pay to the Administrative Agent, for its own account, the fees set forth in the Agent Letter at the times specified therein (the "ADMINISTRATIVE AGENT FEES"). (d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that the Fronting Bank Fees shall be paid directly to the applicable Fronting Banks. Once paid, none of the Fees shall be refundable under any circumstances. SECTION 2.06. INTEREST ON LOANS. (a) Subject to the provisions of Section 2.07, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, when determined by reference to the Prime Rate and over a year of 360 days at all other times) at a rate per annum equal to the Alternate Base Rate PLUS, the ABR Margin applicable to the Class of Loans comprising such ABR Borrowing and effective for such date as set forth on Schedule A. (b) Subject to the provisions of Section 2.07, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing PLUS, the LIBOR Margin applicable to the Class of Loans comprising such Eurodollar Borrowing and effective for such date as set forth on Schedule A. 46 (c) Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. The Administrative Agent shall give the Borrower prompt notice of each such determination. SECTION 2.07. DEFAULT INTEREST. If any Credit Party shall default in the payment of the principal of or interest on any Loan or any other amount becoming due hereunder, by acceleration or otherwise, such Credit Party shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount for the period beginning on the date of such default up to (but not including) the date of actual payment (after as well as before judgment) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to (a) in the case of (i) overdue Loans, overdue interest thereon, overdue Commitment Fees or other overdue amounts owing in respect of Loans or other obligations (or the related Commitments) under a particular Tranche or in respect of the Revolving Credit Commitments or (ii) other overdue amounts owing to a Lender participating in no more than one of the Tranches or the Revolving Credit Commitments, the rate that would otherwise be applicable to ABR Loans of the applicable Class pursuant to Section 2.06 PLUS 2% or (b) in the case of any other overdue amount, the Alternate Base Rate PLUS 2%. SECTION 2.08. ALTERNATE RATE OF INTEREST. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined that dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or that the rates at which such dollar deposits are being offered will not adequately and fairly reflect the cost to any Lender of making or maintaining its Eurodollar Loan during such Interest Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give written or telecopy notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each determination by the Administrative Agent hereunder shall be conclusive absent manifest error. SECTION 2.09. TERMINATION AND REDUCTION OF COMMITMENTS. (a) The Tranche A Reimbursement Commitments shall be automatically and permanently terminated at 5:00 p.m., New York City time, on the Business Day next preceding the Tranche A Maturity Date. The Revolving Credit Commitments shall be automatically and permanently terminated at 5:00 p.m., New York City time, on the Revolving Credit Maturity Date. 47 (b) Upon at least three Business Days' prior irrevocable written or telecopy notice to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, any of the Tranche A Reimbursement Commitments or the Revolving Credit Commitments; PROVIDED, HOWEVER, that (i) each partial reduction of any Commitments shall be in an integral multiple of $1,000,000 and in a minimum principal amount of $5,000,000 (or, if less, the remaining amount of the Commitments of the applicable Class), (ii) the Total Tranche A Reimbursement Commitment shall not be reduced to an amount that is less than the Tranche A Exposure at the time and (iii) the Total Revolving Credit Commitment shall not be reduced to an amount that is less than the Aggregate Revolving Credit Exposure at the time. (c) The Tranche A Reimbursement Commitments shall be automatically and permanently reduced at 5:00 p.m., New York City time, on each Installment Date by the portion of the amount set forth in Section 2.11(a) for such Installment Date under the caption "Tranche A Term Loan Amount and Tranche A Exposure" allocated to reduce the Tranche A Exposure pursuant to Section 2.11(c). (d) The Tranche A Reimbursement Commitments shall be automatically and permanently reduced by an amount equal to any amount applied to reduce the Tranche A Exposure pursuant to paragraph (a), (d), (e) or (f) of Section 2.12. (e) The Revolving Credit Commitments shall be automatically and permanently reduced by an amount equal to any amount applied under paragraph (d), (e) or (f) of Section 2.12 to prepay Revolving Credit Borrowings (or that would have been required to be so applied if Revolving Credit Borrowings equal to such amount had been outstanding). (f) Each reduction in a Class of Commitments hereunder shall be made ratably among the Lenders in accordance with their respective Commitments for such Class. The Borrower shall pay to the Administrative Agent for the account of the Lenders, on the date of each termination or reduction, the Commitment Fees and, to the extent applicable, L/C Participation Fees on the amount of the Commitments so terminated or reduced accrued to but excluding the date of such termination or reduction. SECTION 2.10. CONVERSION AND CONTINUATION OF BORROWINGS. A Credit Party shall have the right at any time upon prior irrevocable notice to the Administrative Agent (a) not later than 12:00 (noon), New York City time, one Business Day prior to conversion, to convert any Eurodollar Term, Reimbursement or Revolving Borrowing into an ABR Term, Reimbursement or Revolving Borrowing, (b) not later than 10:00 a.m., New York City time, three Business Days prior to conversion or continuation, to convert any ABR Term, Reimbursement or Revolving Borrowing into a Eurodollar Term, Reimbursement or Revolving Borrowing or to continue any Eurodollar Term, Reimbursement or Revolving Borrowing as a Eurodollar Term, Reimbursement or Revolving Borrowing for an additional Interest Period, and (c) not later than 10:00 a.m., New York City time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Term, 48 Reimbursement or Revolving Borrowing to another permissible Interest Period, subject in each case to the following: (i) each conversion or continuation shall be made pro rata among the relevant Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Term Borrowing, Tranche A Reimbursement Borrowing or Revolving Borrowing, as applicable; (ii) if less than all the outstanding principal amount of any Term Borrowing, Tranche A Reimbursement Borrowing or Revolving Borrowing shall be converted or continued, then each resulting Term Borrowing, Tranche A Reimbursement Borrowing or Revolving Borrowing, as applicable, shall satisfy the limitations specified in Sections 2.02(a) and (b) regarding the principal amount and maximum number of Borrowings of the relevant Type; (iii) each conversion shall be effected by each Lender by recording for the account of such Lender the new Term Loan, Tranche A Reimbursement Loan or Revolving Loan, as applicable, of such Lender resulting from such conversion and reducing the Term Loan, Tranche A Reimbursement Loan or Revolving Loan, as applicable, (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on a Term Loan, Tranche A Reimbursement Loan or Revolving Loan, as applicable, (or portion thereof) being converted shall be paid by the applicable Credit Party at the time of conversion; (iv) if any Eurodollar Term, Reimbursement or Revolving Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the applicable Credit Party shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15; (v) any portion of a Term Borrowing, Tranche A Reimbursement Borrowing or Revolving Borrowing, as applicable, maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Term, Reimbursement or Revolving Borrowing; (vi) any portion of a Eurodollar Term, Reimbursement or Revolving Borrowing which Borrowing cannot be converted into or continued as a Eurodollar Term, Reimbursement or Revolving Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Term, Reimbursement or Revolving Borrowing, as applicable; and (vii) no Interest Period may be selected for any Eurodollar Term or Reimbursement Borrowing that would end later than an Installment Date occurring on or after the first day of such Interest Period if, after giving effect to such selection, the aggregate outstanding amount of (A) the Eurodollar Term or Reimbursement Borrowings made pursuant to the same Commitments with Interest Periods ending on or prior to such Installment Date and (B) the ABR Term or Reimbursement Borrowings made pursuant to the same Commitments would not be at least equal to 49 the principal amount of Term Borrowings and (based on the Borrower's expected allocation on such Installment Date under Section 2.11(c)) Tranche A Reimbursement Borrowings made pursuant to the same Commitments to be paid on such Installment Date. Each notice pursuant to this Section 2.10 shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Term Borrowing, Tranche A Reimbursement Borrowing or Revolving Borrowing that the applicable Credit Party requests be converted or continued, (ii) whether such Term Borrowing, Tranche A Reimbursement Borrowing or Revolving Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (iv) if such Term Borrowing, Tranche A Reimbursement Borrowing or Revolving Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, the applicable Credit Party shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall advise the other Lenders of any notice given pursuant to this Section 2.10 and of each Lender's portion of any converted or continued Term Borrowing, Tranche A Reimbursement Borrowing or Revolving Borrowing. If the applicable Credit Party shall not have given notice in accordance with this Section 2.10 to continue any Term Borrowing, Tranche A Reimbursement Borrowing or Revolving Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.10 to convert such Term Borrowing, Tranche A Reimbursement Borrowing or Revolving Borrowing), such Term Borrowing, Tranche A Reimbursement Borrowing or Revolving Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued or converted into an ABR Borrowing. SECTION 2.11. REPAYMENT OF TERM BORROWINGS AND REDUCTION OF THE TRANCHE A EXPOSURE; REALLOCATION OF THE TRANCHE A EXPOSURE. (a) The Term Borrowings shall be payable as to principal and the Tranche A Exposure shall be reduced in the aggregate annual amounts set forth below in consecutive quarterly installments on each March 31, June 30, September 30 and December 31 (each an "INSTALLMENT DATE"), commencing March 31, 1998, with 40% of each annual amount being paid or reduced on each June 30 and each December 31 and 10% of each annual amount being paid or reduced on each March 31 and September 30; PROVIDED that (a) the $20,000,000 repayment of Tranche A Term Loans and/or reduction of Tranche A Exposure and (b) the $400,000 repayment of Tranche B Term Loans, in each case required to be effected on the December 31, 1998 Installment Date shall instead be effected on the Effective Date and such early repayments and reductions shall satisfy the requirement pursuant to this clause (a) to make payments and effect reductions on the December 31, 1998 Installment Date: 50 TRANCHE A TERM LOAN AMOUNT AND TRANCHE B ANNUAL PERIOD ENDING/ TRANCHE A TERM LOAN INSTALLMENT DATE EXPOSURE AMOUNT December 31, 1998 50,000,000 1,000,000 December 31, 1999 60,000,000 1,000,000 December 31, 2000 75,000,000 1,000,000 December 31, 2001 85,000,000 1,000,000 December 31, 2002 116,000,000 (b) The Borrower shall have the right at any time and from time to time, but not more frequently than four times in any fiscal year (and more frequently with the consent of the Administrative Agent, which consent shall not be unreasonably withheld), upon at least 3 Business Days' prior written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent to: (i) reduce the stated amount of any one or more Tranche A Letters of Credit and apply all or any portion of the amount of such reduction to increase or issue any other one or more Tranche A Letters of Credit on a dollar for dollar basis; (ii) reduce the stated amount of any Tranche A Letter of Credit and request a Tranche A Reimbursement Borrowing in an amount not in excess of the difference between the amount of such reduction and the Interest Component or Foreign Currency Component, as applicable, in respect thereof (which Interest Component or Foreign Currency Component, as applicable, shall be held in reserve and be available for any reallocation pursuant to clause (iv) below); (iii) prepay any portion of any Tranche A Term Borrowing or Tranche A Reimbursement Borrowing and apply all or any portion of such prepayment to increase or issue any Tranche A Letter of Credit; or (iv) in connection with any transaction referred to in (iii) above, apply a portion of any Interest Component or Foreign Currency Component held in reserve pursuant to clause (ii) above to increase any Tranche A Letter of Credit increased as part of such transaction; PROVIDED, HOWEVER, that (A) after giving effect to any such reallocation, (x) each Tranche A Letter of Credit shall have an unused stated amount not less than the sum of the principal amount (or the Dollar Equivalent thereof, as applicable) of the portion of the Local Facility supported by such Tranche A Letter of Credit and the Interest Component or Foreign Currency Component, as applicable, in respect of such principal amount (or the Dollar Equivalent thereof, as applicable) and (y) the Tranche A Exposure shall not exceed the Total Tranche A Reimbursement Commitment; (B) the Administrative Agent shall not have advised the Borrower that, in its reasonable judgment, the amount of any affected Local Facility after giving effect to any such reallocation would exceed the debt capacity of the applicable Credit Party; and (C) the portion of the 51 Tranche A L/C Exposure allocated to any Local Facility or Facilities extended to the Borrower's Mexican subsidiaries shall not exceed $50,000,000 in the aggregate outstanding at any time. In the event of any prepayment of a Tranche A Term Borrowing under clause (iii) above, the aggregate Tranche A Reimbursement Commitments shall be increased on a dollar for dollar basis by the aggregate amount of such prepayment and the Tranche A Reimbursement Commitment of each Tranche A Lender shall be increased by its Applicable Percentage thereof. No issuance or increase of a Tranche A Letter of Credit or making of a Tranche A Reimbursement Loan pursuant to this paragraph (b) shall constitute a "Credit Event" for any purpose hereunder. (c) Except as set forth in paragraph (b) above or in paragraph (d) below, each prepayment of principal of the Term Borrowings and reduction of the Tranche A Exposure pursuant to Section 2.12 shall be applied to (i) the Tranche A Term Borrowings and the Tranche A Exposure and (ii) the Tranche B Term Borrowings ratably in accordance with the respective amounts thereof and shall reduce scheduled payments and reductions required under paragraph (a) above after the date of such prepayment or reduction in the scheduled order of maturity. Amounts to be applied to the Tranche A Term Borrowings and the Tranche A Exposure under this Section 2.11 shall be allocated as among Tranche A Term Loans, Tranche A Reimbursement Loans, Tranche A L/C Disbursements and individual Tranche A Letters of Credit as specified to the Administrative Agent by the Borrower not less than three Business Days prior to the applicable Installment Date or other date of prepayment or reduction by written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice). To the extent not previously paid or reduced, (i) all Tranche A Term Borrowings and all Tranche A Reimbursement Borrowings shall be due and payable and the Tranche A Exposure shall be reduced to zero on the Tranche A Maturity Date, and (ii) all Tranche B Term Borrowings shall be due and payable on the Tranche B Maturity Date. Each payment of Borrowings pursuant to this Section 2.11 shall be accompanied by accrued interest on the principal amount paid to but excluding the date of payment. (d) Notwithstanding the provisions of paragraph (c) above, the first $15,000,000 in aggregate optional or mandatory prepayments after the Effective Date that would otherwise be made pursuant to Section 2.12(a) or (e) to Lenders holding Tranche B Term Loans shall be applied, until the Tranche A Term Borrowings shall have been paid in full and the Tranche A Exposure reduced to zero, to prepay Tranche A Term Borrowings and to reduce the Tranche A Exposure and shall reduce scheduled payments and reductions in respect of such Borrowings and the Tranche A Exposure under Section 2.11(a) after the date of any such prepayment or reduction in the scheduled order of maturity; PROVIDED that reductions to the Tranche A Exposure in respect of prepayments made under a Local Facility pursuant to the first proviso of Section 2.12(d) shall reduce the amount subject to this paragraph (d) on a dollar for dollar basis by the amount of each such reduction that would otherwise have been applied to prepayment of Tranche B Term Loans. (e) Each reference in this Section 2.11 to the reduction of the Tranche A Exposure shall refer (and be limited) to any combination of (i) the prepayment of Tranche A Reimbursement Loans, 52 (ii) the repayment of Tranche A L/C Disbursements, (iii) the prepayment of Indebtedness under any Local Facility and the causing of the related Tranche A Letter of Credit to be reduced by the amount that will result in the stated amount thereof equaling the sum of the principal amount of the Local Facility and the Interest Component or Foreign Currency Component, as applicable, in respect thereof and (iv) the reduction of the Foreign Currency Component, if any, held in reserve pursuant to Section 2.11(b)(ii). SECTION 2.12. PREPAYMENT. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing and to reduce the Tranche A Exposure, in whole or in part, upon at least three Business Days' prior written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent, and, in the case of a reduction in the Tranche A Exposure, the applicable Fronting Banks, before 11:00 a.m., New York City time; PROVIDED, HOWEVER, that (i) each partial prepayment or reduction (other than of a Swingline Loan) shall be in an amount which is an integral multiple of $1,000,000 and not less than $5,000,000 (or, if less, the aggregate outstanding amount under the applicable Tranche or Local Facility), (ii) each prepayment of Term Borrowings or reduction of the Tranche A Exposure shall be applied as set forth in paragraphs (c) and (d) of Section 2.11 and (iii) if the Borrower shall prepay any Tranche B Term Borrowing hereunder prior to January 1, 2000, it shall pay to the Administrative Agent, for the account of the Lenders of the applicable Class, a premium equal to 1% of the amount so prepaid. (b) In the event of any termination of the Revolving Credit Commitments, the Credit Parties shall on the date of such termination repay or prepay all its outstanding Swingline Loans and Revolving Credit Borrowings, reduce the Revolving L/C Exposure to zero and cause all Revolving Letters of Credit to be canceled and returned to the Fronting Banks. In the event of any partial reduction of the Revolving Credit Commitments, then (i) at or prior to the effective date of such reduction, the Administrative Agent shall notify the Borrower, the Swingline Lender and the Revolving Credit Lenders of the Aggregate Revolving Credit Exposure and (ii) if the Aggregate Revolving Credit Exposure would exceed the Total Revolving Credit Commitment after giving effect to such reduction, then the Credit Parties shall, on the date of such reduction, repay or prepay Swingline Loans and Revolving Credit Borrowings, or reduce the Revolving L/C Exposure, in an aggregate amount sufficient to eliminate such excess. Notwithstanding the foregoing, on the date of any termination or reduction of the Revolving Credit Commitments pursuant to Section 2.09, the Borrower shall pay or prepay so much of, FIRST, the Swingline Loans and, SECOND, the Revolving Credit Borrowings as shall be necessary in order that the Aggregate Revolving Credit Exposure will not exceed the Total Revolving Credit Commitment after giving effect to such termination or reduction. (c) In the event of any termination of the Tranche A Reimbursement Commitments, the Borrower shall on the date of such termination repay or prepay all its outstanding Tranche A Reimbursement Borrowings, reduce the remaining Tranche A Exposure to zero and cause all Tranche A Letters of Credit to be canceled and returned to the Fronting Banks. In the event of any partial 53 reduction of the Tranche A Reimbursement Commitments, then (i) at or prior to the effective date of such reduction, the Administrative Agent shall notify the Borrower and the Tranche A Lenders of the Tranche A Exposure and (ii) if the Tranche A Exposure would exceed the Total Tranche A Reimbursement Commitment after giving effect to such reduction, then the Borrower shall, on the date of such reduction, repay or prepay Tranche A Reimbursement Borrowings or otherwise reduce the Tranche A Exposure in an aggregate amount sufficient to eliminate such excess. (d) The Borrower shall apply all Net Proceeds (minus an amount equal to the lesser of (i) the amount of such Net Proceeds applied to prepay loans under the Tranche C Facility Credit Agreement and (ii) the amount of such Net Proceeds multiplied by a fraction the numerator of which is the aggregate principal amount of loans outstanding under the Tranche C Facility Credit Agreement and the denominator of which is the aggregate principal and stated amount of (A) outstanding Term Loans (excluding Tranche A Reimbursement Loans) and Tranche A Exposure and (B) outstanding loans under the Tranche C Facility Credit Agreement) promptly upon receipt thereof by UCAR, the Borrower or any Subsidiary to prepay Term Borrowings and to reduce the Tranche A Exposure (and, after the Term Loans and the loans under the Tranche C Facility Credit Agreement have been paid in full and the Tranche A Exposure has been reduced to zero, to reduce the Revolving Credit Exposure), PROVIDED that the requirements of this Section 2.12(d) may instead, at the option of the Borrower, be satisfied in respect of Net Proceeds realized in connection with the disposition of any property of any Subsidiary that is a borrower under a Local Facility Credit Agreement (or any of its subsidiaries) by prepaying Indebtedness under such Local Facility and reducing the stated amount of the applicable Tranche A Letter of Credit by the amount that will result in the stated amount thereof equaling the sum of the principal amount of the Local Facility and the Interest Component or Foreign Currency Component, as applicable, in respect thereof; PROVIDED, FURTHER that the aggregate prepayments on and after the Effective Date that would have been made under this paragraph (d) to Lenders holding Tranche B Term Loans but for the immediately preceding proviso shall not exceed $7,500,000. (e) Not later than 90 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 1998, the Borrower shall calculate Excess Cash Flow for such fiscal year and shall apply (i) the applicable percentage (determined as set forth in Schedule A) of such Excess Cash Flow (the "EXCESS CASH FLOW PREPAYMENT AMOUNT") less (ii) (A) any voluntary prepayments of Term Loans during the period beginning on April 1 of such fiscal year and ending on March 31 of the immediately succeeding fiscal year (if such difference is positive) and (B) an amount equal to the lesser of (i) the amount of such Excess Cash Flow Prepayment Amount applied to prepay loans under the Tranche C Facility Credit Agreement and (ii) such Excess Cash Flow Prepayment Amount multiplied by a fraction the numerator of which is the aggregate principal amount of the loans outstanding under the Tranche C Facility Credit Agreement and the denominator of which is the aggregate principal and stated amount of (x) outstanding Term Loans (excluding Tranche A Reimbursement Loans) and Tranche A Exposure and (y) loans outstanding under the Tranche C Facility 54 Credit Agreement to prepay Term Borrowings and to reduce the Tranche A Exposure (and, after the Term Loans and the loans under the Tranche C Facility Credit Agreement have been paid in full and the Tranche A Exposure has been reduced to zero, to reduce the Revolving Credit Exposure). Not later than the date on which the Borrower is required to deliver financial statements with respect to the end of each fiscal year under Section 5.04(a), the Borrower will deliver to the Administrative Agent a certificate of the Borrower signed by a Financial Officer of the Borrower setting forth the amount, if any, of Excess Cash Flow for such fiscal year and the calculation thereof in reasonable detail. (f) At the time of any prepayment of the loans pursuant to Section 2.12 of the Tranche C Facility Credit Agreement, the Borrower shall prepay the Term Loans and/or reduce the Tranche A Exposure in an aggregate amount bearing the same proportion to the aggregate amount of Term Loans (excluding Tranche A Reimbursement Loans) and Tranche A Exposure outstanding hereunder as the amount of loans prepaid pursuant to Section 2.12 of the Tranche C Facility Credit Agreement bears to the aggregate amount of loans outstanding under the Tranche C Facility Credit Agreement. (g) Each reference in this Section 2.12 to the reduction of the Tranche A Exposure shall refer (and be limited) to any combination of (i) the prepayment of Tranche A Reimbursement Loans, (ii) the repayment of Tranche A L/C Disbursements, (iii) the prepayment of Indebtedness under any Local Facility and the causing of the related Tranche A Letter of Credit to be reduced by the amount that will result in the stated amount thereof equaling the sum of the principal amount of the Local Facility and the Interest Component or the Foreign Currency Component, as applicable, in respect thereof and (iv) the reduction of the Foreign Currency Component, if any, held in reserve pursuant to Section 2.11(b)(ii). Each notice of prepayment or reduction pursuant to this Section 2.12 shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid and the portion of the Tranche A Exposure to be reduced, shall be irrevocable and shall commit the applicable Credit Party to prepay such Borrowing and to reduce the Tranche A Exposure by the amount stated therein on the date stated therein. All prepayments and reductions under this Section 2.12 shall be subject to Section 2.12(a)(iii) and Section 2.15 but otherwise shall be without premium or penalty. All prepayments under this Section 2.12 shall be accompanied by accrued interest on the principal amount being prepaid to but excluding the date of payment. (h) In the event the amount of any prepayment required to be made above shall exceed the aggregate principal amount of the ABR Loans outstanding under the Tranches required to be prepaid (the amount of any such excess being called the "EXCESS AMOUNT"), the Borrower shall have the right, in lieu of making such prepayment in full, to prepay all the outstanding applicable ABR Loans and to deposit an amount equal to the Excess Amount with the Collateral Agent in a cash collateral account maintained (pursuant to documentation reasonably satisfactory to the Administrative Agent) by and in the sole dominion and control of the Collateral Agent. Any amounts so deposited shall be held by the Collateral Agent as collateral for the Obligations and applied to the prepayment of the 55 applicable Eurodollar Loans at the end of the current Interest Periods applicable thereto. On any Business Day on which (i) collected amounts remain on deposit in or to the credit of such cash collateral account after giving effect to the payments made on such day pursuant to this Section 2.12(h) and (ii) the Borrower shall have delivered to the Collateral Agent a written request or a telephonic request (which shall be promptly confirmed in writing) that such remaining collected amounts be invested in the Permitted Investments specified in such request, the Collateral Agent shall use its reasonable efforts to invest such remaining collected amounts in such Permitted Investments; PROVIDED, HOWEVER, that the Collateral Agent shall have continuous dominion and full control over any such investments (and over any interest that accrues thereon) to the same extent that it has dominion and control over such cash collateral account and no Permitted Investment shall mature after the end of the Interest Period for which it is to be applied. The Borrower shall not have the right to withdraw any amount from such cash collateral account until the applicable Eurodollar Loans and accrued interest thereon are paid in full or if a Default or Event of Default then exists or would result. (i) Notwithstanding anything to the contrary contained herein, the borrower under the Local Facility Credit Agreement in Canada shall not be required to prepay more than 25% of the principal amount of the Indebtedness thereunder prior to the fifth anniversary of the Original Closing Date, although such borrower may, at its election, prepay any amounts thereunder. SECTION 2.13. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES. (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to any Lender or any Fronting Bank in respect of any Letter of Credit or of the principal of or interest on any Eurodollar Loan made by such Lender or any Fees or other amounts payable hereunder (other than changes in respect of (i) taxes imposed on the overall net income of such Lender or such Fronting Bank by the jurisdiction in which such Lender or such Fronting Bank has its principal office or by any political subdivision or taxing authority therein and (ii) any Taxes described in Section 2.19), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets or deposits with or for the account of or credit extended by or, in the case of the Letters of Credit, participated in by such Lender (except any such reserve requirement which is reflected in the Adjusted LIBO Rate) or such Fronting Bank or shall impose on such Lender or such Fronting Bank or the interbank eurodollar market any other condition affecting this Agreement, any Letter of Credit (or any participation with respect thereto), the Letter of Credit Exposure, the Letter of Credit Commitment or any Eurodollar Loans of such Lender or such Fronting Bank, and the result of any of the foregoing shall be to increase the cost to such Lender or such Fronting Bank of making or maintaining its Letter of Credit Exposure, its Letter of Credit Commitment or any Eurodollar Loan (or, in the case of such Fronting Bank, of making any payment under any Letter of Credit) or to reduce the amount of any sum 56 received or receivable by such Lender or such Fronting Bank hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender or such Fronting Bank to be material, then from time to time the Borrower or the applicable Credit Party will pay to such Lender or such Fronting Bank upon demand such additional amount or amounts as will compensate such Lender or such Fronting Bank for such additional costs incurred or reduction suffered. (b) If any Lender or Fronting Bank shall have determined that the adoption after the date hereof of any law, rule, regulation or guideline regarding capital adequacy, or any change after the date hereof in any of the foregoing or in the interpretation or administration of any of the foregoing by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any lending office of such Lender) or Fronting Bank or any Lender's or Fronting Bank's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) made or issued after the date hereof by any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's or such Fronting Bank's capital or on the capital of such Lender's or such Fronting Bank's holding company, if any, as a consequence of this Agreement or its obligations pursuant hereto to a level below that which such Lender or such Fronting Bank or such Lender's or such Fronting Bank's holding company would have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such Fronting Bank's policies and the policies of such Lender's or such Fronting Bank's holding company with respect to capital adequacy) by an amount deemed by such Lender or such Fronting Bank to be material, then from time to time the Borrower or the applicable Credit Party shall pay to such Lender or such Fronting Bank upon demand such additional amount or amounts as will compensate such Lender or such Fronting Bank or such Lender's or such Fronting Bank's holding company for any such reduction suffered. (c) A certificate of each Lender or Fronting Bank setting forth such amount or amounts as shall be necessary to compensate such Lender or such Fronting Bank or its holding company as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Borrower through the Administrative Agent and shall be conclusive absent manifest error. The Borrower or the applicable Credit Party shall pay each Lender or Fronting Bank the amount shown as due on any such certificate delivered by it within 10 days after the Borrower's receipt of the same. (d) In the event any Lender or Fronting Bank delivers a notice pursuant to paragraph (e) below, the Borrower or the applicable Credit Party may require, at the Borrower's or the applicable Credit Party's expense and subject to Section 2.15, such Lender or such Fronting Bank to assign, at par plus accrued interest and fees, without recourse (in accordance with Section 9.04) all its interests, rights and obligations hereunder (including, in the case of a Lender, all of its Commitments and the Loans at the time owing to it and participations in Letters of Credit and Swingline Loans held by it and its obligations to acquire such participations) to a financial institution specified by the Borrower; PROVIDED that 57 (i) such assignment shall not conflict with or violate any law, rule or regulation or order of any court or other Governmental Authority, (ii) the Borrower or the applicable Credit Party shall have received the written consent of the Administrative Agent (which consent shall not be unreasonably withheld), the Swingline Lender and each applicable Fronting Bank, as applicable, to such assignment, (iii) the Borrower or the applicable Credit Party shall have paid to the assigning Lender or Fronting Bank all monies accrued and owing hereunder to it (including pursuant to this Section 2.13) and (iv) in the case of a required assignment by a Fronting Bank, all outstanding Letters of Credit issued by such Fronting Bank shall be canceled and returned to such Fronting Bank. (e) Promptly after any Lender or Fronting Bank has determined, in its sole judgment, that it will make a request for increased compensation pursuant to this Section 2.13, such Lender or such Fronting Bank will notify the Borrower thereof. Failure on the part of any Lender or Fronting Bank so to notify the Borrower or to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of such Lender's or such Fronting Bank's right to demand compensation with respect to such period or any other period; PROVIDED that the Borrower or the applicable Credit Party shall not be under any obligation to compensate any Lender or Fronting Bank under paragraph (b) above with respect to increased costs or reductions with respect to any period prior to the date that is six months prior to such request if such Lender or such Fronting Bank knew or could reasonably have been expected to be aware of the circumstances giving rise to such increased costs or reductions and of the fact that such circumstances would in fact result in a claim for increased compensation by reason of such increased costs or reductions; PROVIDED FURTHER that the foregoing limitation shall not apply to any increased costs or reductions arising out of the retroactive application of any law, regulation, rule, guideline or directive as aforesaid within such six month period. The protection of this Section 2.13 shall be available to each Lender and Fronting Bank regardless of any possible contention as to the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed. SECTION 2.14. CHANGE IN LEGALITY. (a) Notwithstanding any other provision herein, if the adoption of or any change in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent, such Lender may: (i) declare that Eurodollar Loans will not thereafter be made by such Lender hereunder, whereupon any request by a Credit Party for a Eurodollar Borrowing shall, as to such Lender only, be deemed a request for an ABR Loan unless such declaration shall be subsequently withdrawn; and 58 (ii) require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any Lender shall exercise its rights under subparagraphs (i) and (ii) above, all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans. (b) For purposes of this Section 2.14, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower. SECTION 2.15. INDEMNITY. The Borrower shall indemnify each Lender against any loss or expense (other than taxes) which such Lender may sustain or incur as a consequence of (a) any failure by a Credit Party to fulfill on the date of any Borrowing or proposed Borrowing hereunder the applicable conditions set forth in Article IV, (b) any failure by a Credit Party to borrow or to refinance, convert or continue any Loan hereunder after irrevocable notice of such Borrowing, refinancing, conversion or continuation has been given pursuant to Section 2.03 or 2.10, (c) any payment, prepayment or conversion of a Eurodollar Loan required by any other provision of this Agreement or otherwise made or deemed made on a date other than the last day of the Interest Period applicable thereto, (d) any default in payment or prepayment of the principal amount of any Loan or any part thereof or interest accrued thereon, as and when due and payable (at the due date thereof, whether by scheduled maturity, acceleration, irrevocable notice of prepayment or otherwise) or (e) the occurrence of any Event of Default, including, in each such case, any loss or reasonable expense sustained or incurred or to be sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain such Loan or any part thereof as a Eurodollar Loan. Such loss or reasonable expense shall exclude loss of margin hereunder but shall include an amount equal to the excess, if any, as reasonably determined by such Lender, of (i) its cost of obtaining the funds for the Loan being paid, prepaid, converted or not borrowed, converted or continued (assumed to be the Adjusted LIBO Rate applicable thereto) for the period from the date of such payment, prepayment, conversion or failure to borrow, convert or continue to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the Interest Period for such Loan which would have commenced on the date of such failure) over (ii) the amount of interest (as reasonably determined by such Lender) that would be realized by such Lender in reemploying the funds so paid, prepaid, converted or not borrowed, converted or continued for such period or Interest Period, as the case may be. A certificate of any Lender setting forth any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.15 (and the reasons therefor) shall be delivered to the 59 Borrower through the Administrative Agent and shall be conclusive absent manifest error. SECTION 2.16. PRO RATA TREATMENT. Except as required under Section 2.14 and subject to Section 2.11, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each reimbursement of L/C Disbursements, each payment of the Commitment Fees or L/C Participation Fees, each reduction of the Tranche A Letters of Credit, each reduction of the Term Commitments, the Tranche A Reimbursement Commitments or the Revolving Credit Commitments and each refinancing of any Borrowing with, conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated (except in the case of Swingline Loans) pro rata among the Lenders in accordance with their respective applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their applicable outstanding Loans or participations in L/C Disbursements, as applicable). Each Lender agrees that in computing such Lender's portion of any Borrowing or L/C Disbursement, the Administrative Agent may, in its discretion, round each Lender's percentage of such Borrowing or L/C Disbursement, computed in accordance with Section 2.01, to the next higher or lower whole dollar amount. SECTION 2.17. SHARING OF SETOFFS. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrower or another Credit Party, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means (including from any realization of collateral pledged under any Local Facility Loan Document as a result of the subrogation provisions contained in any Local Facility Credit Agreement), obtain payment (voluntary or involuntary) in respect of any Loan or Letter of Credit Exposure as a result of which the unpaid principal or stated portion of its Loans or Letter of Credit Exposure made or acquired pursuant to any Commitment (or, after acceleration of the Loans pursuant to Article VII, applicable to any Loan or Letter of Credit Exposure made or acquired pursuant to all the Commitments) shall be proportionately less than the unpaid principal portion of the Loans or Letter of Credit Exposure of any other Lender made or acquired pursuant to such Commitments (or, after acceleration of the Loans pursuant to Article VII, applicable to any Loan or Letter of Credit Exposure made or acquired pursuant to all the Commitments), it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, an interest in the Loans or Letter of Credit Exposure of such other Lender, so that the aggregate unpaid principal amount of the Loans or Letter of Credit Exposure and interests in Loans or Letter of Credit Exposure held by each such Lender under such Commitment or Commitments shall be in the same proportion to the aggregate unpaid principal amount of all Loans or Letter of Credit Exposure then outstanding under such Commitment or Commitments as the principal amount of its Loans or Letter of Credit Exposure under such Commitment or Commitments prior to such exercise of banker's lien, setoff or counterclaim or other event was to the principal amount of all such Loans or Letter of 60 Credit Exposure outstanding under such Commitment or Commitments prior to such exercise of banker's lien, setoff or counterclaim or other event; PROVIDED, HOWEVER, that, if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.17 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. Each of the Borrower and the other Credit Parties expressly consents to the foregoing arrangements and agrees that any Lender holding an interest in a Loan or Letter of Credit Exposure deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower or such Credit Party to such Lender by reason thereof as fully as if such Lender had made a Loan directly to, or had Letter of Credit Exposure directly for the benefit of, the Borrower or such Credit Party in the amount of such interest. Solely for purposes of this Section 2.17, all references to Loans shall include the loans under the Tranche C Facility Credit Agreement and all holders of such loans shall be third party beneficiaries of this Section 2.17. SECTION 2.18. PAYMENTS. (a) The Borrower and each other Loan Party shall make each payment without set off or counterclaim (including principal of or interest on any Borrowing or L/C Disbursement or any Fees or other amounts) required to be made by it hereunder and under any other Loan Document (excluding the Local Facility Loan Documents) not later than 12:00 noon, New York City time, on the date when due in Dollars to the Administrative Agent at its offices at 270 Park Avenue, New York, New York, Attention of Agent Bank Services, in immediately available funds, for credit to The Chase Manhattan Bank, ABA Number 02100120, Account Number 323-2-92771. The Administrative Agent shall distribute such payments to the Lenders and the Fronting Banks promptly upon receipt in like funds as received. (b) Whenever any payment (including principal of or interest on any Borrowing or L/C Disbursement or any Fees or other amounts) hereunder or under any other Loan Document (excluding the Local Facility Loan Documents) shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day (except in the case of payment of principal of a Eurodollar Borrowing if the effect of such extension would be to extend such payment into the next succeeding month, in which event such payment shall be due on the immediately preceding Business Day), and such extension of time shall in such case be included in the computation of interest or Fees, if applicable. SECTION 2.19. TAXES. (a) Any and all payments by the Borrower or any other Loan Party to the Administrative Agent, the Fronting Banks or the Lenders hereunder or under any other Loan Document (excluding payments by the applicable borrower under a Local Facility Credit Agreement) shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING (i) in the case of each Lender, each Fronting Bank and the Administrative Agent, taxes that would not be imposed but for a connection between such Lender, such Fronting Bank 61 or the Administrative Agent (as the case may be) and the jurisdiction imposing such tax, other than a connection arising solely by virtue of the activities of such Lender, such Fronting Bank or the Administrative Agent (as the case may be) pursuant to or in respect of this Agreement or under any other Loan Document, including entering into, lending money or extending credit pursuant to, receiving payments under, or enforcing, this Agreement or any other Loan Document, and (ii) in the case of each Lender, each Fronting Bank and the Administrative Agent, any United States withholding taxes payable with respect to any payments made hereunder or under the other Loan Documents under laws (including any statute, treaty, ruling, determination or regulation) in effect on the Initial Date (as hereinafter defined) applicable to such Lender, such Fronting Bank or the Administrative Agent, as the case may be, but not excluding any United States withholding taxes payable solely as a result of any change in such laws occurring after the Initial Date (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "TAXES"). For purposes of this Section 2.19, the term "INITIAL DATE" shall mean (i) in the case of the Administrative Agent, any Fronting Bank or any Lender, the date on which such person became a party to this Agreement and (ii) in the case of any assignment, including any assignment by a Lender or a Fronting Bank to a new lending office, the date of such assignment. If any Taxes shall be required by law to be deducted from or in respect of any sum payable hereunder or under any other Loan Document (excluding sums payable by the applicable borrower under a Local Facility Credit Agreement) to any Lender, any Fronting Bank or the Administrative Agent, (i) the sum payable by the Borrower or any other Loan Party, as the case may be, shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.19) such Lender, such Fronting Bank or the Administrative Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Loan Party, as the case may be, shall make such deductions and (iii) the Borrower or such Loan Party, as the case may be, shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. The Borrower and the other Loan Parties shall not, however, be required to pay any amounts pursuant to clause (i) of the preceding sentence to any Lender, any Fronting Bank or the Administrative Agent (in the case of payments to be made by the Borrower) not organized under the laws of the United States of America or a state thereof (or, in the case of payments to be made by another Loan Party, not organized under the laws of such Loan Party's jurisdiction) if such Lender, such Fronting Bank or the Administrative Agent fails to comply with the requirements of paragraph (f) or (g), as the case may be, and paragraph (h) of this Section 2.19. (b) In addition, the Borrower and each other Loan Party agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (excluding those arising from such actions by the applicable 62 borrower under a Local Facility Credit Agreement) (hereinafter referred to as "OTHER TAXES"). (c) The Borrower and each other Loan Party, as applicable, will indemnify each Lender, each Fronting Bank and the Administrative Agent for the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.19) paid by such Lender, such Fronting Bank or the Administrative Agent, as the case may be, and any liability (including penalties, interest and expenses including reasonable attorney's fees and expenses) arising therefrom or with respect thereto whether or not such Taxes or Other Taxes were correctly or legally asserted. A certificate as to the amount of such payment or liability prepared by a Lender, a Fronting Bank or the Administrative Agent, absent manifest error, shall be final, conclusive and binding for all purposes; PROVIDED, that if the Borrower or another Loan Party, as applicable, reasonably believes that such Taxes were not correctly or legally asserted, such Lender, Fronting Bank or the Administrative Agent, as the case may be shall use reasonable efforts to cooperate with the Borrower or such other Loan Party, as applicable, to obtain a refund of such Taxes or Other Taxes. Such indemnification shall be made within 10 days after the date any Lender, any Fronting Bank or the Administrative Agent, as the case may be, makes written demand therefor. If a Lender, a Fronting Bank or the Administrative Agent shall become aware that it is entitled to receive a refund in respect of Taxes or Other Taxes, it shall promptly notify the Borrower or such other Loan Party, as applicable, of the availability of such refund and shall, within 30 days after receipt of a request by the Borrower or such other Loan Party, pursue or timely claim such refund at the Borrower's or such other Loan Party's expense. If any Lender, any Fronting Bank or the Administrative Agent receives a refund in respect of any Taxes or Other Taxes for which such Lender, such Fronting Bank or the Administrative Agent has received payment from the Borrower or another Loan Party hereunder, it shall promptly repay such refund (plus any interest received) to the Borrower or such other Loan Party, as applicable (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.19 with respect to the Taxes or Other Taxes giving rise to such refund); PROVIDED that the Borrower or such other Loan Party, upon the request of such Lender, such Fronting Bank or the Administrative Agent, agrees to return such refund (plus any penalties, interest or other charges required to be paid) to such Lender, such Fronting Bank or the Administrative Agent in the event such Lender, such Fronting Bank or the Administrative Agent is required to repay such refund to the relevant taxing authority. (d) Within 30 days after the date of any payment of Taxes or Other Taxes withheld by the Borrower or another Loan Party, as the case may be, in respect of any payment to any Lender, any Fronting Bank or the Administrative Agent, the Borrower or such Loan Party, as the case may be, will furnish to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (e) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section 2.19 shall survive the payment in full of principal 63 and interest hereunder, the expiration of the Letters of Credit and the termination of the Commitments. (f) In the case of any Borrowing by, or L/C Disbursement for the benefit of, the Borrower or a Subsidiary Borrower organized under the laws of the United States (a "DOMESTIC SUBSIDIARY BORROWER"), this paragraph (f) shall apply. Each Lender, each Fronting Bank and the Administrative Agent that is not organized under the laws of the United States of America or a state thereof agrees that at least 10 days prior to the first Interest Payment Date following the Initial Date in respect of such Fronting Bank or such Lender, it will deliver to the Borrower and the Administrative Agent (if appropriate) two duly completed copies of either (i) United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, certifying, as applicable, that such Fronting Bank, such Lender or the Administrative Agent, as the case may be, is entitled to receive payments under this Agreement and the other Loan Documents payable to it without deduction or withholding of any United States federal income taxes and backup withholding taxes or is entitled to receive such payments at a reduced rate pursuant to a treaty provision or (ii) in the case of a Lender that is not a "bank" within the meaning of Section 881(c)(3) of the Code, (A) deliver to the Borrower and the Administrative Agent (I) a statement under penalties of perjury that such Lender (w) is not a "bank" under Section 881(c)(3)(A) of the Code, is not subject to regulatory or other legal requirements as a bank in any jurisdiction, and has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any Governmental Authority, any application made to a rating agency or qualification for any exemption from tax, securities law or other legal requirements, (x) is not a 10-percent shareholder within the meaning of Section 881(c)(3)(B) of the Code, (y) is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(c) of the Code and (z) is not a "conduit entity" within the meaning of U.S. Treasury Regulations Section 1.881-3 and (II) an Internal Revenue Service Form W-8 or successor applicable form; (B) deliver to the Borrower and the Administrative Agent a further copy of said Form W-8, or any successor applicable form or other manner of certification on or before the date that any such Form W-8 expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by such Lender; and (C) obtain such extensions of time for filing and completing such forms or certifications as may be reasonably requested by the Borrower or the Administrative Agent; unless in any such case an event (including any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders any such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States Federal income taxes or is entitled to receive such payments at a reduced rate pursuant to a treaty provision and (ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. Each person that shall become a participant pursuant to Section 9.04 64 shall, upon the effectiveness of the related transfer, be required to provide all the forms and statements required pursuant to this paragraph (f) to the Lender from which the related participation shall have been purchased. Unless the Borrower and the Administrative Agent have received forms, certificates and other documents required by this Section 2.19(f) indicating that payments hereunder or under any other Loan Document or the Letters of Credit to or for any Fronting Bank or Lender not incorporated under the laws of the United States or a state thereof are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower (or the applicable Domestic Subsidiary Borrower) or the Administrative Agent shall withhold such taxes from such payments at the applicable statutory rate. (g) In the event any Loan Party other than the Borrower or a Domestic Subsidiary Borrower is required to pay additional amounts pursuant to this Section 2.19, this paragraph (g) shall apply. Each Lender, each Fronting Bank and the Administrative Agent that is not incorporated within or under the laws of the jurisdiction of such Loan Party and that is claiming such additional amounts agrees that within a reasonable period of time following the request of such Loan Party it will, to the extent it is legally entitled to a reduction in the rate of or exemption from withholding taxes in the jurisdiction of such Loan Party, deliver to such Loan Party and the Administrative Agent any form or document required under the laws, regulations, official interpretations or treaties enacted by, made or entered into with such jurisdiction properly completed and duly executed by such Fronting Bank, such Lender or Administrative Agent establishing that any payments hereunder are exempt from withholding tax or subject to a reduced rate of withholding tax in such jurisdiction as the case may be; PROVIDED that, in the sole determination of such Lender, such Fronting Bank or the Administrative Agent, such form or document shall not be otherwise disadvantageous to such Lender, such Fronting Bank or the Administrative Agent. (h) Any Fronting Bank and any Lender claiming any additional amounts payable pursuant to this Section 2.19 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested in writing by the Borrower or any affected Credit Party to change the jurisdiction of its applicable lending office, if the making of such a filing or change would avoid the need for or reduce the amount of any such additional amounts which would be payable or may thereafter accrue and would not, in the sole determination of such Fronting Bank or such Lender, be otherwise disadvantageous to such Fronting Bank or such Lender. (i) Nothing contained in this Section 2.19 shall require any Lender or Fronting Bank or the Administrative Agent to make available any of its tax returns (or any other information that it deems to be confidential or proprietary). SECTION 2.20. LETTERS OF CREDIT. (a) TRANCHE A LETTERS OF CREDIT. (i) GENERAL. Subject to the terms and conditions and relying upon the representations and warranties of UCAR and the Borrower set forth herein and in the Effectiveness Agreement, each 65 Fronting Bank having a Tranche A L/C Commitment on the Second Closing Date issued the Tranche A Letters of Credit set forth opposite its name on Schedule 2.20, appropriately completed, in each case for the account of the applicable Credit Party specified on Schedule 2.20. The Borrower may thereafter request the issuance of Tranche A Letters of Credit from any Fronting Bank having a Tranche A L/C Commitment, appropriately completed, for the account of the Borrower or another specified Credit Party, at any time and from time to time while the Tranche A Reimbursement Commitments remain in effect, but only to give effect to any reallocation of the Tranche A Exposure permitted under Section 2.11(b) or any reduction of the stated amount of any Tranche A Letter of Credit pursuant to this Agreement or in connection with any permitted amendment, renewal or extension of an existing Tranche A Letter of Credit, including in connection with the conversion of Dollar borrowings under any Local Facility to borrowings in another currency. This Section 2.20(a) shall not be construed to impose an obligation upon any Fronting Bank to issue any Tranche A Letter of Credit that is inconsistent with the terms and conditions of this Agreement or that would result in such Fronting Bank having Tranche A Letters of Credit in an aggregate amount at any time outstanding in excess of such Fronting Bank's Tranche A L/C Commitment. Each Tranche A Letter of Credit shall be in substantially the form of Exhibit I with such changes therefrom as shall in the reasonable judgment of the Administrative Agent and the applicable Fronting Bank be necessary or advisable. (ii) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN CONDITIONS. In order to request the issuance of a Tranche A Letter of Credit after the Effective Date (or to request that a Fronting Bank amend, renew or extend an existing Tranche A Letter of Credit), the Borrower shall hand deliver or telecopy to the applicable Fronting Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of such Tranche A Letter of Credit, or identifying any Tranche A Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension, the date on which such Tranche A Letter of Credit is to expire (which shall comply with paragraph (iii) below), the amount of such Tranche A Letter of Credit, the name and address of the account party (which shall be the Borrower or another Credit Party and shall, in the case of any Letter of Credit issued for the benefit of a Subsidiary, unless resulting in increased costs, be such Subsidiary) and the beneficiary thereof and such other information as shall be necessary to prepare such Tranche A Letter of Credit or grant such issuance, amendment, renewal or extension. Following receipt of such notice and prior to the issuance, amendment, renewal or extension of any Tranche A Letter of Credit, the Administrative Agent shall notify the Borrower and the applicable Fronting Bank of the amount of the Tranche A Exposure after giving effect to (A) the issuance, amendment, renewal or extension of such Tranche A Letter of Credit, (B) the issuance or expiration of any other Tranche A Letter of Credit that is to be issued or will expire prior to the requested date of issuance, amendment, renewal or extension of such Tranche A Letter of Credit and (C) the borrowing or repayment of any Tranche A Reimbursement Borrowings that (based upon notices delivered to the Administrative Agent by the Borrower) are to be borrowed or repaid 66 on or prior to the requested date of issuance of such Tranche A Letter of Credit. Each Tranche A Letter of Credit shall be issued, amended, renewed or extended only if, and upon issuance, amendment, renewal or extension of each Tranche A Letter of Credit the Borrower shall be deemed to represent and warrant that, after giving effect to such issuance, amendment, renewal or extension the Tranche A Exposure shall not have been increased (except as contemplated by Section 2.11(b)(iii)) and each applicable condition set forth in Section 2.11(b) shall have been satisfied. (iii) EXPIRATION DATE. Each Tranche A Letter of Credit shall expire at the close of business on a date no later than the Business Day immediately preceding the Tranche A Maturity Date. No Tranche A Letter of Credit shall be issued (nor shall any Tranche A Letter of Credit be amended, renewed or extended) if (except as contemplated by Section 2.11(b)(iii)) it would result in the Tranche A Exposure exceeding the Total Tranche A Reimbursement Commitment in effect at such time. (iv) PARTICIPATIONS. By the issuance of a Tranche A Letter of Credit and without any further action on the part of the Fronting Bank issuing such Letter of Credit or the Lenders, such Fronting Bank will grant to each Tranche A Lender, and each such Lender will acquire from such Fronting Bank, a participation in such Letter of Credit equal to such Lender's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit, effective upon the issuance of such Letter of Credit. In consideration and in furtherance of the foregoing, each Tranche A Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of such Fronting Bank, such Lender's Applicable Percentage of each Tranche A L/C Disbursement made by such Fronting Bank under such Letter of Credit and not reimbursed by the Borrower or the relevant Credit Party (or, if applicable, another party pursuant to its obligations under any other Loan Document) on or before the next Business Day as provided in paragraph (v) below. Each Tranche A Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Tranche A Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (v) REIMBURSEMENT. If a Fronting Bank shall make any Tranche A L/C Disbursement in respect of a Tranche A Letter of Credit, the Borrower or the Credit Party that is account party under such Letter of Credit shall pay (including by the borrowing of Tranche A Reimbursement Loans) to the Administrative Agent, on or before the Business Day immediately following the date of such Tranche A L/C Disbursement, an amount equal to such Tranche A L/C Disbursement. If the Borrower or such Credit Party shall fail to pay any amount required to be paid under this paragraph on or before such Business Day (or to cause payment thereof when due pursuant to a Tranche A Reimbursement Borrowing), then (A) such unpaid amount shall bear interest, for each day from and including the day of such Tranche A L/C Disbursement to but excluding the date of payment, at a rate per annum equal to the interest rate applicable to overdue ABR Loans that are Tranche A Reimbursement Loans pursuant to 67 Section 2.07 (PROVIDED that the 2.00% margin applicable to overdue Loans shall not be applicable until the first Business Day after the Borrower receives notice from the Administrative Agent that such L/C Disbursement has been or will be made), (B) the Administrative Agent shall notify such Fronting Bank and the Tranche A Lenders thereof, (C) each Tranche A Lender shall comply with its obligation under paragraph (iv) above by wire transfer of immediately available funds, in the same manner as provided in Section 2.02(c) with respect to Loans made by such Lender (and Section 2.02(d) shall apply, MUTATIS MUTANDIS, to the payment obligations of the Tranche A Lenders) and (D) the Administrative Agent shall promptly pay to such Fronting Bank amounts so received by it from the Tranche A Lenders. The Administrative Agent shall promptly pay to each applicable Fronting Bank on a pro rata basis with respect to outstanding Tranche A L/C Disbursements any amounts received by it from the Borrower or any other Credit Party pursuant to this paragraph prior to the time that any Tranche A Lender makes any payment pursuant to paragraph (iv) above; any such amounts received by the Administrative Agent thereafter shall be promptly remitted by the Administrative Agent to the Tranche A Lenders that shall have made such payments and to such Fronting Bank, as their interests may appear. (b) REVOLVING LETTERS OF CREDIT. (i) GENERAL. The Borrower may request the issuance of a Revolving Letter of Credit, in a form reasonably acceptable to the Administrative Agent and the relevant Fronting Bank, appropriately completed, for the account of the Borrower or, at the Borrower's option, another specified Credit Party, at any time and from time to time while the Revolving Credit Commitments remain in effect. This Section 2.20(b) shall not be construed to impose an obligation upon any Fronting Bank to issue any Revolving Letter of Credit that is inconsistent with the terms and conditions of this Agreement or that would result in (A) its having Revolving Letters of Credit in an aggregate stated amount at any time outstanding in excess of such Fronting Bank's Revolving L/C Commitment set forth opposite its name on Schedule 2.20 or (B) there existing Revolving Letters of Credit in an aggregate stated amount at any time in excess of $200,000,000. (ii) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN CONDITIONS. In order to request the issuance of a Revolving Letter of Credit (or to request that a Fronting Bank amend, renew or extend an existing Revolving Letter of Credit), the Borrower shall hand deliver or telecopy to the applicable Fronting Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of such Revolving Letter of Credit, or identifying any Revolving Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension, the date on which such Revolving Letter of Credit is to expire (which shall comply with paragraph (iii) below), the amount of such Revolving Letter of Credit to be issued, amended, renewed or extended, the name and address of the account party (which shall be the Borrower or another Credit Party, as selected by the Borrower) and the beneficiary thereof and such other information as shall be necessary to prepare such Revolving Letter of Credit or grant such issuance, amendment, renewal or extension. Following receipt of such notice and prior to the issuance, amendment, renewal or 68 extension of any Revolving Letter of Credit, the Administrative Agent shall notify the Borrower and the applicable Fronting Bank of the amount of the Aggregate Revolving Credit Exposure and Revolving L/C Exposure after giving effect to (A) the issuance, amendment, renewal or extension of such Revolving Letter of Credit, (B) the issuance or expiration of any other Revolving Letter of Credit that is to be issued or will expire prior to the requested date of issuance of such Revolving Letter of Credit and (C) the borrowing or repayment of any Revolving Loans and Swingline Loans that (based upon notices delivered to the Administrative Agent by the Borrower) are to be borrowed or repaid prior to the requested date of issuance of such Revolving Letters of Credit. Each Revolving Letter of Credit shall be issued, amended, renewed or extended subject to the terms and conditions and relying on the representations and warranties of UCAR and the Borrower set forth herein, and in any case only if, and upon issuance, amendment, renewal or extension of each Revolving Letter of Credit the Borrower shall be deemed to represent and warrant that, after giving effect to such issuance, amendment, renewal or extension the Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit Commitment in effect at such time. (iii) EXPIRATION DATE. Each Revolving Letter of Credit shall expire at the close of business on the earlier of the date one year after the date of the issuance of such Revolving Letter of Credit and the date that is three Business Days prior to the Revolving Credit Maturity Date, unless such Revolving Letter of Credit expires by its terms on an earlier date; PROVIDED that a Revolving Letter of Credit shall not be issued (nor shall a Revolving Letter of Credit be amended, renewed or extended) that would result in the Aggregate Revolving Credit Exposure exceeding the Total Revolving Credit Commitment in effect at such time. Compliance with the foregoing proviso shall be determined based upon the assumption that (A) each Revolving Letter of Credit remains outstanding and undrawn in accordance with its terms until its expiration date (taking into account any rights of renewal or extension that do not require written notice by or consent of any Fronting Bank, in its sole discretion, in order to effect such renewal or extension) and (B) the Revolving Credit Commitments will not be reduced pursuant to Section 2.09. (iv) PARTICIPATIONS. By the issuance of a Revolving Letter of Credit and without any further action on the part of the Fronting Bank issuing such Letter of Credit or the Revolving Credit Lenders, such Fronting Bank will grant to each Revolving Credit Lender, and each such Lender will acquire from such Fronting Bank, a participation in such Revolving Letter of Credit equal to such Revolving Credit Lender's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit, effective upon the issuance of such Revolving Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of such Fronting Bank, such Revolving Credit Lender's Applicable Percentage of each Revolving L/C Disbursement made by such Fronting Bank under such Letter of Credit and not reimbursed by the Borrower (or, if applicable, another party pursuant to its obligations under any other Loan Document) on or before the next Business Day as provided 69 in paragraph (v) below. Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Revolving Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (v) REIMBURSEMENT. If a Fronting Bank shall make any Revolving L/C Disbursement in respect of a Revolving Letter of Credit, the Borrower or the Credit Party that is account party under such Letter of Credit shall pay to the Administrative Agent, on or before the Business Day immediately following the date of such Revolving L/C Disbursement, an amount equal to such Revolving L/C Disbursement. If the Borrower or such Credit Party shall fail to pay any amount required to be paid under this paragraph on or before such Business Day (or to cause payment thereof when due pursuant to a Revolving Credit Borrowing), then (A) such unpaid amount shall bear interest, for each day from and including the day of such Revolving L/C Disbursement to but excluding the date of payment, at a rate per annum equal to the interest rate applicable to overdue ABR Loans that are Revolving Credit Loans pursuant to Section 2.07 (PROVIDED that the 2.00% margin applicable to overdue Loans shall not be applicable until the first Business Day after the Borrower receives notice from the Administrative Agent that such L/C Disbursement has been or will be made), (B) the Administrative Agent shall notify such Fronting Bank and the Revolving Credit Lenders thereof, (C) each Revolving Credit Lender shall comply with its obligation under paragraph (iv) above by wire transfer of immediately available funds, in the same manner as provided in Section 2.02(c) with respect to Loans made by such Revolving Credit Lender (and Section 2.02(d) shall apply, MUTATIS MUTANDIS, to the payment obligations of the Revolving Credit Lenders) and (D) the Administrative Agent shall promptly pay to such Fronting Bank amounts so received by it from the Revolving Credit Lenders. The Administrative Agent shall promptly pay to each applicable Fronting Bank on a pro rata basis with respect to outstanding Revolving L/C Disbursements any amounts received by it from the Borrower or any other Credit Party pursuant to this paragraph prior to the time that any Revolving Credit Lender makes any payment pursuant to paragraph (iv) above; any such amounts received by the Administrative Agent thereafter shall be promptly remitted by the Administrative Agent to the Revolving Credit Lenders that shall have made such payments and to such Fronting Bank, as their interests may appear. (c) OBLIGATIONS ABSOLUTE. The Borrower's and the other Credit Parties' obligations to reimburse L/C Disbursements as provided in paragraphs (a) and (b) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever, and irrespective of: (i) any lack of validity or enforceability of any Letter of Credit or any Loan Document, or any term or provision therein; 70 (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or any Loan Document; (iii) the existence of any claim, setoff, defense or other right that the Borrower, any other Credit Party, any other party guaranteeing, or otherwise obligated with, the Borrower, any other Credit Party, any Subsidiary or other Affiliate thereof or any other person may at any time have against the beneficiary under any Letter of Credit, any Fronting Bank, the Administrative Agent or any Lender (other than the defense of payment in accordance with the terms of this Agreement or a defense based on the gross negligence or wilful misconduct of the applicable Fronting Bank) or any other person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreement or transaction; (iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; PROVIDED that payment by the applicable Fronting Bank shall not have constituted gross negligence or wilful misconduct of such Fronting Bank; (v) payment by any Fronting Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; PROVIDED that payment by the applicable Fronting Bank shall not have constituted gross negligence or wilful misconduct of such Fronting Bank; (vi) nonpayment by any other Fronting Bank for any reason; and (vii) any other act or omission to act or delay of any kind of any Fronting Bank, the Lenders, the Administrative Agent or any other person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.20(c), constitute a legal or equitable discharge of the Borrower's or any other Credit Party's obligations hereunder; PROVIDED that such act or omission shall not have constituted gross negligence or wilful misconduct of such Fronting Bank. (d) DISBURSEMENT PROCEDURES. Each Fronting Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Fronting Bank shall as promptly as possible give telephonic notification, confirmed by telecopy, to the Administrative Agent and the Borrower of such demand for payment and whether such Fronting Bank has made or will make an L/C Disbursement thereunder; PROVIDED that any failure to give or delay in giving such notice shall not relieve the Borrower or any other Credit Party of its obligation to reimburse such Fronting Bank and the Lenders with respect to any such L/C Disbursement. The Administrative Agent shall promptly give each Tranche A Lender or Revolving Credit Lender, as applicable, notice thereof. 71 (e) INTERIM INTEREST. If any Fronting Bank shall make any L/C Disbursement in respect of a Letter of Credit, then, unless the Borrower or the Credit Party that is account party under such Letter of Credit shall reimburse such L/C Disbursement in full on such date, the unpaid amount thereof shall bear interest for the account of such Fronting Bank, for each day from and including the date of such L/C Disbursement, to but excluding the earlier of the date of payment or the date on which interest shall commence to accrue thereon as provided in subparagraph (a)(v) or (b)(v) above, at the rate per annum that would apply to such amount if such amount were an ABR Loan. (f) LIABILITY OF THE FRONTING BANKS. Without limiting the generality of paragraph (c) above, it is expressly understood and agreed that the absolute and unconditional obligation of the Borrower and the other Credit Parties hereunder to reimburse L/C Disbursements will not be excused by the gross negligence or wilful misconduct of any Fronting Bank, except as otherwise expressly provided in said paragraph (c). However, nothing in this Agreement shall be construed to excuse any Fronting Bank from liability to the Borrower or any other Credit Party to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower and the other Credit Parties to the extent permitted by applicable law) suffered by the Borrower or any other Credit Party that are caused by such Fronting Bank's gross negligence or wilful misconduct in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. It is understood that each Fronting Bank may accept documents that appear on their face to be in order, without responsibility for further investigation in making any payment under any Letter of Credit and, except as otherwise expressly provided in said paragraph (c), (i) such Fronting Bank's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect, if such document on its face appears to be in order, and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute wilful misconduct or gross negligence of such Fronting Bank. (g) RESIGNATION OR REMOVAL OF A FRONTING BANK. Any Fronting Bank may resign at any time by giving 180 days' prior written notice to the Administrative Agent, the Lenders and the Borrower, and may be removed at any time by the Borrower by notice to such Fronting Bank, the Administrative Agent and the Lenders, subject in each case to the appointment by the Borrower of a replacement Fronting Bank reasonably satisfactory to the Administrative Agent, PROVIDED that (i) any such replacement Fronting Bank must have credit ratings of at least A from S&P and A2 from Moody's, (ii) The Chase Manhattan Bank shall not resign as Fronting Bank hereunder for any reason other than compliance with 72 applicable legal and regulatory requirements and (iii) no Fronting Bank may resign as to any Letter of Credit previously issued by it. Subject to the next succeeding sentences of this paragraph (g), upon the acceptance of any appointment as the Fronting Bank hereunder by a successor Fronting Bank, such successor shall succeed to and become vested with all the interests, rights and obligations of the retiring Fronting Bank and the retiring Fronting Bank shall be discharged from its obligations to issue additional Letters of Credit hereunder to the extent of the commitment of the successor Fronting Bank to provide Letters of Credit. At the time such removal or resignation shall become effective, the Borrower or each Credit Party that is account party under any Letter of Credit of such Fronting Bank shall pay all accrued and unpaid fees of such Fronting Bank pursuant to Section 2.05(b)(ii). The acceptance of any appointment as Fronting Bank hereunder by a successor Fronting Bank shall be evidenced by an agreement entered into by such successor, in a form satisfactory to the Borrower and the Administrative Agent, and, from and after the effective date of such agreement, (i) such successor Fronting Bank shall have all the rights and obligations of its predecessor Fronting Bank under this Agreement and the other Loan Documents and (ii) references herein and in the other Loan Documents to the term "FRONTING BANK" shall be deemed to refer to such successor or to such predecessor Fronting Bank, or to such successor and all predecessor and current Fronting Banks, as the context shall require. After the resignation or removal of a Fronting Bank hereunder, such retiring Fronting Bank shall remain a party hereto and shall continue to have all the rights and obligations of a Fronting Bank under this Agreement and the other Loan Documents with respect to Letters of Credit issued by it prior to such resignation or removal, but shall not be required to issue additional Letters of Credit. (h) CASH COLLATERALIZATION. If any Event of Default shall occur and be continuing, the Borrower and the other Credit Parties shall, on the Business Day the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Tranche A Lenders or Revolving Credit Lenders, as applicable, holding participations in outstanding Letters of Credit representing a majority of the aggregate undrawn amount of all outstanding Tranche A Letters of Credit or Revolving Letters of Credit, as applicable) thereof and of the amount to be deposited, deposit in an account with the Collateral Agent, for the benefit of the Tranche A Lenders or Revolving Credit Lenders, as applicable, an aggregate amount in cash equal to the Tranche A L/C Exposure or Revolving L/C Exposure, as applicable, as of such date; PROVIDED, that no Credit Party that is a foreign Subsidiary shall deposit any amount in excess of the portion of the Tranche A L/C Exposure or Revolving L/C Exposure in respect of which foreign Credit Parties are the account parties and such deposited amount shall serve to secure only the obligations of foreign Credit Parties in respect of such portion. If requested by the Borrower, the Administrative Agent will create separate collateral accounts for each Credit Party or take any other action, at the sole cost of the Borrower, that is reasonably requested to avoid taxes. Such deposit shall be held by the Collateral Agent as collateral for the payment and performance of the Obligations. The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. 73 Other than any interest earned on the investment of such deposits in Permitted Investments, which investments shall be made at the option and sole discretion of the Collateral Agent (PROVIDED that the Collateral Agent shall use reasonable efforts to make such investments), such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall (a) automatically be applied by the Administrative Agent to reimburse the Fronting Banks on a pro rata basis for Tranche A L/C Disbursements or Revolving L/C Disbursements, as applicable, which have not been reimbursed, (b) be held for the satisfaction of the reimbursement obligations of the Borrower and the other Credit Parties for the Tranche A L/C Exposure or Revolving L/C Exposure, as applicable, and (c) if the maturity of the Loans has been accelerated (but subject to the consent of Tranche A Lenders or Revolving Credit Lenders, as applicable, holding participations in outstanding Letters of Credit representing greater than 50% of the aggregate undrawn amount of all outstanding Tranche A Letters of Credit or Revolving Letters of Credit, as applicable), be applied to satisfy the Obligations. If the Borrower and the other Credit Parties are required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower and the other Credit Parties within three Business Days after all Events of Default have been cured or waived. (i) ADDITIONAL FRONTING BANKS. From time to time, the Borrower may by notice to the Administrative Agent designate additional Fronting Banks reasonably satisfactory to the Administrative Agent; PROVIDED that such additional Fronting Banks must have credit ratings of at least A from S&P and A2 from Moody's. Such additional Fronting Banks shall execute a counterpart of this Agreement upon approval of the Administrative Agent (which shall not be unreasonably withheld) and shall thereafter be Fronting Banks hereunder for all purposes and shall have the Tranche A L/C Commitment or Revolving L/C Commitment noted under their signature and, if applicable, the Tranche A L/C Commitment or Revolving L/C Commitment of any other Fronting Bank shall be reduced by the amount or amounts specified to the Administrative Agent and each affected Fronting Bank and delivered concurrently with any notice of designation of an additional Fronting Bank. ARTICLE III REPRESENTATIONS AND WARRANTIES Each of UCAR and the Borrower represents and warrants to each of the Lenders that: SECTION 3.01. ORGANIZATION; POWERS. Each of UCAR, the Borrower and each of the Subsidiaries (a) is a corporation duly organized, validly existing and in good standing (or, if applicable in a foreign jurisdiction, enjoys the equivalent status under the laws of any jurisdiction of organization outside the United States) under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be 74 conducted, (c) is qualified to do business in every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) has the corporate power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Credit Parties, to borrow and otherwise obtain credit hereunder. SECTION 3.02. AUTHORIZATION. The execution, delivery and performance by UCAR, the Borrower and each of the Subsidiaries of each of the Loan Documents to which it is or will be a party and, in the case of the Credit Parties, the borrowings and other extensions of credit hereunder, and the other transactions contemplated hereby and thereby (collectively, the "TRANSACTIONS") (a) have been duly authorized by all corporate and stockholder action required to be obtained by UCAR, the Borrower and the Subsidiaries and (b) will not (i) violate (A) any provision of any law, statute, rule or regulation or of the certificate or articles of incorporation or other constitutive documents or by-laws of UCAR, the Borrower or any Subsidiary, (B) any applicable order of any court or any rule, regulation or order of any Governmental Authority or (C) any provision of any indenture, certificate of designation for preferred stock, agreement or other instrument to which UCAR, the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any such indenture, certificate of designation for preferred stock, agreement or other instrument, where any such conflict, violation, breach or default referred to in clause (i) or (ii) of this Section 3.02, individually or in the aggregate could reasonably be expected to have a Material Adverse Effect, or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by UCAR, the Borrower or any Subsidiary, other than the Liens created by the Loan Documents. SECTION 3.03. ENFORCEABILITY. This Agreement has been duly executed and delivered by UCAR, the Borrower and each other Credit Party which is party hereto and constitutes, and each other Loan Document when executed and delivered by UCAR, the Borrower and each other Loan Party which is party thereto will constitute, a legal, valid and binding obligation of UCAR, the Borrower and such Loan Party enforceable against UCAR, the Borrower and such Loan Party in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). SECTION 3.04. GOVERNMENTAL APPROVALS. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for (a) filings and recording necessary to satisfy the Collateral Requirement, (b) such as have been made or obtained and are in full force and effect and (c) such actions, consents, registrations, filings and approvals the 75 failure to obtain or make which could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.05. FINANCIAL STATEMENTS. UCAR has heretofore furnished to the Lenders its consolidated balance sheets and consolidated statements of operations, cash flows and stockholders' equity as of and for the fiscal year ended December 31, 1997, audited by and accompanied by the opinion of KPMG Peat Marwick LLP, independent public accountants. Such financial statements present fairly the financial condition and results of operations of UCAR and its consolidated subsidiaries as of such dates and for such periods. Except as disclosed in the Information Memorandum, none of UCAR, the Borrower and the Subsidiaries has or shall have as of the Effective Date any material Guarantee, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including any interest rate or foreign currency hedging transaction, which is not reflected in the foregoing statements or the notes thereto. Such financial statements were prepared in accordance with GAAP applied on a consistent basis. SECTION 3.06. NO MATERIAL ADVERSE CHANGE. There has been no material adverse change in the assets, liabilities (including contingent liabilities), business, properties, financial condition or results of operations of UCAR and its subsidiaries, taken as a whole, since December 31, 1997 (other than those matters specifically disclosed in the Information Memorandum and then only to the extent reflected in the financial projections contained therein; it being understood that general references in the Information Memorandum to the possibility of the development of adverse or worsening circumstances shall not constitute specific disclosure for purposes of this exception). SECTION 3.07. TITLE TO PROPERTIES; POSSESSION UNDER LEASES. (a) Each of UCAR, the Borrower and the Subsidiaries has good and marketable title to, or valid leasehold interests in, or easements or other limited property interests in, all its material properties and assets, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes. All such material properties and assets are free and clear of Liens, other than Liens expressly permitted by Section 6.02. (b) Each of UCAR, the Borrower and the Subsidiaries has complied with all obligations under all material leases to which it is a party, except where the failure to comply would not have a Material Adverse Effect, and all such leases are in full force and effect, except leases in respect of which the failure to be in full force and effect could not reasonably be expected to have a Material Adverse Effect. Each of UCAR, the Borrower and the Subsidiaries enjoys peaceful and undisturbed possession under all such material leases, other than leases which, individually or in the aggregate, are not material to the Borrower and the Subsidiaries, taken as a whole, and in respect of which the failure to enjoy peaceful and undisturbed possession could not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect. 76 (c) Each of UCAR, the Borrower and the Subsidiaries owns or has licenses to use, or could obtain ownership of or licenses to use, on terms not materially adverse to it, all patents, trademarks, service marks, trade names, copyrights and rights with respect thereto necessary for the present conduct of its business, without any known conflict with the rights of others, and free from any burdensome restrictions, except where such conflicts and restrictions could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 3.08. SUBSIDIARIES. (a) Schedule 3.08 sets forth as of the Effective Date the name and jurisdiction of incorporation of each Subsidiary and, as to each such Subsidiary, the percentage of each class of Capital Stock owned by the Borrower or by any Subsidiary. (b) As of the Effective Date, there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than those granted to employees, consultants or directors and directors' qualifying shares) of any nature relating to any Capital Stock of UCAR, the Borrower or any Subsidiary, except under the Loan Documents or as set forth on Schedule 3.08. SECTION 3.09. LITIGATION; COMPLIANCE WITH LAWS. (a) Except as set forth in Schedule 3.09, there are not any material actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of the Borrower, threatened against or affecting UCAR, the Borrower or any Subsidiary or any business, property or rights of any such person (i) which involve any Loan Document or, as of the Effective Date, the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and which, if adversely determined, could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (b) None of UCAR, the Borrower, the Subsidiaries and their respective material properties or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any law, rule or regulation (including any Environmental Law), or is in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect. It is understood that the violations that occurred prior to March 13, 1998, and that gave rise to the Litigation Liabilities shall not be deemed a breach of this Section 3.09(b). SECTION 3.10. AGREEMENTS. (a) None of UCAR, the Borrower and the Subsidiaries is a party to any agreement or instrument or subject to any corporate restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect. (b) None of UCAR, the Borrower and the Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other material agreement or instrument to which it is a party or by which 77 it or any of its properties or assets are or may be bound, in either case where such default could reasonably be expected to result in a Material Adverse Effect. Immediately after giving effect to the Transactions, no Default or Event of Default shall have occurred and be continuing. SECTION 3.11. FEDERAL RESERVE REGULATIONS. (a) None of UCAR, the Borrower and the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. (b) No part of the proceeds of any Loan or Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose, or (ii) for any purpose which entails a violation of, or which is inconsistent with, the provisions of the Regulations of the Board, including Regulation U or X. SECTION 3.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. None of UCAR, the Borrower and the Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.13. USE OF PROCEEDS. The Credit Parties have used, and will use, the proceeds of the Loans and have requested, and will request, the issuance of Letters of Credit only for the purposes specified in the preamble to this Agreement. SECTION 3.14. TAX RETURNS. Each of UCAR, the Borrower and the Subsidiaries has timely filed or caused to be timely filed all Federal, and all material state and local, tax returns required to have been filed by it and has paid or caused to be paid all taxes shown thereon to be due and payable by it and all assessments in excess of $2,000,000 in the aggregate received by it, except taxes or assessments that are being contested in good faith by appropriate proceedings in accordance with Section 5.03 and for which such person has set aside on its books adequate reserves and taxes, assessments, charges, levies or claims in respect of property taxes for property that UCAR, the Borrower or a Subsidiary has determined to abandon where the sole recourse for such tax, assessment, charge, levy or claim is to such property. Each of UCAR, the Borrower and the Subsidiaries has paid in full or made adequate provision (in accordance with GAAP) for the payment of all taxes due with respect to all periods ending on or before the Effective Date, which taxes, if not paid or adequately provided for, could reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.14, as of the Effective Date, with respect to each of UCAR, the Borrower and the Subsidiaries, (a) no material claims are being asserted in writing with respect to any taxes, (b) no presently effective waivers or extensions of statutes of limitation with respect to taxes have been given or requested, (c) no tax returns are being examined by, and no written notification of intention to examine has been received from, the Internal Revenue Service or, 78 with respect to any material potential tax liability, any other taxing authority and (d) no currently pending issues have been raised in writing by the Internal Revenue Service or, with respect to any material potential tax liability, any other taxing authority. For purposes hereof, "TAXES" shall mean any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any Governmental Authority. SECTION 3.15. NO MATERIAL MISSTATEMENTS. (a) The written information, reports, financial statements, exhibits and schedules furnished by or on behalf of UCAR, the Borrower or any of the Subsidiaries to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto (including the Confidential Information Memorandum (the "INFORMATION MEMORANDUM") dated October 1998 relating to UCAR and its subsidiaries), when taken as a whole, did not contain, and as they may be amended, supplemented or modified from time to time, will not contain, as of the Effective Date any material misstatement of fact and did not omit, and as they may be amended, supplemented or modified from time to time, will not omit, to state as of the Effective Date any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not materially misleading in their presentation of the refinancing (as described in the Information Memorandum) or of UCAR, the Borrower, and the Subsidiaries, taken as a whole. (b) All financial projections concerning UCAR, the Borrower and the Subsidiaries that are or have been made available to the Administrative Agent or any Lender by UCAR, the Borrower or any Subsidiary, including those contained in the Information Memorandum, unless otherwise disclosed, have been or will be prepared in good faith based upon assumptions believed by UCAR and the Borrower to be reasonable. SECTION 3.16. EMPLOYEE BENEFIT PLANS. Each of UCAR, the Borrower and the ERISA Affiliates is in compliance with the applicable provisions of ERISA and the provisions of the Code relating to ERISA and the regulations and published interpretations thereunder and any similar applicable non-U.S. law except for such noncompliance which could not reasonably be expected to result in a Material Adverse Effect. No Reportable Event has occurred as to which UCAR, the Borrower or any ERISA Affiliate was required to file a report with the PBGC, other than reports for which the 30 day notice requirement is waived, reports that have been filed and reports the failure of which to file could not reasonably be expected to result in a Material Adverse Effect. As of the Effective Date, the present value of all benefit liabilities under each Plan of UCAR, the Borrower and the ERISA Affiliates (on a termination basis and based on the actual assumptions used by such Plan under Section 412 of the Code) did not, as of the last annual valuation date applicable thereto for which a valuation is available, exceed by more than $7,500,000 the value of the assets of such Plan, and the present value of all benefit liabilities of all underfunded Plans (based on the actual assumptions used by such Plan under Section 412 of the Code) did not, as of the last annual valuation dates applicable thereto for which valuations are 79 available, exceed by more than $15,000,000 the value of the assets of all such underfunded Plans. None of UCAR, the Borrower and the ERISA Affiliates has incurred or could reasonably be expected to incur any Withdrawal Liability that could reasonably be expected to result in a Material Adverse Effect. None of UCAR, the Borrower and the ERISA Affiliates has received any written notification that any Multiemployer Plan is in reorganization or has been terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, where such reorganization or termination has resulted or could reasonably be expected to result, through increases in the contributions required to be made to such Plan or otherwise, in a Material Adverse Effect. SECTION 3.17. ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.17: (a) There has not been a Release or threatened Release of Hazardous Materials at, on, under or around the properties currently owned or currently or formerly operated by UCAR, the Borrower and the Subsidiaries (the "PROPERTIES") in amounts or concentrations which (i) constitute or constituted a violation of Environmental Laws, except as could not reasonably be expected to have a Material Adverse Effect, (ii) would reasonably be expected to give rise to an Environmental Claim which, in any such case or in the aggregate, is reasonably likely to result in a Material Adverse Effect or (iii) could reasonably be expected to impair materially the fair saleable value of any material Property. (b) The Properties and all operations of UCAR, the Borrower and the Subsidiaries are in compliance, and in all prior periods have been in compliance, with all Environmental Laws, and all necessary Environmental Permits have been obtained and are in effect, except to the extent that such non-compliance or failure to obtain any necessary permits, in the aggregate, are not reasonably likely to result in a Material Adverse Effect. (c) None of UCAR, the Borrower and the Subsidiaries has received any written notice of an Environmental Claim in connection with the Properties or the operations of the Borrower or the Subsidiaries or with regard to any person whose liabilities for environmental matters UCAR, the Borrower or the Subsidiaries has retained or assumed, in whole or in part, contractually, by operation of law or otherwise, which, in either such case or in the aggregate, is reasonably likely to result in a Material Adverse Effect. (d) Hazardous Materials have not been transported from the Properties, nor have Hazardous Materials been generated, treated, stored or disposed of at, on, under or around any of the Properties in a manner that could reasonably be expected to give rise to liability of UCAR, the Borrower or any Subsidiary under any Environmental Law, nor have any of UCAR, the Borrower and the Subsidiaries retained or assumed any liability, contractually, by operation of law or otherwise, with respect to the generation, treatment, storage or disposal of Hazardous Materials, which, in each case, individually or in the aggregate, is reasonably likely to result in a Material Adverse Effect. 80 (e) No Lien in favor of any Governmental Authority for (i) any liability under any Environmental Law or (ii) damages arising from or costs incurred by such Governmental Authority in response to a Release or threatened Release of Hazardous Materials into the environment has been recorded with respect to the Properties except for Liens permitted by Section 6.02 or by the Tranche C Facility Credit Agreement. (f) During the period from the date of the environmental assessment report prepared by ENVIRON Corporation in connection with the Recapitalization to the Effective Date, no event has occurred or been discovered, no liability has been incurred and no Environmental Claim has been asserted that, had it been in existence at the time such report was issued, would have materially adversely altered the conclusions contained therein with respect to the properties, activities and operations covered thereby. SECTION 3.18. CAPITALIZATION OF UCAR AND THE BORROWER. The authorized Capital Stock, the par value thereof and the amount of such authorized Capital Stock issued and outstanding for each of UCAR and the Borrower as of October 31, 1998 is set forth on Schedule 3.18 (except for changes in the outstanding common stock of UCAR due to exercises under employee stock option or employee stock purchase plans in the ordinary course since August 31, 1998). All outstanding shares of Capital Stock of the Borrower are fully paid and nonassessable, are owned beneficially and of record by UCAR and are free and clear of all Liens and encumbrances whatsoever other than the Liens created by the Loan Documents. SECTION 3.19. SECURITY DOCUMENTS. (a) Each Pledge Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties secured thereby, a legal, valid and enforceable security interest in the Collateral described therein and, when certificates or promissory notes representing the Collateral (as defined in the applicable Pledge Agreement) are delivered to the Collateral Agent and the other actions specified in such Pledge Agreement have been taken, each such Pledge Agreement will constitute a duly perfected first priority Lien on, and security interest in, all right, title and interest of each Pledgor thereunder in such Collateral, in each case prior and superior in right to any other person, subject to the agreements listed in Schedule 3.08. (b) Each Security Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties secured thereby, a legal, valid and enforceable security interest in the Collateral described therein and, when financing statements in appropriate form are filed in the offices specified on the schedules to each such Security Agreement and the other actions specified in such Security Agreement have been taken, each such Security Agreement will constitute a duly perfected Lien on, and security interest in, all right, title and interest of the Pledgors thereunder in such Collateral and, to the extent contemplated therein and subject to ss. 9-306 of the Uniform Commercial Code, the proceeds thereof, in each case prior and superior in right to any other person, other than with respect to Liens expressly permitted by Section 6.02 and by the Tranche C Facility Credit Agreement. 81 (c) Each Mortgage is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties secured thereby, a legal, valid and enforceable Lien on all of the Loan Parties' right, title and interest in and to the Mortgaged Properties thereunder and, to the extent contemplated therein and subject to ss. 9-306 of the Uniform Commercial Code, the proceeds thereof, and when each such Mortgage is filed in the offices specified on the schedules thereto, when financing statements in appropriate form are filed in the offices specified on the schedules thereto and when the other actions required by applicable law and specified on the schedules thereto have been taken, each Mortgage will constitute an enforceable mortgage Lien on, and duly perfected security interest in, all right, title and interest of the Loan Parties in the Mortgaged Property subject thereto and, to the extent contemplated therein and subject to ss. 9-306 of the Uniform Commercial Code, the proceeds thereof, in each case prior and superior in right to any other person, other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 6.02 and by the Tranche C Facility Credit Agreement. (d) The Intellectual Property Security Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties secured thereby, a legal, valid and enforceable security interest in the Collateral described therein, and when financing statements in appropriate form are filed in the offices specified in the schedules thereto and the Intellectual Property Security Agreement is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Intellectual Property Security Agreement will constitute a duly perfected Lien on, and security interest in, all right, title and interest of the Pledgors in such Collateral and, to the extent contemplated therein and subject to ss. 9-306 of the Uniform Commercial Code, the proceeds thereof, in each case prior and superior in right to any other person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a lien on registered trademarks, trademark applications and copyrights acquired by the Pledgors after the date hereof), other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 6.02 and by the Tranche C Facility Credit Agreement. SECTION 3.20. LABOR MATTERS. Except as set forth in Schedule 3.20, there are no strikes pending or threatened against UCAR, the Borrower or any Subsidiary which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. The hours worked and payments made to employees of UCAR, the Borrower and the Subsidiaries have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable law dealing with such matters. All material payments due from UCAR, the Borrower or any Subsidiary or for which any claim may be made against UCAR, the Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of UCAR, the Borrower or such Subsidiary to the extent required by GAAP. None of the consummation of the Recapitalization, the consummation of the refinancing effected in October 1995, the consummation of the refinancing effected in March 1997 and the Transactions has given or 82 will give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which UCAR, the Borrower or any Subsidiary (or any predecessor) is a party or by which UCAR, the Borrower or any Subsidiary (or any predecessor) is bound, other than collective bargaining agreements which, individually or in the aggregate, are not material to UCAR, the Borrower and the Subsidiaries taken as a whole. SECTION 3.21. NO FOREIGN ASSETS CONTROL REGULATION VIOLATION. None of the Transactions will result in a violation of any of the foreign assets control regulations of the United States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as amended (including the Foreign Assets Control Regulations, the Transaction Control Regulations, the Cuban Assets Control Regulations, the Foreign Funds Control Regulations, the Iranian Assets Control Regulations, the Nicaraguan Trade Control Regulations, the South African Transactions Regulations, the Libyan Sanctions Regulations, the Soviet Gold Coin Regulations, the Panamanian Transactions Regulations, the Kuwaiti Assets Control Regulations and the Iraqi Sanctions Regulations contained in said Chapter V), or any ruling issued thereunder or any enabling legislation or Presidential Executive Order granting authority therefor, nor will the proceeds of the Loans or the Letters of Credit be used by any of the Credit Parties in a manner that would violate any thereof. SECTION 3.22. INSURANCE. Each of UCAR, the Borrower and the Subsidiaries carries and maintains with respect to its insurable properties insurance (including, to the extent consistent with past practices, self-insurance) with financially sound and reputable insurers of the types, to such extent and against such risks as is customary with companies in the same or similar businesses. SECTION 3.23. LOCATION OF REAL PROPERTY AND LEASED PREMISES. (a) Schedule 3.23(a) lists completely and correctly as of the Effective Date all real property owned by UCAR, the Borrower, each domestic Subsidiary, each Subsidiary that is a borrower under a Local Facility and each other Subsidiary that is required to grant a Mortgage pursuant to the Collateral Requirement and the address thereof. As of the Effective Date, UCAR, the Borrower and the Subsidiaries own in fee all the real property set forth as being owned by them on Schedule 3.23(a). (b) Schedule 3.23(b) lists completely and correctly as of the Effective Date, all real property leased by UCAR, the Borrower, each domestic Subsidiary, each Subsidiary that is a borrower under a Local Facility and each other Subsidiary that is required to grant a leasehold mortgage pursuant to the Collateral Requirement and the address thereof. As of the Effective Date, UCAR, the Borrower and the Subsidiaries have valid leases in all the real property set forth as being leased by them on Schedule 3.23(b). SECTION 3.24. LITIGATION LIABILITIES. The sum of the aggregate Litigation Payments plus Reserves in respect of Litigation Liabilities does not, and is not reasonably expected to, exceed $400,000,000 (including $90,000,000 (calculated on a present value basis) of payments to the Department of Justice); PROVIDED that it is understood that all other Litigation Payments and Reserves will 83 be calculated on a gross dollar basis for purposes of determining the accuracy of this representation. SECTION 3.25. YEAR 2000. Any reprogramming required to permit the proper functioning, in and following the year 2000, of (i) UCAR's, the Borrower's and each Subsidiaries' computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which their systems interface) and the testing of all such systems and equipment, as so reprogrammed, will be completed in all material respects by June 30, 1999. The cost to UCAR, the Borrower and each Subsidiary of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to UCAR, the Borrower and each Subsidiary (including, without limitation, reprogramming errors and the failure of others' systems or equipment) could not reasonably be expected to result in a Default or a Material Adverse Effect. Except for such of the reprogramming referred to in the preceding sentence as may be necessary, the computer and management information systems of UCAR, the Borrower and each Subsidiary are and, with ordinary course upgrading and maintenance, will continue for the term of this Agreement to be, sufficient to permit UCAR, the Borrower and each Subsidiary to conduct its businesses without Material Adverse Effect. ARTICLE IV CONDITIONS SECTION 4.01. EFFECTIVE DATE. This amendment and restatement shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.08): (a) The Administrative Agent (or its counsel) shall have received from UCAR, the Borrower and the Required Lenders either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent, the Collateral Agent, the Lenders and the Fronting Banks and dated the Effective Date) of each of (i) Kelley Drye & Warren LLP, counsel for UCAR and the Borrower, substantially to the effect set forth in the form of Exhibit N-1, (ii) the General Counsel of UCAR and the Borrower, substantially to the effect set forth in the form of Exhibit N-2, and (iii) local counsel in each jurisdiction listed on Schedule 4.01, substantially to the effect set forth in the forms of such opinions set forth in Exhibit N-3, and, in the case of each such opinion required by this paragraph, covering such other matters relating to the Loan Parties, the Loan Documents or the Transactions as the Required Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinions. 84 (c) The Administrative Agent shall have received (i) in the case of each domestic Loan Party, each of the items referred to in clauses (A), (B) and (C) below and, in the case of each other Loan Party, as requested by the Administrative Agent, the equivalent documentation in its jurisdiction of organization: (A) a copy of the certificate or articles of incorporation, including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of each Loan Party as of a recent date from such Secretary of State; (B) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Effective Date and certifying (w) that attached thereto is a true and complete copy of the by-laws of such Loan Party as in effect on the Effective Date and at all times since a date immediately prior to the date of the resolutions described in clause (x) below, (x) that attached thereto is a true and complete copy of the resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrower and the other Credit Parties, the borrowings and issuances of Letters of Credit under this Agreement and the borrowings under the Local Facility Credit Agreements, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (y) that the certificate or articles of incorporation of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (A) above, and (z) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; and (C) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to (B) above; and (ii) such other documents as the Lenders, the Fronting Banks, Cravath, Swaine & Moore, counsel for the Administrative Agent, or, in the case of any Local Facility or foreign Credit Party, counsel for the Administrative Agent in the jurisdiction of such Local Facility or foreign Credit Party, may reasonably request. (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (b) and (c) of Section 4.02. (e) The Collateral Requirement shall have been satisfied. (f) The Guarantee Requirement shall have been satisfied. (g) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including (i) all Fees accrued under this Agreement immediately prior to the Effective Date and (ii) to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document. (h) The Lenders shall have received a reasonably satisfactory pro forma consolidated balance sheet of UCAR as of September 30, 1998, reflecting all pro forma adjustments as if the Transactions had been consummated on such date, together with a certificate of the Borrower signed by a Financial Officer of the Borrower to the effect that such balance sheet fairly presents the pro forma financial position of UCAR and its subsidiaries in accordance with GAAP, and such pro forma consolidated balance sheet shall be consistent in all material respects with the forecasts and other information previously provided to the Lenders. (i) All requisite material governmental authorities and all material third parties shall have been approved or consented to the Transactions and the other transactions contemplated hereby to the extent required and all applicable appeal periods shall have expired. (j) The Senior Subordinated Indenture shall have been amended so that, after giving effect to such amendment, the Senior Subordinated Indenture will not prohibit the incurrence of Indebtedness (including in the form of Guarantees) and the granting of liens under this Agreement, the Tranche C Facility Credit Agreement and the other Loan Documents on terms reasonably satisfactory in form and substance to the Administrative Agent. (k) This Agreement and the other Loan Documents shall have been amended, to the satisfaction of the Administrative Agent, in order to effect the Transactions, including the incurrence of Indebtedness under (including in the form of Guarantees) and the granting of Liens in respect of the Tranche C Facility. (l) The Tranche C Facility Credit Agreement shall have become effective in accordance with its terms. (m) As of the Effective Date, immediately prior to giving effect to the amendment and restatement of this Agreement, no Default shall have occurred and be continuing under this Agreement. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, this amendment and restatement shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.08) at or prior to 3:00 p.m., New York City time, on January 15, 1999. SECTION 4.02. EACH CREDIT EVENT. On the date of each Borrowing and on the date of each issuance, renewal or extension of a Letter of Credit hereunder (other than (a) a Borrowing in which a Revolving Loan is continued or converted as contemplated by Section 2.10 without any increase in the aggregate principal amount of Revolving Loans outstanding, (b) a Tranche A Letter of Credit or 85 Tranche A Reimbursement Loan issued, increased or made pursuant to Section 2.11(b) (including for purposes of Section 2.20(a)(v)) and (c) an extension or renewal of any Letter of Credit made without any increase in the stated amount of such Letter of Credit), the following conditions must be satisfied (or waived pursuant to Section 9.08) (each a "CREDIT EVENT"): (a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03 or, in the case of the issuance of a Letter of Credit, the Fronting Bank and the Administrative Agent shall have received a notice requesting the issuance of such Letter of Credit as required by Section 2.20(a) or 2.20(b), as applicable. (b) The representations and warranties set forth in Article III hereof shall be true and correct in all material respects on and as of the date of such Credit Event with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (c) At the time of and immediately after such Credit Event, no Event of Default or Default shall have occurred and be continuing. (d) At the time of and immediately after such Credit Event, the Administrative Agent shall have received a certificate of the Borrower signed by a Financial Officer of the Borrower (i) in the case of a Credit Event with respect to the Revolving Credit Commitments, certifying that each condition required to be met in connection with the incurrence of additional Indebtedness under Section 4.03(b), 4.03(c) and/or 4.03(f), as applicable, of the Senior Subordinated Indenture (or, if applicable, the analogous provision of each Refinancing Note Indenture) has been satisfied, (ii) certifying that the Loans to be made or the obligations of the Borrower in respect of the Letter of Credit to be issued or renewed will constitute "Senior Indebtedness" for purposes of the Senior Subordinated Indenture and each applicable Refinancing Note Indenture and (iii) setting forth in reasonable detail the calculations necessary to certify as to such compliance. Each Credit Event (except those specified in the parenthetical contained in the introductory paragraph of this Article IV) shall be deemed to constitute a representation and warranty by UCAR and the Borrower on the date of such Borrowing or issuance, as the case may be, as to the matters specified in paragraphs (b) and (c) of this Section 4.02. In no event shall the existence of a Tranche A L/C Disbursement or a default or event of default under any Local Facility Loan Document in itself cause a failure to meet the lending conditions set forth above. 86 ARTICLE V AFFIRMATIVE COVENANTS Each of UCAR and the Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been cancelled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, each of UCAR and the Borrower will, and will cause each of the Subsidiaries to: SECTION 5.01. EXISTENCE; BUSINESSES AND PROPERTIES. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05, and except for the liquidation or dissolution of Subsidiaries if the assets of such corporations to the extent they exceed estimated liabilities are acquired by the Borrower or a Wholly Owned Subsidiary in such liquidation or dissolution; PROVIDED that Subsidiaries which are Guarantors may not be liquidated into Subsidiaries that are not Guarantors and domestic Subsidiaries may not be liquidated into foreign Subsidiaries. (b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; comply in all material respects with all applicable laws, rules, regulations (including any Environmental Law) and orders of any Governmental Authority, whether now in effect or hereafter enacted; and at all times maintain and preserve all property material to the conduct of such business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith, if any, may be properly conducted at all times (in each case except as expressly permitted by this Agreement). SECTION 5.02. INSURANCE. (a) Keep its insurable properties insured at all times by financially sound and reputable insurers in such amounts as shall be customary for similar businesses and maintain such other insurance (including, to the extent consistent with past practices, self-insurance), of such types, to such extent and against such risks, as is customary with companies in the same or similar businesses. (b) Cause all such property and casualty insurance policies with respect to the Mortgaged Properties to be endorsed or otherwise amended to include a "standard" or "New York" lender's loss payable endorsement, in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent, which endorsement shall provide that, from and after the Effective Date, if the insurance carrier shall have received written notice 87 from the Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to the Borrower or the Loan Parties under such policies directly to the Collateral Agent; cause all such policies to provide that neither the applicable Loan Party, the Administrative Agent, the Collateral Agent nor any other party shall be a coinsurer thereunder and to contain a "Replacement Cost Endorsement", without any deduction for depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may reasonably (in light of a Default or a material development in respect of the insured Mortgaged Property) require from time to time to protect their interests; deliver original or certified copies of all such policies to the Collateral Agent; cause each such policy to provide that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium upon not less than 10 days' prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent or (ii) for any other reason upon not less than 30 days' prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent; deliver to the Administrative Agent and the Collateral Agent, prior to the cancellation, modification or nonrenewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent and the Collateral Agent), or insurance certificate with respect thereto, together with evidence reasonably satisfactory to the Administrative Agent and the Collateral Agent of payment of the premium therefor. (c) If at any time the area in which the Premises (as defined in the Mortgages) are located is designated (i) a "flood hazard area" in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such reasonable total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time reasonably require, and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time, or (ii) a "Zone 1" area (as so designated in the National Ocean and Earthquake Risk Map), obtain earthquake insurance in such reasonable total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time reasonably require. (d) With respect to each Mortgaged Property, carry and maintain comprehensive general liability insurance and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all claims, in no event for a combined single limit of less than $1,000,000, naming the Collateral Agent as an additional insured, on forms reasonably satisfactory to the Collateral Agent. (e) Notify the Administrative Agent and the Collateral Agent promptly whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.02 is taken out by UCAR, the Borrower or any Subsidiary; and promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original 88 copy of such policy or policies, or insurance certificate with respect thereto. (f) In connection with the covenants set forth in this Section 5.02, it is understood and agreed that: (i) none of the Administrative Agent, the Collateral Agent, the Lenders, the Fronting Banks and their respective agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 5.02, it being understood that (A) the Borrower and the other Loan Parties shall look solely to their insurance companies or any other parties other than the aforesaid parties for the recovery of such loss or damage and (B) such insurance companies shall have no rights of subrogation against the Administrative Agent, the Collateral Agent, the Lenders, the Fronting Banks or their agents or employees. If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then each of UCAR and the Borrower hereby agree, to the extent permitted by law, to waive, and to cause each Subsidiary to waive, its right of recovery, if any, against the Administrative Agent, the Collateral Agent, the Lenders, the Fronting Banks and their agents and employees; and (ii) the designation of any form, type or amount of insurance coverage by the Administrative Agent, the Collateral Agent or the Required Lenders under this Section 5.02 shall in no event be deemed a representation, warranty or advice by the Administrative Agent, the Collateral Agent or the Lenders that such insurance is adequate for the purposes of the business of UCAR, the Borrower and the Subsidiaries or the protection of their properties. SECTION 5.03. TAXES. Pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise which, if unpaid, might give rise to a Lien upon such properties or any part thereof; PROVIDED, HOWEVER, that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy or claim so long as (a) the validity or amount thereof shall be contested in good faith by appropriate proceedings and UCAR, the Borrower or the affected Subsidiary, as applicable, shall have set aside on its books adequate reserves with respect thereto, (b) such tax, assessment, charge, levy or claim is in respect of property taxes for property that UCAR, the Borrower or one of the Subsidiaries has determined to abandon and the sole recourse for such tax, assessment, charge, levy or claim is to such property or (c) the amount of such taxes, assessments, charges, levies and claims and interest and penalties thereon does not exceed $1,000,000 in the aggregate. 89 SECTION 5.04. FINANCIAL STATEMENTS, REPORTS, ETC. In the case of the Borrower, furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year, a consolidated balance sheet and related statements of operations, cash flows and stockholders' equity showing the financial condition of UCAR, the Borrower and the Subsidiaries as of the close of such fiscal year and the consolidated results of their operations during such year, all audited by KPMG Peat Marwick LLC or other independent public accountants of recognized national standing reasonably acceptable to the Administrative Agent and accompanied by an opinion of such accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present the financial condition and results of operations of UCAR, the Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, a consolidated balance sheet and related statements of operations, cash flows and stockholders' equity showing the financial condition of UCAR, the Borrower and the Subsidiaries as of the close of such fiscal quarter and the consolidated results of their operations during such fiscal quarter and the then-elapsed portion of the fiscal year, all certified by one of its Financial Officers on behalf of the Borrower as fairly presenting the financial condition and results of operations of UCAR, the Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP (except for the absence of footnotes), subject to normal year-end audit adjustments; (c) concurrently with any delivery of financial statements under (a) or (b) above, a certificate of the accounting firm or Financial Officer on behalf of the Borrower opining on or certifying such statements (which certificate, when furnished by an accounting firm, may be limited to accounting matters and disclaim responsibility for legal interpretations) (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth computations in detail reasonably satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.10, 6.11 and 6.12 (it being understood that the information required by this clause (ii) may be provided in a certificate of a Financial Officer on behalf of the Borrower instead of from such accounting firm); (d) promptly after the same become publicly available, copies of all periodic and other publicly available reports, proxy statements and, to the extent requested by the Administrative Agent, other materials filed by UCAR, the Borrower or any Subsidiary with the Securities and Exchange Commission, or any governmental authority succeeding to any of or all the functions of said Commission, or with any national 90 securities exchange, or distributed to its shareholders generally, as the case may be; (e) if, as a result of any change in accounting principles and policies from those as in effect on the date of this Agreement, the consolidated financial statements of UCAR, the Borrower and the Subsidiaries delivered pursuant to paragraph (a) or (b) above will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such clauses had no such change in accounting principles and policies been made, then, together with the first delivery of financial statements pursuant to paragraph (a) and (b) above following such change, a schedule prepared by a Financial Officer on behalf of the Borrower reconciling such changes to what the financial statements would have been without such changes; (f) within 90 days after the beginning of each fiscal year, a copy of an operating and capital expenditure budget for such fiscal year; (g) promptly following the creation or acquisition of any Subsidiary, a certificate of the Borrower signed by a Responsible Officer of the Borrower, identifying such new Subsidiary and the ownership interest of the Borrower and the Subsidiaries therein; (h) simultaneously with the delivery of any financial statements pursuant to paragraph (a) or (b) above, a balance sheet and related statements of operations, cash flows and stockholder's equity for each unconsolidated Subsidiary for the applicable period; (i) promptly, a copy of all reports submitted in connection with any material interim or special audit made by independent accountants of the books of UCAR, the Borrower or any Subsidiary; and (j) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of UCAR, the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, or such consolidating financial statements, or such financial statements showing the results of operations of any Unrestricted Subsidiary, as in each case the Administrative Agent or any Lender, acting through the Administrative Agent, may reasonably request. SECTION 5.05. LITIGATION AND OTHER NOTICES. Furnish to the Administrative Agent and each Lender written notice of the following promptly after any Responsible Officer of the Borrower obtains actual knowledge thereof: (a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto; 91 (b) the filing or commencement of, or any written threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against UCAR, the Borrower or any Subsidiary thereof in respect of which there is a reasonable possibility of an adverse determination and which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; and (c) any other development specific to UCAR, the Borrower or any Subsidiary that is not a matter of general public knowledge and that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect. SECTION 5.06. EMPLOYEE BENEFITS. (a) Comply in all material respects with the applicable provisions of ERISA and the provisions of the Code relating to ERISA and any applicable similar non-U.S. law and (b) furnish to the Administrative Agent (i) as soon as possible after, and in any event within 30 days after any Responsible Officer of UCAR, the Borrower or any ERISA Affiliate knows or has reason to know that, any Reportable Event has occurred, a statement of a Financial Officer on behalf of the Borrower setting forth details as to such Reportable Event and the action proposed to be taken with respect thereto, together with a copy of the notice, if any, of such Reportable Event given to the PBGC, (ii) promptly after any Responsible Officer learns of receipt thereof, a copy of any notice that the Borrower or any ERISA Affiliate may receive from the PBGC relating to the intention of the PBGC to terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) or to appoint a trustee to administer any such Plan, (iii) within 30 days after the due date for filing with the PBGC pursuant to Section 412(n) of the Code a notice of failure to make a required installment or other payment with respect to a Plan, a statement of a Financial Officer on behalf of the Borrower setting forth details as to such failure and the action proposed to be taken with respect thereto, together with a copy of any such notice given to the PBGC and (iv) promptly after any Responsible Officer learns thereof and in any event within 30 days after receipt thereof by UCAR, the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by UCAR, the Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability or (B) a determination that a Multiemployer Plan is, or is expected to be, terminated or in reorganization, in each case within the meaning of Title IV of ERISA; PROVIDED that in the case of each of clauses (i) through (iv) above, notice to the Administrative Agent shall only be required if such event or condition, together with all other events or conditions referred to in clauses (i) through (iv) above, could reasonably be expected to result in liability of UCAR, the Borrower or any Subsidiary in an aggregate amount exceeding $7,500,000. SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS. Maintain all financial records in accordance with GAAP and permit any persons designated by the Administrative Agent or any Lender to visit and inspect the financial records and the properties of UCAR, the Borrower or any Subsidiary at reasonable times, upon reasonable prior notice to UCAR or the Borrower, and as 92 often as reasonably requested and to make extracts from and copies of such financial records, and permit any persons designated by the Administrative Agent or any Lender upon reasonable prior notice to UCAR or the Borrower to discuss the affairs, finances and condition of the Borrower or any Subsidiary with the officers thereof and independent accountants therefor (subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract). SECTION 5.08. USE OF PROCEEDS. Use the proceeds of the Loans and request the issuance of Letters of Credit only for the purposes set forth in the preamble to this Agreement. SECTION 5.09. COMPLIANCE WITH ENVIRONMENTAL LAWS. Comply, and cause all lessees and other persons occupying its Properties to comply, with all Environmental Laws and Environmental Permits applicable to its operations and Properties; obtain and renew all Environmental Permits necessary for its operations and Properties; and conduct any Remedial Action in accordance with Environmental Laws, except, in each case with respect to this Section 5.09, to the extent the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. SECTION 5.10. PREPARATION OF ENVIRONMENTAL REPORTS. If a Default caused by reason of a breach of Section 3.17 or 5.09 shall have occurred and be continuing, at the request of the Required Lenders through the Administrative Agent, provide to Lenders within 90 days after such request, at the expense of the Borrower, an environmental site assessment report for the Properties which are the subject of such Default prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent, indicating the presence or absence of Hazardous Materials and the estimated cost of any Remedial Action required under any applicable Environmental Law in connection with such Properties. SECTION 5.11. FURTHER ASSURANCES. Execute any and all further documents, financing statements, agreements and instruments, and take all further action (including filing Uniform Commercial Code and other financing statements) that may be required under applicable law, or which the Collateral Agent may reasonably request, (a) in order to effectuate the transactions contemplated by the Loan Documents (other than the Local Facility Loan Documents), (b) in order to cause the Guarantee Requirement and Collateral Requirement to be satisfied at all times and (c) in order to grant, preserve, protect and perfect the validity and first priority (subject to Liens permitted by Section 6.02 and the Tranche C Facility Credit Agreement) of the security interests created or intended to be created by the Security Documents. All such security interests and Liens will be created under the Security Documents and other instruments and documents in form and substance reasonably satisfactory to the Collateral Agent, and UCAR, the Borrower and the Subsidiaries shall deliver or cause to be delivered to the Administrative Agent all such instruments and documents (including legal opinions and lien searches) as the Required Lenders shall reasonably request to evidence compliance with this Section 5.11. UCAR and the Borrower agree to provide, and to cause each Subsidiary to provide, such evidence as the Collateral Agent shall reasonably 93 request as to the perfection and priority status of each such security interest and Lien. SECTION 5.12. SIGNIFICANT SUBSIDIARIES. Cause Significant Subsidiaries at all times to (a) account for 85% or more of the consolidated assets of the Borrower and (b) have accounted for 85% or more of EBITDA for each of the two consecutive periods of four fiscal quarters immediately preceding the date of determination, after giving effect to the designation of any Significant Subsidiary on such date. SECTION 5.13. FISCAL YEAR. In the case of each of UCAR, the Borrower and the Subsidiaries, cause its respective fiscal year to end on December 31. SECTION 5.14. DIVIDENDS. In the case of the Borrower, permit its Subsidiaries to pay dividends and cause such dividends to be paid to the extent required to pay the monetary Obligations, subject to restrictions permitted by Section 6.09(d) and under the Tranche C Facility Credit Agreement and to prohibitions imposed by applicable requirements of law. SECTION 5.15. INTEREST/EXCHANGE RATE PROTECTION AGREEMENTS. Maintain in effect one or more Interest/Exchange Rate Protection Agreements with any of the Lenders or other financial institutions reasonably satisfactory to the Administrative Agent, the effect of which shall be to limit at all times the interest payable in connection with 40% of the aggregate principal amount of Term Borrowings, Tranche A Reimbursement Borrowings and Indebtedness under the Local Facilities projected to be outstanding at such time, in each case to a maximum rate and on terms and conditions comparable to those set forth in the Interest/Exchange Rate Protection Agreements in effect on the Effective Date or otherwise reasonably acceptable, taking into account current market conditions, to the Administrative Agent, and deliver evidence of the execution and delivery thereof to the Administrative Agent. SECTION 5.16. CORPORATE SEPARATENESS. Cause the management, business and affairs of each of the Unrestricted Subsidiaries to be conducted in such a manner so that each Unrestricted Subsidiary will be perceived as a legal entity separate and distinct from UCAR, the Borrower and the Subsidiaries. ARTICLE VI NEGATIVE COVENANTS Each of UCAR and the Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been cancelled or have expired and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, neither UCAR 94 nor the Borrower will, and neither will cause or permit any of the Subsidiaries to: SECTION 6.01. INDEBTEDNESS. Incur, create, assume or permit to exist any Indebtedness, except: (a) Indebtedness existing on the Effective Date and set forth in Schedule 6.01, but not any extensions, renewals or replacements of such Indebtedness except (i) renewals and extensions expressly provided for in the agreements evidencing any such Indebtedness as the same are in effect on the Effective Date and (ii) refinancings and extensions of any such Indebtedness if the interest rate with respect thereto and other terms thereof are no less favorable to the obligor thereon or to the Lenders than the Indebtedness being refinanced or extended and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced or extended; PROVIDED that such Indebtedness permitted under clause (i) or clause (ii) above shall not be (A) Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (B) in a principal amount which exceeds the Indebtedness being renewed, extended or refinanced or (C) incurred, created or assumed if any Default or Event of Default has occurred and is continuing or would result therefrom; (b) Indebtedness created hereunder, under the Tranche C Facility Credit Agreement and under the other Loan Documents; PROVIDED that no principal amount of Indebtedness under any Local Facility described in clause (b) of the definition of "Local Facility" may be incurred unless the Tranche A Exposure shall be simultaneously and permanently reduced by an aggregate amount not less than such principal amount; PROVIDED FURTHER that, with respect to Indebtedness under the Tranche C Facility Credit Agreement, (i) the principal amount of such Indebtedness shall not exceed $210,000,000, (ii) no Guarantor shall Guarantee the Obligations under the Tranche C Facility Credit Agreement unless it shall also Guarantee on a PARI PASSU basis the Obligations under this Agreement and (iii) if any additional or more restrictive representation, warranty, covenant, condition, event of default or other term shall be contained in the Tranche C Facility Credit Agreement, the Borrower agrees that such additional or more restrictive representation, warranty, covenant, condition, event of default or other term shall be incorporated herein (and, to the extent that any such additional or more restrictive term shall subsequently be amended to be less restrictive, such amendment shall also be incorporated herein); (c) (i) in the case of UCAR, any Senior Subordinated Guarantee, (ii) in the case of the Borrower, Senior Subordinated Notes in an aggregate principal amount (the "SUBORDINATED PRINCIPAL") not to exceed the sum of (A) $200,000,000 and (B) the aggregate principal amount of Senior Subordinated Notes issued after the Second Closing Date in payment of interest thereon pursuant to the terms thereof (less the principal amount of any Senior Subordinated Notes 95 that is repaid after the Second Closing Date) and (iii) in the case of the Borrower, Refinancing Notes in an aggregate principal amount not to exceed the sum at the time immediately prior to issuance and refinancing of (A) the Subordinated Principal, (B) any premium payable and reasonable expenses incurred in connection with such refinancing and (C) if the Refinancing Notes are issued at a time when there is accrued but unpaid interest on the Subordinated Principal, the amount of such accrued but unpaid interest; (d) Indebtedness of the Borrower and the Subsidiaries pursuant to Interest/Exchange Rate Protection Agreements entered into in order to fix the effective rate of interest, or to hedge against currency fluctuations, on the Loans and other Indebtedness or to hedge against currency fluctuations with respect to purchases and sales of goods in the ordinary course, in each case, PROVIDED that such transactions shall be entered into for business purposes and not for the purpose of speculation; (e) Indebtedness owed to (including obligations in respect of letters of credit for the benefit of) any person providing worker's compensation, health, disability or other employee benefits or property, casualty or liability insurance to the Borrower or any Subsidiary, pursuant to reimbursement or indemnification obligations to such person; (f) (i) Indebtedness of the Borrower or any Wholly Owned Subsidiary that is a Guarantor to any Subsidiary or to the Borrower; (ii) Indebtedness of the Borrower or any Wholly Owned Subsidiary that is not a Guarantor to any Subsidiary; (iii) Indebtedness of any Subsidiary to the Borrower or another Subsidiary incurred pursuant to a Permitted Foreign Transfer (subject in the case of Specified Permitted Transactions to the limitations set forth in Section 6.04(k)); and (iv) so long as at the time of incurrence no Default or Event of Default shall have occurred and be continuing, Indebtedness of UCAR to the Borrower incurred for the purpose of making permitted investments in Unrestricted Subsidiaries (and in an amount limited to the amount of investments so permitted), in each case subject to compliance with the provisions of the Pledge Agreements to the extent applicable to such Indebtedness; (g) Indebtedness of the Borrower or a Subsidiary which represents the assumption by the Borrower or such Subsidiary of Indebtedness of a Subsidiary in connection with the permitted merger of such Subsidiary with or into the assuming person or the purchase of all or substantially all the assets of such Subsidiary; (h) Indebtedness of the Borrower or any Subsidiary in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations and trade-related letters of credit, in each case provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business, and any extension, renewal or refinancing thereof to the extent not provided to secure the repayment of other Indebtedness and 96 to the extent that the amount of refinancing Indebtedness is not greater than the amount of Indebtedness being refinanced; (i) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; PROVIDED that such Indebtedness is extinguished within two Business Days of its incurrence; (j) Indebtedness of a Subsidiary acquired after the date hereof and Indebtedness of a corporation merged or consolidated with or into the Borrower or a Subsidiary after the date hereof, which Indebtedness in each case exists at the time of such acquisition, merger, consolidation or conversion into a Subsidiary and is not created in contemplation of such event and where such acquisition, merger or consolidation is permitted by this Agreement, PROVIDED that the aggregate principal amount of Indebtedness under this paragraph (j) shall not exceed $25,000,000 for the Borrower and all Subsidiaries; (k) Capital Lease Obligations, mortgage financings and purchase money Indebtedness incurred by the Borrower or any Subsidiary prior to or within 270 days after a Capital Expenditure permitted under Section 6.10 in order to finance such Capital Expenditure, and extensions, renewals and refinancings thereof if the interest rate with respect thereto and other terms thereof are no less favorable to the Borrower or such Subsidiary than the Indebtedness being refinanced and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced; PROVIDED that such refinancing Indebtedness shall not be (i) Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (ii) in a principal amount which exceeds the Indebtedness being renewed, extended or refinanced or (iii) incurred, created or assumed if any Default or Event of Default has occurred and is continuing or would result therefrom; (l) Capital Lease Obligations incurred by the Borrower or any Subsidiary in respect of any Sale and Leaseback Transaction that is permitted under Section 6.03; (m) other Indebtedness of the Borrower and the Subsidiaries in an aggregate principal amount at any time outstanding not in excess of $100,000,000, $20,000,000 of which may be incurred on a secured basis; (n) Indebtedness of UCAR consisting of contingent liabilities or Indebtedness of the type referred to in the proviso contained in the definition of "Unrestricted Subsidiary"; and (o) all premium (if any), interest (including post-petition interest), fees, expenses, indemnities, charges and additional or contingent interest on obligations described in clauses (a) through (n) above. 97 Notwithstanding anything to the contrary in this Agreement or any other Loan Document, no Refinancing Notes shall be issued (and no Indebtedness shall be incurred under the Refinancing Note Indenture) unless: (a) concurrently with the issuance of any Refinancing Notes, Senior Subordinated Notes in a principal amount equal to the principal amount of such Refinancing Notes (less any amount issued pursuant to clause (iii)(B) or (iii)(C) of paragraph (c) above) shall have been redeemed or repurchased (or called for redemption, so long as the redemption price has been indefeasibly deposited with the trustee in respect of such Senior Subordinated Notes (the "TRUSTEE")) and cancelled upon delivery to the Trustee, at a price not in excess of 100% of the principal amount thereof (plus interest accrued to the date of redemption or repurchase and not paid in cash and plus any premium in respect of such redemption or repurchase (so long as the premium on repurchase does not exceed 104.5%, or if lower at the time such repurchase is made, the scheduled premium set forth in the Senior Subordinated Indenture)), (b) the terms of the Refinancing Notes and the Refinancing Note Indenture (other than the interest rate, the interest payment dates and any redemption premiums, which shall be determined at the time of issuance of the Refinancing Notes) shall be reasonably satisfactory to the Required Lenders (PROVIDED, HOWEVER, that such terms of the Refinancing Notes and the Refinancing Note Indenture shall be deemed to be satisfactory to the Required Lenders if the Refinancing Notes are issued with substantially the same terms as the Senior Subordinated Notes that are being refinanced (other than any changes thereto that are not adverse in any respect to the interests of the Lenders)), (c) the interest rate of the Refinancing Notes shall be a fixed, non-increasing interest rate per annum not in excess of the rate payable in respect of the Senior Subordinated Notes, payable on a principal amount of the Refinancing Notes not in excess of the gross proceeds of the sale thereof and interest on the Refinancing Notes shall be payable semiannually and (d) the Refinancing Notes shall mature not earlier than the maturity date of the Senior Subordinated Notes. SECTION 6.02. LIENS. Create, incur, assume or permit to exist any Lien on any property or assets (including stock or other securities of any person, including any Subsidiary) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, or sell or transfer any account receivable or any right in respect thereof, except: (a) Liens on property or assets of the Borrower and its Subsidiaries existing on the Effective Date and set forth in Schedule 6.02; PROVIDED that such Liens shall secure only those obligations which they secure on the Effective Date (and extensions, renewals and refinancings of such obligations permitted by Section 6.01(a)) and shall not subsequently apply to any other property or assets of UCAR, the Borrower or any Subsidiary; (b) any Lien created under the Loan Documents; (c) any Lien existing on any property or asset of the Borrower or any Subsidiary prior to the acquisition thereof by the Borrower or any Subsidiary; PROVIDED that (i) such Lien is not created in contemplation of or in connection with such 98 acquisition and (ii) such Lien does not apply to any other property or asset of the Borrower or any Subsidiary; (d) any Lien on any property or asset of a Subsidiary securing Indebtedness permitted by Section 6.01(j); PROVIDED that such Lien does not apply to any other property or assets of UCAR, the Borrower or any Subsidiary not securing such Indebtedness at the date of acquisition of such property or asset (other than after acquired property subjected to a Lien securing Indebtedness incurred prior to such date and permitted hereunder which contains a requirement for the pledging of after acquired property); (e) Liens for taxes, assessments or other governmental charges or levies not yet delinquent, or which are for less than $1,000,000 in the aggregate, or which are being contested in compliance with Section 5.03 or for property taxes on property that UCAR, the Borrower or one of the Subsidiaries has determined to abandon if the sole recourse for such tax, assessment, charge, levy or claim is to such property; (f) carriers', warehousemen's, mechanic's, materialmen's, repairmen's or other like Liens arising in the ordinary course of business and securing obligations that are not due and payable or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, UCAR, the Borrower or the relevant Subsidiary shall have set aside on its books reserves in accordance with GAAP; (g) pledges and deposits made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workmen's compensation, unemployment insurance and other social security laws or regulations and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations; (h) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business; (i) zoning restrictions, easements, trackage rights, leases (other than Capital Lease Obligations), licenses, special assessments, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of UCAR, the Borrower or any of the Subsidiaries; (j) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary (including the interests of vendors and lessors 99 under conditional sale and title retention agreements); PROVIDED that (i) such security interests secure Indebtedness or Sale and Lease-Back Transactions permitted by Section 6.01, (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within 270 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 100% of the cost of such real property, improvements or equipment at the time of such acquisition (or construction), (iv) such expenditures are permitted by this Agreement and (v) such security interests do not apply to any other property or assets of the Borrower or any Subsidiary (other than to accessions to such real property, improvements or equipment and provided that individual financings of equipment provided by a single lender may be cross-collateralized to other financings of equipment provided solely by such lender); (k) Liens securing reimbursement obligations in respect of trade-related letters of credit permitted under Section 6.01 and covering the goods (or the documents of title in respect of such goods) financed by such letters of credit; (l) Liens arising out of capitalized or operating lease transactions permitted under Section 6.03, so long as such Liens (i) attach only to the property sold in such transaction and any accessions thereto and (ii) do not interfere with the business of UCAR, the Borrower or any Subsidiary in any material respect; (m) Liens consisting of interests of lessors under capital leases permitted by Section 6.01; (n) Liens securing judgments for the payment of money in an aggregate amount not in excess of $7,500,000 (except to the extent covered by insurance as to which the insurer has acknowledged in writing its obligation to cover), unless such judgments shall remain undischarged for a period of more than 30 consecutive days during which execution shall not be effectively stayed; (o) any Lien arising by operation of law pursuant to Section 107(1) of CERCLA or pursuant to analogous state or foreign law, for costs or damages which are not yet due (by virtue of a written demand for payment by a Governmental Authority) or which are being contested in compliance with the standard set forth in Section 5.03(a), or on property that the Borrower or a Subsidiary has determined to abandon if the sole recourse for such costs or damages is to such property, PROVIDED that the liability of the Borrower and the Subsidiaries with respect to the matter giving rise to all such Liens shall not, in the reasonable estimate of the Borrower (in light of all attendant circumstances, including the likelihood of contribution by third parties), exceed $7,500,000; (p) any leases or subleases to other persons of properties or assets owned or leased by the Borrower or a Subsidiary; 100 (q) Liens which are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness or (ii) pertaining to pooled deposit and/or sweep accounts of the Borrower and/or any Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower and its Subsidiaries; (r) other Liens with respect to property or assets not constituting collateral for the Obligations with an aggregate fair market value of not more than $20,000,000 at any time; (s) any Lien arising as a result of a transaction permitted under Section 6.05(h) or (i) or under Section 6.13; (t) the sale of accounts receivable in connection with collection in the ordinary course of business and Liens which might arise as a result of the sale or other disposition of accounts receivable pursuant to Section 6.05(h); and (u) the replacement, extension or renewal of any Lien permitted by clause (c), (d) or (j) above; PROVIDED that such replacement, extension or renewal Lien shall not cover any property other than the property that was subject to such Lien prior to such replacement, extension or renewal; and PROVIDED FURTHER that the Indebtedness and other obligations secured by such replacement, extension or renewal Lien are permitted by this Agreement. SECTION 6.03. SALE AND LEASE-BACK TRANSACTIONS. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a "SALE AND LEASE-BACK TRANSACTION"), other than any Sale and Lease-Back Transaction which involves a sale by the Borrower or a Subsidiary solely for cash consideration on terms not less favorable than would prevail in an arm's-length transaction and which (a) results in a Capital Lease Obligation or an operating lease, in either case entered into to finance a Capital Expenditure permitted by Section 6.10 consisting of the initial acquisition by the Borrower or such Subsidiary of the property sold or transferred in such Sale and Lease-Back Transaction, PROVIDED that such Sale and Lease-Back Transaction occurs within 270 days after such acquisition or (b) results in a Capital Lease Obligation or an operating lease entered into for any other purpose; PROVIDED that the proceeds of any such Sale and Lease-Back Transaction in reliance upon this clause (b) shall be deemed subject to Section 2.12(e). SECTION 6.04. INVESTMENTS, LOANS AND ADVANCES. Purchase, hold or acquire any capital stock, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other person, except: 101 (a) investments (i) existing on the Effective Date in the capital stock of the Subsidiaries; (ii) by UCAR in the capital stock of the Borrower; (iii) by the Borrower or any Subsidiary in any Wholly Owned Subsidiary that is a Guarantor (so long as such Guarantor shall remain a Wholly Owned Subsidiary after giving effect to such investment); (iv) by any Wholly Owned Subsidiary in any Wholly Owned Subsidiary that is a Guarantor; (v) by any Subsidiary that is not a Guarantor in any Wholly Owned Subsidiary that is not a Guarantor (so long as such Subsidiary shall remain a Wholly Owned Subsidiary after giving effect to such investment); or (vi) that constitute Permitted Foreign Transfers (subject in the case of Specified Permitted Transactions to the limitations set forth in paragraph (k) below); (b) Permitted Investments and investments that were Permitted Investments when made; (c) investments arising out of the receipt by the Borrower or any Subsidiary of noncash consideration for the sale of assets permitted under Section 6.05 provided that such consideration (if the stated amount or value thereof is in excess of $1,000,000) is pledged upon receipt pursuant to the Pledge Agreements to the extent required thereby; (d) intercompany loans permitted to be incurred as Indebtedness under Section 6.01; (e) (i) loans and advances to employees of UCAR, the Borrower or the Subsidiaries not to exceed $6,000,000 in the aggregate at any time outstanding (excluding up to $3,000,000 in loans existing on the Effective Date to former employees) and (ii) advances of payroll payments and expenses to employees in the ordinary course of business; (f) (i) accounts receivable arising and trade credit granted in the ordinary course of business and any securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and (ii) prepayments and other credits to suppliers made in the ordinary course of business consistent with the past practices of UCAR, the Borrower and the Subsidiaries; (g) Interest/Exchange Rate Protection Agreements permitted pursuant to Section 6.01(d); (h) investments, other than investments listed in paragraphs (a) through (g) of this Section, existing on the Effective Date and set forth on Schedule 6.04; (i) investments resulting from pledges and deposits referred to in Section 6.02(g) or (h); (j) investments constituting Permitted Business Acquisitions made either as Capital Expenditures pursuant to Section 6.10 or, to the extent not used for other purposes permitted hereunder, made with funds that if not so spent would 102 constitute Net Proceeds under clause (a) of the definition of "Net Proceeds" (subject to the limitation set forth in the second proviso to such clause (a)); (k) investments constituting Permitted Other Acquisitions or Specified Permitted Transactions; PROVIDED that the sum of (i) the aggregate amount of Specified Permitted Transactions and (ii) the aggregate amount of consideration (whether cash or property, as valued at the time each such investment is made) for all Permitted Other Acquisitions acquired after the Effective Date shall not exceed (net of any return representing return of capital of (but not return on) any such investment) at any time (A) the amount set forth on Schedule A for the Leverage Ratio that is in effect at such time (it being agreed that any such investment permitted when made shall not cease to be permitted as a result of the applicable Leverage Ratio subsequently changing) PLUS, (B) to the extent not used for other purposes permitted hereunder, the funds that if not so spent would constitute Net Proceeds under clause (a) of the definition of "Net Proceeds" (subject to the limitation set forth in the second proviso to such clause (a)); (l) investments in Permitted Business Acquisitions and Unrestricted Subsidiaries to the extent made with proceeds of the issuance of Capital Stock of UCAR (to the extent not previously used to prepay Indebtedness (other than Revolving Loans or Swingline Loans), make any investment or capital expenditure or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any fiscal year) issued after the Original Closing Date (after application of the Net Proceeds of such issuance to prepay Obligations in accordance with Section 2.12(d) and the Tranche C Facility Credit Agreement); and (m) investments by the Borrower or any Subsidiary in any Subsidiary resulting from or in connection with the formation of a European holding company and any related reorganization or restructuring of the Subsidiaries that occurs in connection therewith; PROVIDED that, after giving effect to any such formation, reorganization or restructuring (COLLECTIVELY, THE "EUROPEAN HOLDING COMPANY STRATEGY"), the Collateral Requirement and Guarantee Requirement shall be satisfied in a manner reasonably satisfactory to the Administrative Agent. PROVIDED, HOWEVER, that the aggregate amount of the consideration (whether cash or property, as valued at the time each such investment is made) for all investments made in Unrestricted Subsidiaries (other than investments made therein pursuant to paragraph (l) above) after the Effective Date shall not exceed (net of return of capital of (but not return on) any such investment) $50,000,000 at any time, PROVIDED FURTHER, HOWEVER, that no more than $25,000,000 of such amount at any time may be invested in Unrestricted Subsidiaries not engaged primarily in Related Businesses. SECTION 6.05. MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND ACQUISITIONS. Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or 103 sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial part of its assets (whether now owned or hereafter acquired), other than assets of UCAR constituting an Unrestricted Subsidiary, or any Capital Stock of any Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person, except that this Section shall not prohibit: (a) the purchase and sale of inventory in the ordinary course of business by the Borrower or any Subsidiary or the acquisition of any asset of any person in the ordinary course of business; (b) if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have occurred and be continuing (i) the merger of any Subsidiary into the Borrower in a transaction in which the Borrower is the surviving corporation and (ii) the merger or consolidation of any Subsidiary into or with any other Wholly Owned Subsidiary in a transaction in which the surviving entity is a Wholly Owned Subsidiary (which shall be a domestic Subsidiary if the non-surviving person shall be a domestic Subsidiary) and, in the case of each of clauses (i) and (ii), no person other than the Borrower or a Wholly Owned Subsidiary receives any consideration; (c) Sale and Lease-Back Transactions permitted by Section 6.03; (d) investments permitted by Section 6.04; (e) subject to Section 6.07, sales, leases or transfers (i) from the Borrower or any Subsidiary to the Borrower or to a domestic Wholly Owned Subsidiary, (ii) from any foreign Subsidiary to any foreign Wholly Owned Subsidiary or to the Borrower or (iii) constituting Permitted Foreign Transfers (subject in the case of Specified Permitted Transactions to the limitations set forth in Section 6.04(k)); (f)(i) the lease of all or any part of the Borrower's facility located in Robinson, Illinois and (ii) sales, leases or other dispositions of equipment or real property of the Borrower or the Subsidiaries determined, in the case of this clause (ii), by the Board of Directors or senior management of the Borrower to be no longer useful or necessary in the operation of the business of the Borrower or the Subsidiaries; PROVIDED that in the case of this clause (ii), (x) the Net Proceeds thereof shall be applied in accordance with Section 2.12(d) and (y) the fair market value of assets sold, leased or otherwise disposed of in any one year shall not exceed $3,000,000 in the aggregate; (g) sales, leases or other dispositions of inventory of the Borrower and the Subsidiaries determined by the Board of Directors or senior management of the Borrower to be no longer useful or necessary in the operation of the business of the 104 Borrower and the Subsidiaries; PROVIDED that the Net Proceeds thereof shall be applied in accordance with Section 2.12(d); (h) sales or other dispositions of accounts receivable of foreign Subsidiaries in connection with factoring arrangements so long as the aggregate face amount at any time outstanding of receivables subject to such arrangements does not exceed $50,000,000; (i) sales or other dispositions by the Borrower or any Subsidiary of assets (other than receivables, except to the extent disposed of incidentally in connection with an asset disposition otherwise permitted hereby), including Capital Stock of Subsidiaries, for consideration in an aggregate amount not exceeding 25% of the book value of the Total Assets set forth in UCAR's and its subsidiaries' June 30, 1998 quarterly consolidated financial statements (which book value equals $1,273,000,000); PROVIDED that (i) each such disposition shall be for a consideration determined in good faith by the Board of Directors or senior management of the Borrower to be at least equal to the fair market value (if any) of the asset sold, (ii) the aggregate amount of all noncash consideration included in the proceeds of any such disposition may not exceed 15% of the fair market value of such proceeds; PROVIDED, HOWEVER, that obligations of the type referred to in clause (a) or (e) of the definition of "Permitted Investments" (without regard to the maturity or the credit rating thereof) shall not be deemed non-cash proceeds if such obligations are promptly sold for cash and the proceeds of such sale are included in the calculation of Net Proceeds from such sale, (iii) the aggregate Net Proceeds of all such dispositions under this paragraph (i) shall be applied in accordance with Section 2.12(d), except as contemplated by the last sentence of this paragraph and (iv) no Default or Event of Default shall have occurred and be continuing immediately prior to or after such disposition; PROVIDED FURTHER that notwithstanding the first proviso to clause (a) of the definition of "Net Proceeds", no Mortgaged Property (other than Mortgaged Properties which are part of UCAR's Graphite and Carbon Specialties Business) may be sold, transferred, leased or otherwise disposed of at any time unless the Net Proceeds thereof shall be applied immediately to the prepayment of Obligations in accordance with Section 2.12(d) or within 10 Business Days to the acquisition of property having a value equivalent to or greater than the value of such Mortgaged Property and such newly acquired property is thereupon either made a Mortgaged Property subject to a Mortgage on terms reasonably satisfactory to the Collateral Agent or constitutes an addition to a Mortgaged Property and is subject to the Mortgage on such Mortgaged Property; and PROVIDED FURTHER that no sale may be made of the Capital Stock of (x) any Credit Party, UCAR Carbon Company Inc., UCAR Holdings Inc. or UCAR Holdings II Inc. or (y) except in connection with the sale of all its outstanding Capital Stock that is held by the Borrower in any Subsidiary, the Capital Stock of any other Subsidiary. Upon receipt by the Borrower or any Subsidiary of the Net Proceeds of any transaction contemplated by this paragraph (i), the Borrower shall promptly deliver a certificate of the Borrower signed by a Responsible Officer of the Borrower to the 105 Administrative Agent setting forth the amount of the Net Proceeds received in respect thereof and whether it shall apply such Net Proceeds to prepay Obligations in accordance with Section 2.12(d) and the Tranche C Facility Credit Agreement or will use such Net Proceeds to purchase assets useful in the business of the Borrower and the Subsidiaries within 12 months of such receipt (subject to the second proviso to clause (a) of the definition of "Net Proceeds"); (j) sale or other disposition of UCAR's, the Borrower's or the Subsidiaries' facilities owned and existing on the Effective Date in Berlin, Germany and Welland, Canada; and (k) intercompany sales, transfers, dispositions, acquisitions, mergers and consolidations in connection with the implementation of the European Holding Company Strategy; PROVIDED that (i) any such sale or transfer is made to, or any such merger into or consolidation with is effected with, a Subsidiary at least 90% of the outstanding Capital Stock of which is owned directly by the Borrower or a Wholly Owned Subsidiary and (ii) after giving effect to any such sale, transfer, disposition, acquisition, merger or consolidation, the Collateral Requirement and Guarantee Requirement shall be satisfied in a manner reasonably satisfactory to the Administrative Agent. SECTION 6.06. DIVIDENDS AND DISTRIBUTIONS. Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its Capital Stock (other than dividends and distributions on the common stock of UCAR payable solely by the issuance of additional shares of common stock of UCAR or rights, warrants or options to acquire common stock of UCAR) or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any Subsidiary to purchase or acquire) any shares of any class of its Capital Stock or set aside any amount for any such purpose (collectively, the "RESTRICTED EQUITY PAYMENTS"); PROVIDED, HOWEVER, that: (a) any Subsidiary may declare and pay dividends to, repurchase its Capital Stock from or make other distributions to the Borrower or to any Wholly Owned Subsidiary (or, in the case of non-Wholly Owned Subsidiaries, to the Borrower or any Subsidiary and to each other owner of Capital Stock of such Subsidiary on a pro rata basis (or more favorable basis from the perspective of the Borrower or such Subsidiary) based on their relative ownership interests); (b) the Borrower may declare and pay dividends or make other distributions to UCAR in respect of overhead, tax liabilities, legal, accounting and other professional fees and expenses and any fees and expenses associated with registration statements filed with the Securities and Exchange Commission and subsequent ongoing public reporting requirements, in each case to the extent actually incurred by UCAR in connection with the business of its ownership of the Capital Stock of the Borrower and the Unrestricted Subsidiaries; 106 (c) so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, UCAR, the Borrower and the Subsidiaries may make Restricted Equity Payments so long as, after giving effect thereto, the aggregate amount of Restricted Junior Payments made after the Effective Date shall not exceed the Restricted Junior Payment Amount applicable to the fiscal year in which any such Restricted Equity Payment is made; (d) UCAR or the Borrower may purchase or redeem, or the Borrower may declare and pay dividends or make other distributions to UCAR the proceeds of which are to be used to purchase or redeem, shares of Capital Stock (or rights, options or warrants in respect of such shares) of UCAR (including related stock appreciation rights or similar securities) held by present or former directors, officers or employees of UCAR, the Borrower or any Subsidiary or by any Plan upon such person's death, disability, retirement or termination of employment or under the terms of any such Plan or any other agreement under which such shares of stock or related rights were issued; PROVIDED that the aggregate amount of such purchases or redemptions (or dividends or distributions to UCAR) under this paragraph (d) shall not exceed $5,000,000 per calendar year which, if not used in any year may be carried forward to any subsequent calendar year; PROVIDED, HOWEVER, that the aggregate amount of such purchases or redemptions (or dividends or distributions to UCAR) that may be made pursuant to this paragraph (d) shall not exceed $25,000,000; and (e) the Borrower may declare and pay dividends or make other distributions to UCAR in order to fund Litigation Payments; PROVIDED that the amount of dividends and distributions permitted pursuant to this clause (e), plus the amount of Restricted Debt Payments permitted pursuant to the last sentence of Section 6.09(b), shall not exceed $400,000,000 (calculated in the manner described in Section 3.24). It being understood that $20,000,000 of such payments and distributions to UCAR in respect of Litigation Liabilities have been made as of the Effective Date. SECTION 6.07. TRANSACTIONS WITH AFFILIATES. (a) Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates or any known direct or indirect holder of 10% or more of any class of capital stock of UCAR, unless such transaction is (i) otherwise permitted under this Agreement and (ii) upon terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's-length transaction with a person which was not an Affiliate, PROVIDED that the foregoing restriction shall not apply to the indemnification of directors of UCAR, the Borrower and the Subsidiaries in accordance with customary practice. (b) The foregoing paragraph (a) shall not prohibit, to the extent otherwise permitted under this Agreement, (i) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements or stock option, ownership or purchase plans approved 107 by the Board of Directors of UCAR, (ii) loans or advances to employees of UCAR, the Borrower or any Subsidiary in accordance with Section 6.04(e), (iii) transactions among UCAR, the Borrower and Wholly Owned Subsidiaries and transactions among Wholly Owned Subsidiaries otherwise permitted by this Agreement, (iv) Permitted Foreign Transfers (other than Specified Permitted Transactions), (v) the payment of fees and indemnities to directors, officers and employees of the Borrower and the Subsidiaries in the ordinary course of business, (vi) transactions pursuant to permitted agreements in existence on the Effective Date and set forth on Schedule 6.07, (vii) payments pursuant to the Tax Sharing Agreement, (viii) any employment agreements entered into by the Borrower or any of the Subsidiaries in the ordinary course of business, (ix) dividends and repurchases permitted under Section 6.06, and (x) any purchase by UCAR of Capital Stock of the Borrower or any contribution by UCAR to the equity capital of the Borrower. SECTION 6.08. BUSINESS OF UCAR, THE BORROWER AND THE SUBSIDIARIES. (a) In the case of the Borrower and the Subsidiaries (taken as a whole), cease to engage primarily in the business of manufacturing graphite and carbon electrodes and (b) in the case of UCAR, engage at any time in any business or business activity other than (i) the ownership of all the outstanding capital stock of the Borrower together with activities directly related thereto, (ii) the ownership of Unrestricted Subsidiaries together with activities directly related thereto, (iii) performance of its obligations under the Loan Documents, under intercompany Indebtedness and under Indebtedness incurred in accordance with Section 6.01(n) and (iv) actions required by law to maintain its status as a corporation and as a public company. SECTION 6.09. INDEBTEDNESS AND OTHER MATERIAL AGREEMENTS. (a) Amend or modify, or grant any waiver or release under, any instruments, agreements or documents evidencing or related to the Senior Subordinated Notes or the Refinancing Notes in any manner adverse to the Lenders. (b) (i) Directly or indirectly, make any payment, retirement, repurchase or redemption on account of the principal of the Senior Subordinated Notes, the Refinancing Notes or intercompany Indebtedness owed to UCAR or directly or indirectly prepay or defease any such Indebtedness prior to the stated maturity date of such Indebtedness (collectively, "RESTRICTED DEBT PAYMENTS"), except with the proceeds of Capital Stock of UCAR issued by UCAR after the Original Closing Date (after application of the Net Proceeds of such issuance to prepay Obligations in accordance with Section 2.12(d) and the Tranche C Facility Credit Agreement), PROVIDED, that, in addition to the foregoing, so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, the Borrower may make Restricted Debt Payments so long as, after giving effect thereto, the aggregate amount of Restricted Junior Payments made after the Effective Date shall not exceed the Restricted Junior Payment Amount applicable to the fiscal year in which any such Restricted Debt Payment is made, (ii) make any payment or prepayment of any such Indebtedness that would violate the terms of this Agreement or of such Indebtedness, any agreement or document evidencing, related to or securing the payment or performance of such Indebtedness or any subordination agreement or provision 108 applicable to such Indebtedness or (iii) pay in cash any amount in respect of such Indebtedness that may at the Borrower's option be paid in kind thereunder; PROVIDED, HOWEVER, that the proceeds of the Refinancing Notes may be applied to repay or prepay Senior Subordinated Notes. Notwithstanding the foregoing, the Borrower may make Restricted Debt Payments in respect of intercompany Indebtedness owed to UCAR in order to fund Litigation Payments; PROVIDED that the amount of Restricted Debt Payments that may be made to UCAR pursuant to this sentence, plus the amount of dividends or other distributions permitted to be made to UCAR pursuant to Section 6.06(e), shall not exceed $400,000,000 (calculated in the manner described in Section 3.24) (it being understood that $20,000,000 of such payments and distributions to UCAR in respect of Litigation Liabilities have been made as of the Effective Date). (c) Amend or modify in any manner adverse to the Lenders, or grant any waiver or release under or terminate in any manner (if such action shall be adverse to the Lenders), the certificate of incorporation or by-laws of the Borrower or any Subsidiary. (d) Permit any Subsidiary to enter into any agreement or instrument which by its terms restricts the payment of dividends or the making of cash advances by such Subsidiary to the Borrower or any Subsidiary that is a direct or indirect parent of such Subsidiary other than those in effect on the Effective Date and set forth on Schedule 6.09 (or replacements of such agreements on terms no less favorable to the Lenders), and those arising under any Loan Document (other than any Loan Document in respect of any Local Facility described in clause (b) of the definition of "Local Facility"). SECTION 6.10. CAPITAL EXPENDITURES. Permit UCAR to make any Capital Expenditures, or permit the aggregate amount of Capital Expenditures made by the Borrower and the Subsidiaries, in any fiscal year to exceed the aggregate amount set forth below: YEAR AMOUNT ---- ------ 1998 $58,000,000 1999 88,000,000 2000 72,000,000 2001 58,000,000 2002 65,000,000 PROVIDED, HOWEVER, that (a) the Borrower may in any fiscal year, upon written notice to the Administrative Agent, increase the amount of Capital Expenditures permitted to be made pursuant to this Section by an amount up to $10,000,000 by reducing the amount of Capital Expenditures permitted to be made pursuant to this Section in the next succeeding fiscal year by the amount of such increase; PROVIDED that not more than $20,000,000 in the aggregate of increases may be made pursuant to this clause (a) in any three- fiscal-year period, and (b) to the extent that Capital Expenditures made in any fiscal year were less than the amount set forth above for such fiscal year less any reduction made for such fiscal year pursuant to clause (a), such unused amount may be carried forward to the next succeeding fiscal year; PROVIDED that not more that $20,000,000 may be carried forwarded from any fiscal year. 109 SECTION 6.11. INTEREST COVERAGE RATIO. Permit the ratio (the "INTEREST COVERAGE RATIO") as of the last day of any fiscal quarter, which last day occurs in any period set forth below for the four quarter period ended as of such day of (a) EBITDA MINUS Capital Expenditures of UCAR, the Borrower and the Subsidiaries to (b) Cash Interest Expense to be less than the ratio set forth below for such period: FROM AND INCLUDING: TO AND INCLUDING: RATIO: July 1, 1998 December 31, 1998 2.00:1.00 January 1, 1999 June 30, 1999 2.00:1.00 July 1, 1999 December 31, 1999 2.00:1.00 January 1, 2000 June 30, 2000 2.00:1.00 July 1, 2000 December 31, 2000 2.50:1.00 January 1, 2001 June 30, 2001 3.00:1.00 July 1, 2001 December 31, 2002 3.00:1.00 SECTION 6.12. LEVERAGE RATIO. Permit the ratio (the "LEVERAGE RATIO") of (a) Total Debt plus Reserves as of the last day of any fiscal quarter, which last day occurs in any period set forth below to (b) EBITDA for the four quarter period ended as of such day to be in excess of the ratio set forth below for such period: FROM AND INCLUDING: TO AND INCLUDING: RATIO: July 1, 1998 December 31, 1998 4.50:1.00 January 1, 1999 September 30, 1999 4.50:1.00 October 1, 1999 December 31, 1999 4.25:1.00 January 1, 2000 June 30, 2000 4.00:1.00 July 1, 2000 December 31, 2000 3.50:1.00 January 1, 2001 June 30, 2001 3.00:1.00 July 1, 2001 December 31, 2002 3.00:1.00 SECTION 6.13. CAPITAL STOCK OF THE SUBSIDIARIES. Sell, transfer, lease or otherwise dispose of, or make subject to any subscription, option, warrant, call, right or other agreement or commitment of any nature, the Capital Stock of any Subsidiary, other than (a) pursuant to the Loan Documents or pursuant to a transaction permitted pursuant to Section 6.05 and subject to Section 2.12(d), (b) sales, transfers and other dispositions of the Capital Stock of Subsidiaries in connection with UCAR's sale of its Graphite and Carbon Specialties Business, (c) in connection with transactions of the type described in Section 6.05(k) or 6.07(b)(i) and (d) directors' qualifying shares. ARTICLE VII EVENTS OF DEFAULT In case of the happening of any of the following events ("EVENTS OF DEFAULT"): (a) any representation or warranty made or deemed made by UCAR, the Borrower or any Loan Party in any Loan Document 110 (other than a Local Facility Loan Document), or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document (other than a Local Facility Loan Document), shall prove to have been false or misleading in any material respect when so made, deemed made or furnished by UCAR, the Borrower or any other Loan Party; (b) default shall be made in the payment of any principal of any Loan, any principal of any Indebtedness under any Local Facility or the reimbursement with respect to any L/C Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepay ment thereof or by acceleration thereof or otherwise; (c) default shall be made in the payment of any premium or interest on any Loan or on any L/C Disbursement or in the payment of any Fee or any other amount (other than an amount referred to in (b) above) due under any Loan Document (other than a Local Facility Loan Document), when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days; (d) default shall be made in the due observance or performance by UCAR, the Borrower or any Subsidiary of any covenant, condition or agreement contained in Section 5.01(a) (with respect to the Borrower), 5.05(a), 5.08 or 5.12 or in Article VI; (e) default shall be made in the due observance or performance by UCAR, the Borrower, any Credit Party or any Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than a Local Facility Loan Document) (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or the Required Lenders to the Borrower; (f) (i) UCAR, the Borrower or any Significant Subsidiary shall fail to observe or perform any term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any Indebtedness (other than any Indebtedness under any Loan Document) having an aggregate principal or notional amount in excess of $7,500,000, if the effect of any such failure is to cause, or to permit the holder or holders of such Indebtedness or a trustee on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity, or UCAR, the Borrower or any Significant Subsidiary shall fail to pay any principal in respect of any such Indebtedness at the stated maturity thereof or (ii) an "Event of Default" shall occur under the Tranche C Facility Credit Agreement; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of UCAR, the 111 Borrower or any Subsidiary, or of a substantial part of the property or assets of UCAR, the Borrower or a Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for UCAR, the Borrower or any Subsidiary or for a substantial part of the property or assets of UCAR, the Borrower or a Subsidiary or (iii) the winding-up or liquidation of UCAR, the Borrower or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) UCAR, the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for UCAR, the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; (i) one or more judgments for the payment of money in an aggregate amount in excess of $7,500,000 (except to the extent covered by insurance as to which the insurer has acknowledged in writing its obligation to cover) shall be rendered against UCAR, the Borrower, any Significant Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of UCAR, the Borrower or any Significant Subsidiary to enforce any such judgment; (j) (i) a Reportable Event or Reportable Events, or a failure to make a required installment or other payment (within the meaning of Section 412(n)(1) of the Code), shall have occurred with respect to any Plan, (ii) a trustee shall be appointed by a United States district court to administer any Plan, (iii) the PBGC shall institute proceedings (including giving notice of intent thereof) to terminate any Plan, (iv) the Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan and the Borrower or such ERISA Affiliate does not have reasonable grounds for contesting such Withdrawal Liability or is not contesting such Withdrawal Liability in a timely and 112 appropriate manner, (v) the Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, (vi) the Borrower or any ERISA Affiliate shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (vii) any other similar event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vii) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; (k) (i) any Loan Document (other than a Local Facility Loan Document) shall for any reason be asserted by UCAR, the Borrower or any Subsidiary not to be a legal, valid and binding obligation of any party thereto, (ii) any security interest purported to be created by any Security Document and to extend to assets which are not immaterial to UCAR, the Borrower and the Subsidiaries on a consolidated basis shall cease to be, or shall be asserted by the Borrower or any other Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the Collateral Agent to maintain possession of certificates representing securities pledged under the Pledge Agreements or to file Uniform Commercial Code continuation or other similar statements or (iii) the Obligations of UCAR and the Borrower and the guarantee by UCAR thereof pursuant to the Parent Guarantee Agreement shall cease to constitute senior indebtedness under the subordination provisions of any document or instrument evidencing any permitted subordinated Indebtedness or such subordination provisions shall be invalidated or otherwise cease to be legal, valid and binding obligations of the parties thereto, enforceable in accordance with their terms; (l) the Administrative Agent or the Required Lenders shall have given notice to the Borrower of any event of default under any Local Facility Credit Agreement; or (m) there shall have occurred a Change in Control; then, and in every such event (other than an event with respect to the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Commitments, (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part and (iii) demand cash collateral pursuant to Section 2.20(h), whereupon the principal of the Loans so declared to be due and payable, together with accrued interest and premiums thereon and any unpaid accrued Fees and all other liabilities of the Credit Parties accrued hereunder and under any other Loan Document (other than any Local Facility Loan Document), 113 shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event with respect to the Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate, the principal of the Loans then outstanding, together with accrued interest and premiums thereon and any unpaid accrued Fees and all other liabilities of the Credit Parties accrued hereunder and under any other Loan Document (other than any Local Facility Loan Document), shall automatically become due and payable and the Administrative Agent shall be deemed to have made a demand for cash collateral to the full extent permitted under Section 2.20(h), without present ment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Credit Parties , anything contained herein or in any other Loan Document to the contrary notwithstanding. As soon as practicable following any acceleration hereunder the Administrative Agent shall advise the Local Facility Lenders thereof. ARTICLE VIII THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT In order to expedite the transactions contemplated by this Agreement, The Chase Manhattan Bank is hereby appointed to act as Administrative Agent and Collateral Agent on behalf of the Lenders and the Fronting Banks (for purposes of this Article VIII, the Administrative Agent and the Collateral Agent are referred to collectively as the "AGENTS"). Each of the Lenders and each assignee of any such Lender hereby irrevocably authorizes the Agents to take such actions on behalf of such Lender or assignee or such Fronting Bank and to exercise such powers as are specifically delegated to the Agents by the terms and provisions hereof and of the other Loan Documents, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders and the Fronting Banks, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders and the Fronting Banks all payments of principal of and interest on the Loans, all payments in respect of L/C Disbursements and all other amounts due to the Lenders and the Fronting Banks hereunder, and promptly to distribute to each Lender or Fronting Bank its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrower of any Event of Default specified in this Agreement of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute to each Lender copies of all notices, financial statements and other materials delivered by the Borrower pursuant to this Agreement as received by the Administrative Agent. Without limiting the generality of the foregoing, the Agents are hereby expressly authorized to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Security Documents. In the event that any party other than the Lenders and the Agents shall participate in all or any portion of the Collateral pursuant to the Security Documents, 114 all rights and remedies in respect of such Collateral shall be controlled by the Collateral Agent. Neither the Agents nor any of their respective directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his own gross negligence or wilful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by the Borrower or any other Loan Party of any of the terms, conditions, covenants or agreements contained in any Loan Document. The Agents shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or any other Loan Documents or other instruments or agreements. The Agents shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper person or persons. Neither the Agents nor any of their respective directors, officers, employees or agents shall have any responsibility to the Borrower or any other Loan Party on account of the failure of or delay in performance or breach by any Lender or any Fronting Bank of any of its obligations hereunder or to any Lender or any Fronting Bank on account of the failure of or delay in performance or breach by any other Lender or Fronting Bank or the Borrower or any other Loan Party of any of their respective obligations hereunder or under any other Loan Document or in connection herewith or therewith. Each of the Agents may execute any and all duties hereunder by or through agents or employees and shall be entitled to rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. The Lenders hereby acknowledge that neither Agent shall be under any duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders. The Lenders further acknowledge and agree that so long as an Agent shall make any determination to be made by it hereunder or under any other Loan Document in good faith, such Agent shall have no liability in respect of such determination to any person. Subject to the appointment and acceptance of a successor Agent as provided below, either Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor with the consent of the Borrower (not to be unreasonably withheld). If no successor shall have been so appointed by the Required Lenders and approved by the Borrower and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders with the consent of the Borrower (not to be unreasonably 115 withheld), appoint a successor Agent which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of any appointment as Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations hereunder. After the Agent's resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. With respect to the Loans made by it hereunder, each Agent in its individual capacity and not as Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not an Agent, and the Agents and their Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent. Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of its pro rata share (based on its Commit ments hereunder (or if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of its applicable outstanding Loans or participations in L/C Disbursements, as applicable)) of any reasonable expenses incurred for the benefit of the Lenders by the Agents, including counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrower and (b) to indemnify and hold harmless each Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as Agent or any of them in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by it or any of them under this Agreement or any other Loan Document, to the extent the same shall not have been reimbursed by the Borrower; PROVIDED that no Lender shall be liable to an Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or wilful misconduct of such Agent or any of its directors, officers, employees or agents. Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan Document, any related agreement or any document furnished hereunder or thereunder. 116 No Managing Agent shall have any liability hereunder by virtue of its execution of this Agreement as a Managing Agent. As soon as practicable after it becomes aware of an Event of Default that has occurred and is continuing, the Administrative Agent shall notify each Lender thereof. In its capacity as Administrative Agent hereunder, the Administrative Agent will serve as Representative of the Bank Indebtedness under the Senior Subordinated Indenture and the Senior Subordinated Exchange Indenture and agrees to notify each Lender of any notice received by it as such Representative. ARTICLE IX MISCELLANEOUS SECTION 9.01. NOTICES. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at UCAR Global Enterprises Inc., 39 Old Ridgebury Road, Danbury, CT 06817-0001, Attention of President (Telecopy No. (203) 207-7785), and if to UCAR, to it in care of the Borrower; (b) if to the Administrative Agent, to The Loan and Agency Services Group, 8th floor, One Chase Manhattan Plaza, New York, New York 10081 Attention: Janet Belden (Telecopy No. (212) 552-5658) with a copy to James Ramage, The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017 (Telecopy No. (212) 270-4724); (c) if to a Fronting Bank or to any Credit Party (other than the Borrower), to it at its address (or telecopy number) set forth in Schedule 9.01; and (d) if to a Lender, to it at its address (or telecopy number) set forth in the Administrative Questionnaire delivered to the Administrative Agent by such Lender in connection with the execution of this Agreement or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. SECTION 9.02. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by the Borrower, the 117 other Credit Parties and the Guarantors herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and the Fronting Banks and shall survive the making by the Lenders of the Loans, the execution and delivery to the Lenders of the Loan Documents and the issuance of the Letters of Credit, regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or L/C Disbursement or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not been terminated. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein (including pursuant to Sections 2.13, 2.15, 2.19 and 9.05) shall survive the payment in full of the principal and interest hereunder, the expiration of the Letters of Credit and the termination of the Commitments or this Agreement. SECTION 9.03. BINDING EFFECT. This Agreement shall become effective when it shall have been executed by UCAR, the Borrower, and the Administrative Agent and when the Administrative Agent shall have received copies hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of UCAR, the Borrower, the other Credit Parties, each Fronting Bank, the Administrative Agent and each Lender and their respective permitted successors and assigns. SECTION 9.04. SUCCESSORS AND ASSIGNS. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of UCAR, the Borrower, the other Credit Parties, the Administrative Agent, the Fronting Banks or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. (b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations as a Lender under this Agreement (including all or a portion of its Commitments, the Loans and L/C Disbursements at the time owing to it and participations in Letters of Credit and Swingline Loans held by it, it being understood that Lenders shall not be required to assign pro rata amounts of their Loans, L/C Disbursements, Revolving Credit Commitments, Term Commitments and Tranche A Reimbursement Commitments, except that Tranche A Exposures, Tranche A Reimbursement Commitments and Tranche A Term Loans may only be assigned in pro rata amounts); PROVIDED, HOWEVER, that (i) except in the case of an assignment to another Lender, an Affiliate of such Lender or a Related Fund of any Lender, (A) in each case, the Borrower and the Administrative Agent must each give its prior written consent to such assignment (which consent shall not in either case be unreasonably withheld or delayed), PROVIDED that the consent of the Borrower shall not be required if an Event of Default shall have occurred and be continuing, (B) in the case of participations in Letters of Credit, Tranche A Reimbursement 118 Commitments or Revolving Credit Commitments, each applicable Fronting Bank must give its prior written consent to such assignment (which consent shall not in any case be unreasonably withheld or delayed) and (C) in the case of participations in Swingline Loans or Revolving Credit Commitments, the Swingline Lender must give its prior consent to such assignment (which consent in any case shall not be unreasonably withheld), (ii) except in the case of an assignment to another Lender, an Affiliate of such Lender or a Related Fund of any Lender, the amount of the Loans, L/C Disbursements, Commitments or participations in Letters of Credit or Swingline Loans of the assigning Lender subject to such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall be an amount not less than $5,000,000 and an integral multiple of $1,000,000 or shall be the entire remaining amount of such Loans, L/C Disbursements, Commitments or participations in Letters of Credit or Swingline Loans held by such assigning Lender, (iii) unless the assignor ceases to be a Lender, the aggregate amount of the Loans and L/C Disbursements owing to and unused Commitments of such Lender after giving effect to such assignment shall be not less than $5,000,000, (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 (except that no such processing and registration fee shall be payable in the case of an assignee which is already a Lender, an Affiliate of such Lender or a Related Fund of any Lender), and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof unless agreed otherwise by the Administrative Agent, (i) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (ii) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as to any Fees accrued for its account and not yet paid). (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Term Commitments, Tranche A Reimbursement Commitment and Revolving Credit Commitment, and the outstanding balances of its Loans and L/C Disbursements and its participations in Letters of Credit and Swingline Loans, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or 119 warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or thereto, or the financial condition of the Borrower or any other Loan Party or the performance or observance by the Borrower or any other Loan Party of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received copies of this Agreement and the other Loan Documents, together with copies of the most recent financial statements delivered pursuant to this Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, any Fronting Bank, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at its address referred to in subsection 9.01 a copy of each Assignment and Acceptance delivered to it and a register (the "REGISTER") for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Loans and L/C Disbursements owing to, each Lender from time to time. The Administrative Agent shall also record the Letter of Credit Exposure of each Lender in the Register. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the other Credit Parties, the Administrative Agent, the Fronting Banks and the Lenders shall treat each person whose name is recorded in the Register as the owner of Commitments and the Loans and Letter of Credit Exposures recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, the other Credit Parties, the Fronting Banks, any Lender and their representatives (including counsel and accountants), at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Borrower, the applicable Fronting Banks, the Swingline Lender and the 120 Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Lenders. Notwithstanding anything to the contrary contained herein, no assignment under Section 9.04(b) of any rights or obligations shall be effective unless and until the Administrative Agent shall have recorded such assignment in the Register. The Administrative Agent shall record the name of the transferor, the name of the transferee, and the amount of the transfer in the Register after receipt of all documents required pursuant to this Section 9.04 and such other documents as the Administrative Agent may reasonably request. (f) Each Lender may without the consent of the Borrower, any other Credit Party, any Fronting Bank, the Swingline Lender or the Administrative Agent sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments, the Loans owing to it, its Letter of Credit Exposure and the participations in Letters of Credit and Swingline Loans held by it); PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other entities shall be entitled to the benefit of the cost protection provisions contained in Section 2.13, 2.15, 2.19 and 9.05 to the same extent as if they were Lenders; PROVIDED that no such participating bank or entity shall be entitled to receive any greater amount pursuant to such Sections than a Lender would have been entitled to receive in respect of the amount of the participation sold by such Lender to such participating bank or entity had no sale occurred, and (iv) the Borrower, the other Credit Parties, the Administrative Agent, the Fronting Banks, the Swingline Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower or any other Loan Party, as the case may be, relating to its Loans, Letter of Credit Exposure and participations in Letters of Credit and Swingline Loans and Fees and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document (other than amendments, modifications or waivers decreasing any Fee payable hereunder or the amount of principal of or the rate at which interest is payable on the Loans or L/C Disbursements, extending any final maturity date or increasing any Commitment, in each case in respect of an Obligation in which the relevant participating bank or entity is participating, or releasing all or substantially all of the Collateral or any Guarantor (other than a Subsidiary which is not a Significant Subsidiary) from its Guarantee Agreement unless all or substantially all the Capital Stock of such Guarantor is sold in a transaction permitted by this Agreement or as provided in Section 9.18). Each Lender will disclose the identity of its participants to the Borrower and Administrative Agent if requested by the Borrower or the Administrative Agent. (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04, disclose to the 121 assignee or participant or proposed assignee or participant any information relating to the Borrower or any other Loan Party furnished to such Lender by or on behalf of the Borrower or any Loan Party; PROVIDED that, prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree to be bound by Section 9.17. (h) Any Lender may at any time assign all or any portion of its rights under this Agreement to a Federal Reserve Bank, and any Lender that is a fund that invests in bank loans may, without the consent of the Administrative Agent or the Borrower, pledge all or any portion of its Loans and Notes, if any, to any trustee for, or any other representative of, holders of obligations owed, or securities issued, by such fund, as security for such obligations or securities; PROVIDED that any foreclosure or similar action by such trustee shall be subject to the provisions of this Section concerning assignments; PROVIDED FURTHER that no such assignment shall release a Lender from any of its obligations hereunder. In order to facilitate such an assignment to a Federal Reserve Bank or to any trustee or other representative, the Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to the Borrower by the assigning Lender hereunder. (i) In the event that S&P or Moody's shall, after the date that any Lender becomes a Lender, downgrade the long-term certificate of deposit ratings or long-term senior unsecured debt ratings of such Lender (or the parent company thereof), and the resulting ratings shall be BBB+ or Baa1 or lower, then each applicable Fronting Bank shall have the right, but not the obligation, at its own expense, upon notice to such Lender and the Administrative Agent, to replace (or to request the Borrower, at the sole expense of such Fronting Bank, to use its reasonable efforts to replace) such Lender with respect to such Lender's Tranche A Reimbursement Commitment or Revolving Credit Commitment, as applicable, with an assignee (in accordance with and subject to the restrictions contained in paragraph (b) above), and such Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in paragraph (b) above) all its interests, rights and obligations in respect of its Tranche A Reimbursement Commitment or Revolving Credit Commitment, as applicable, to such assignee; PROVIDED, HOWEVER, that (i) no such assignment shall conflict with any law, rule and regulation or order of any Governmental Authority and (ii) such assignee shall pay to such Lender in immediately available funds on the date of such assignment the principal of and interest accrued to the date of payment on the Loans and L/C Disbursements of such Lender hereunder and all other amounts accrued for such Lender's account or owed to it hereunder. (j) None of UCAR, the Borrower and the other Credit Parties shall assign or delegate any of its rights or duties hereunder and any attempted assignment shall be null and void. (k) Except as provided in Section 2.13(d), no Fronting Bank shall assign or delegate any of its interests, rights or obligations as a Fronting Bank under this Agreement without the 122 prior written consent of the Borrower, each applicable Credit Party, the Administrative Agent and the Required Lenders. SECTION 9.05. EXPENSES; INDEMNITY. (a) The Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the Administrative Agent and the Collateral Agent in connection with the preparation of this Agreement and the other Loan Documents, or by the Administrative Agent or the Collateral Agent in connection with the syndication of the Commitments or the administration of this Agreement (including expenses incurred in connection with ongoing Collateral examination to the extent incurred with the reasonable prior approval of the Borrower) or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions hereby contemplated shall be consummated) or incurred by the Administrative Agent, the Collateral Agent or any Lender in connection with the enforcement or protection of their rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made or the Letters of Credit issued hereunder, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent and the Collateral Agent, and, in connection with any such enforcement or protection, the reasonable fees, charges and disbursements of any other counsel (including the reasonable allocated costs of internal counsel if a Lender elects to use internal counsel in lieu of outside counsel) for the Administrative Agent, any Fronting Bank or any Lender (but no more than one such counsel for any Lender). (b) The Borrower agrees to indemnify the Administrative Agent, the Collateral Agent, each Fronting Bank, each Lender and each of their respective directors, trustees, officers, employees and agents (each such person being called an "INDEMNITEE") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto and thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated hereby and thereby, (ii) the use of the proceeds of the Loans or the use of any Letter of Credit or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; PROVIDED that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee (treating, for this purpose only, the Administrative Agent, any Fronting Bank or any Lender and its directors, trustees, officers and employees as a single Indemnitee). Subject to and without limiting the generality of the foregoing sentence, the Borrower agrees to indemnify each Indemnitee against, and hold each Indemnitee harmless from, any Environmental Claim, and any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel or consultant fees, charges and disbursements, 123 incurred by or asserted against any Indemnitee (and arising out of, or in any way connected with or as a result of, any of the events described in clause (i), (ii) or (iii) of the preceding sentence) arising out of, in any way connected with, or as a result of (A) any Environmental Claim related in any way to UCAR, the Borrower or any Subsidiary, (B) any violation of any Environmental Law, (C) any act, omission, event or circumstance (including the actual, proposed or threatened, Release, removal, presence, disposition, discharge or transportation, storage, holding, existence, generation, processing, abatement, handling or presence on, into, from or under any present, past or future property of UCAR, the Borrower or any Subsidiary of any Hazardous Material); PROVIDED that such indemnity shall not, as to any Indemnitee, be available to the extent that such Environmental Claim is, or such losses, claims, damages, liabilities or related expenses are, determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee or any of its directors, trustees, officers or employees. The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, any Fronting Bank or any Lender. All amounts due under this Section 9.05 shall be payable on written demand therefor. (c) Unless an Event of Default shall have occurred and be continuing, the Borrower shall be entitled to assume the defense of any action for which indemnification is sought hereunder with counsel of its choice at its expense (in which case the Borrower shall not thereafter be responsible for the fees and expenses of any separate counsel retained by an Indemnitee except as set forth below); PROVIDED, HOWEVER, that such counsel shall be reasonably satisfactory to each such Indemnitee. Notwithstanding the Borrower's election to assume the defense of such action, each Indemnitee shall have the right to employ separate counsel and to participate in the defense of such action, and the Borrower shall bear the reasonable fees, costs and expenses of such separate counsel, if (i) the use of counsel chosen by the Borrower to represent such Indemnitee would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the Borrower and such Indemnitee and such Indemnitee shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Borrower (in which case the Borrower shall not have the right to assume the defense or such action on behalf of such Indemnitee); (iii) the Borrower shall not have employed counsel reasonably satisfactory to such Indemnitee to represent it within a reasonable time after notice of the institution of such action; or (iv) the Borrower shall authorize such Indemnitee to employ separate counsel at the Borrower's expense. The Borrower will not be liable under this Agreement for any amount paid by an Indemnitee to settle any claims or actions if the settlement is entered into without the Borrower's consent, which consent may not be withheld or delayed unless such settlement is 124 unreasonable in light of such claims or actions against, and defenses available to, such Indemnitee. (d) Notwithstanding anything to the contrary in this Section 9.05, this Section 9.05 shall not apply to taxes, it being understood that the Borrower's only obligations with respect to taxes shall arise under Sections 2.13 and 2.19. SECTION 9.06. RIGHT OF SETOFF. If an Event of Default shall have occurred and be continuing, each Lender and each Fronting Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Fronting Bank to or for the credit or the account of the Borrower or any other Credit Party against any of and all the obligations of the Borrower or any Credit Party now or hereafter existing under this Agreement or any other Loan Document held by such Lender or Fronting Bank, irrespective of whether or not such Lender or such Fronting Bank shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured. The rights of each Lender and Fronting Bank under this Section 9.06 are in addition to other rights and remedies (including other rights of setoff) which such Lender or such Fronting Bank may have. SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK. SECTION 9.08. WAIVERS; AMENDMENT. (a) No failure or delay of the Administrative Agent, any Fronting Bank or any Lender in exercising any right or power hereunder or under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Fronting Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by UCAR, the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on UCAR, the Borrower or any other Loan Party in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances. 125 (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by UCAR, the Borrower, the other Credit Parties and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by each party thereto and the Collateral Agent and consented to by the Required Lenders; PROVIDED, HOWEVER, that no such agreement shall (i) decrease the principal amount of, or extend the final maturity of, or decrease the rate of interest on, any Loan or any L/C Disbursement, without the prior written consent of each Lender directly affected thereby, (ii) extend any Installment Date (other than any final maturity), or extend any date on which payment of interest on any Loan or any L/C Disbursement is due, without the prior written consent of (A) in the case of Term Loans or the Tranche A Exposure, the Required Lenders and Lenders holding Term Loans or having Tranche A Exposures representing at least 80% of the aggregate principal amount of each Tranche affected by such action or (B) in the case of Loans under the Revolving Credit Commitments and Revolving L/C Disbursements, Lenders with Revolving Credit Commitments representing at least 80% of the aggregate Revolving Credit Commitments then in effect, (iii) advance any Installment Date without the prior written consent of Lenders holding Term Loans or having Tranche A Exposures representing (A) at least 80% of the aggregate principal amount of the then outstanding Tranche A Term Loans and the Tranche A Exposure and (B) at least 80% of the aggregate principal amount of the then outstanding Tranche B Term Loans, (iv) increase or extend the Commitment of any Lender or decrease the Commitment Fees or L/C Participation Fees or other fees of any Lender without the prior written consent of such Lender, (v) effect any waiver, amendment or modification that by its terms adversely affects the rights in respect of payments or collateral of Lenders participating in any Tranche differently from those of Lenders participating in the other Tranche, without the consent of a majority in interest of the Lenders participating in the adversely affected Tranche, or change the relative rights in respect of payments or collateral of the Lenders participating in different Tranches without the consent of a majority in interest of Lenders participating in each affected Tranche, (vi) release Collateral, in one transaction or a series of transactions, representing in the aggregate (based on the book value of such released Collateral) more than 10% of the book value of Total Assets set forth in UCAR's most recent consolidated financial statements delivered pursuant to Section 5.04 but less than all or substantially all the Collateral, without the prior written consent of the Designated Lenders or (vii) amend or modify the provisions of Section 2.09(f), Section 2.11(c) or Section 2.16, the provisions of this Section or the definition of "Required Lenders", or release all or substantially all the Collateral or release any Guarantor (other than any Subsidiary which is not a Significant Subsidiary) from its Guarantee Agreement unless all or substantially all the Capital Stock of such Guarantor is sold in a transaction permitted by this Agreement or as provided in Section 9.18, without the prior written consent of each Lender adversely affected thereby; PROVIDED FURTHER that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Collateral Agent or any Fronting Bank hereunder or under any other Loan Document without the prior written consent of the Administrative Agent, the 126 Collateral Agent or such Fronting Bank acting as such at the effective date of such agreement, as the case may be. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08 shall bind any assignee of such Lender. SECTION 9.09. INTEREST RATE LIMITATION. Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges which are treated as interest under applicable law (collectively the "CHARGES"), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender or Fronting Bank, shall exceed the maximum lawful rate (the "MAXIMUM RATE") which may be contracted for, charged, taken, received or reserved by such Lender in accordance with applicable law, the rate of interest payable hereunder, together with all Charges payable to such Lender or such Fronting Bank, shall be limited to the Maximum Rate; PROVIDED that such excess amount shall be paid to such Lender or such Fronting Bank on subsequent payment dates to the extent not exceeding the legal limitation. SECTION 9.10. ENTIRE AGREEMENT. This Agreement, the other Loan Documents and the agreements regarding certain Fees referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents. SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11. SECTION 9.12. SEVERABILITY. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 127 SECTION 9.13. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 9.03. SECTION 9.14. HEADINGS. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.15. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each of UCAR, the Borrower and the other Credit Parties hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Lender or Fronting Bank may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against UCAR, the Borrower, any other Credit Party or any Guarantor or their properties in the courts of any jurisdiction. (b) Each of UCAR, the Borrower and the other Credit Parties hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.16. CONVERSION OF CURRENCIES. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum due hereunder or under any other Loan Document in Dollars into another currency, the parties hereto agree, to the fullest extent that they may legally and effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase Dollars with such other currency in New York, New York, on the 128 Business Day immediately preceding the day on which final judgment is given. (b) The obligations of UCAR, the Borrower and the other Credit Parties in respect of any sum due to the Administrative Agent, any Lender or any Fronting Bank hereunder or under any other Loan Document in Dollars shall, to the extent permitted by applicable law, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Business Day following receipt of any sum adjudged to be so due in the judgment currency, the Administrative Agent, such Lender or such Fronting Bank may in accordance with normal banking procedures purchase Dollars in the amount originally due to the Administrative Agent, such Lender or such Fronting Bank with the judgment currency. If the amount of Dollars so purchased is less than the sum originally due to the Administrative Agent, such Lender or such Fronting Bank, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent, such Lender or such Fronting Bank against the resulting loss. SECTION 9.17. CONFIDENTIALITY. Each of the Lenders, the Fronting Banks and the Administrative Agent agrees that it shall maintain in confidence any information relating to UCAR, the Borrower and the other Loan Parties furnished to it by or on behalf of UCAR, the Borrower or the other Loan Parties (other than information that (a) has become generally available to the public other than as a result of a disclosure by such party, (b) has been independently developed by such Lender, such Fronting Bank or the Administrative Agent without violating this Section 9.17 or (c) was available to such Lender, such Fronting Bank or the Administrative Agent from a third party having, to such person's knowledge, no obligations of confidentiality to UCAR, the Borrower or any other Loan Party) and shall not reveal the same other than (i) to its directors, trustees, officers, employees and advisors with a need to know (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.17) and (ii) as contemplated by Section 9.04(g), except: (A) to the extent necessary to comply with law or any legal process or the requirements of any Governmental Authority or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, (B) as part of normal reporting or review procedures to Governmental Authorities, (C) to its parent companies, Affiliates or auditors (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.17) and (D) in order to enforce its rights under any Loan Document in a legal proceeding. SECTION 9.18. RELEASE OF LIENS AND GUARANTEES. In the event that UCAR, the Borrower or any Subsidiary conveys, sells, leases, assigns, transfers or otherwise disposes of all or any portion of any of the Capital Stock, assets or property of UCAR, the Borrower or any of the Subsidiaries in a transaction not prohibited by Section 6.05, the Administrative Agent and the Collateral Agent shall promptly (and the Lenders hereby authorize the Administrative Agent and the Collateral Agent to) take such action and execute any such documents as may be reasonably requested by the Borrower and at the Borrower's expense to release any Liens created by any Loan Document in respect of such Capital Stock, assets or property, and, 129 in the case of a disposition of all or substantially all the Capital Stock or assets of any Subsidiary Guarantor, terminate such Subsidiary Guarantor's obligations under any Guarantee Agreements to which it is a party. In addition, the Administrative Agent and the Collateral Agent agree to take such actions as are reasonably requested by the Borrower and at the Borrower's expense to terminate the Liens and security interests created by the Loan Documents when all the Obligations are paid in full and all Letters of Credit and Commitments are terminated. Any representation, warranty or covenant contained in any Loan Document relating to any such Capital Stock, assets, property or Subsidiary shall no longer be deemed to be made once such Capital Stock, assets or property is conveyed, sold, leased, assigned, transferred or disposed of. SECTION 9.19. SUBSIDIARY BORROWERS. On or after the Effective Date, the Borrower may designate any Wholly Owned Subsidiary as a Subsidiary Borrower by delivery to the Administrative Agent of a Subsidiary Borrower Agreement executed by such Subsidiary and the Borrower, and upon (a) such delivery, (b) approval by the Administrative Agent and (c) if required, approval by the applicable Fronting Bank, such Subsidiary shall for all purposes of this Agreement be a Subsidiary Borrower and a party to this Agreement until the Borrower shall have executed and delivered to the Administrative Agent a Subsidiary Borrower Termination with respect to such Subsidiary, whereupon such Subsidiary shall cease to be a Subsidiary Borrower and a party to this Agreement. The Borrower shall be required to promptly deliver a Subsidiary Borrower Termination with respect to any Subsidiary that ceases to be a Wholly Owned Subsidiary. Notwithstanding the foregoing, no Subsidiary Borrower Termination will become effective as to any Subsidiary Borrower at a time when any principal of or interest on any Loan to such Subsidiary Borrower shall be outstanding hereunder or such Subsidiary Borrower shall be an account party under an outstanding Letter of Credit or there shall be any unreimbursed L/C Disbursements in respect of any Letter of Credit under which such Subsidiary Borrower was the account party; PROVIDED that such Subsidiary Borrower Termination shall be effective to terminate such Subsidiary Borrower's right to make further Borrowings or request Letters of Credit under this Agreement. As soon as practicable upon receipt of a Subsidiary Borrower Agreement, the Administrative Agent shall send a copy thereof to each Lender. 130 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. UCAR INTERNATIONAL INC., by /S/ CORRADO F. DEGASPERIS -------------------------------------- Name:Corrado F. DeGasparis Title:Controller UCAR GLOBAL ENTERPRISES INC., by /S/ CORRADO F. DEGASPERIS --------------------------------------- Name:Corrado F. DeGasperis Title:Controller UCAR HOLDINGS S.A., by /S/ CORRADO F. DEGASPERIS --------------------------------------- Name:Corrado F. DeGasperis Title:Controller UCAR S.p.A., by /S/ CORRADO F. DEGASPERIS --------------------------------------- Name:Corrado F. DeGasperis Title:Attorney-in-Fact UCAR ELECTRODOS, S.L., by /S/ CORRADO F. DEGASPERIS --------------------------------------- Name:Corrado F. DeGasperis Title:Attorney-in-Fact UCAR INC., by /S/ CORRADO F. DEGASPERIS --------------------------------------- Name:Corrado F. DeGasperis Title:Attorney-in-Fact 131 UCAR MEXICANA S.A. de C.V., by /S/ CORRADO F. DEGASPERIS --------------------------------------- Name:Corrado F. DeGasperis Title:Attorney-in-Fact THE CHASE MANHATTAN BANK, individually and as Fronting Bank, Administrative Agent and Collateral Agent, by /S/ MARIAN N. SCHULMAN --------------------------------------- Name:Marian N. Schulman Title:Vice President ABN AMRO BANK, N.V., by /S/ DAVID A. MANDELL --------------------------------------- Name:David A. Mandell Title:Senior Vice President by /S/ GEORGE DUGAN --------------------------------------- Name:George Dugan Title:Vice President AMSOUTH BANK OF ALABAMA, by /S/ R. MARK GRAF --------------------------------------- Name:R. Mark Graf Title:Senior Vice President by /S/ KIMBLE L. VARDAMAN --------------------------------------- Name:Kimble L. Vardaman Title:Senior Vice President BANCA COMMERCIALE ITALIANA, NEW YORK BRANCH, by /S/ KAREN PURELIS --------------------------------------- Name:Karen Purelis Title:Vice President by /S/ CHARLES DOUGHERTY --------------------------------------- Name:Charles Dougherty Title:Vice President 132 BANKBOSTON N.A., by /S/ HARVEY H. THAYER --------------------------------------- Name:Harvey H. Thayer Title:Managing Director BANK OF AMERICA NT&SA, by /S/ DONALD J. CHIN --------------------------------------- Name:Donald J. Chin Title:Managing Director THE BANK OF NEW YORK, by /S/ KENNETH P. SNEIDER, JR. --------------------------------------- Name:Kenneth P. Sneider, Jr. Title:Vice President THE BANK OF NOVA SCOTIA, by /S/ JAMES R. TRIMBLE --------------------------------------- Name:James R. Trimble Title:Sr. Relationship Manager BANK OF TOKYO-MITSUBISHI TRUST COMPANY, by /S/ NICHOLAS CAMPBELL --------------------------------------- Name:Nicholas Campbell Title:Vice President BANQUE NATIONALE DE PARIS, by /S/ RICHARD L. STED --------------------------------------- Name:Richard L. Sted Title:Senior Vice President by /S/ SOPHIE REVILLARD KAUFMAN --------------------------------------- Name:Sophie Revillard Kaufman Title:Vice President 133 BHF-BANK AKTIENGESELLSCHAFT, by /S/ ROBERT NOVAK --------------------------------------- Name:Robert Novak Title:Assistant Treasurer by /S/ GEOFFREY GWIN --------------------------------------- Name:Geoffrey Gwin Title:Assistant Treasurer CERES FINANCE LTD., by /S/ JOHN CULLINANE --------------------------------------- Name:John Cullinane Title:Director CIBC INC., by /S/ IHOR ZALUCKYJ --------------------------------------- Name:Ihor Zaluckyj Title:Executive Director CREDIT AGRICOLE INDOSUEZ, by /S/ CRAIG WELCH --------------------------------------- Name:Craig Welch Title:First Vice President by /S/ SARAH MCCLINTOCK --------------------------------------- Name:Sarah McClintock Title:Vice President, TL CREDIT LYONNAIS NEW YORK BRANCH, by /S/ VLADIMIR LABUN --------------------------------------- Name:Vladimir Labun Title:First Vice President- Manager THE DAI-ICHI KANGYO BANK, LIMITED, by /S/ RONALD WOLINSKY --------------------------------------- Name:Ronald Wolinsky Title:Vice President & Group Leader 134 FIRST AMERICAN NATIONAL BANK, by /S/ WARD C. WILSON --------------------------------------- Name:Ward C. Wilson Title:Senior Vice President FIRST UNION NATIONAL BANK, SUCCESSOR BY MERGER TO CORESTATES BANK, N.A., by /S/ ROBERT A. BROWN --------------------------------------- Name:Robert A. Brown Title:Vice President FLEET NATIONAL BANK, by /S/ ROBERT C. RUBINO --------------------------------------- Name:Robert C. Rubino Title:Senior Vice President GENERAL ELECTRIC CAPITAL CORPORATION, by /S/ JANET K. WILLIAMS --------------------------------------- Name:Janet K. Williams Title:Duly Authorized Signatory THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH, by /S/ TAKUYA HONJO --------------------------------------- Name:Takuya Honjo Title:Senior Vice President 135 ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A., by /S/ WENDELL JONES --------------------------------------- Name:Wendell Jones Title:Vice President by /S/ ETTORE VIAZZO --------------------------------------- Name:Ettore Viazzo Title:Vice President KBC BANK, N.V., by /S/ ROBERT M. SURDAM, JR. --------------------------------------- Name:Robert M. Surdam, Jr. Title:Vice President by /S/ ROBERT SNAUFFER --------------------------------------- Name:Robert Snauffer Title:First Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH, by /S/ KOJI SASAYAMA --------------------------------------- Name:Koji Sasayama Title:Deputy General Manager MELLON BANK, N.A., by /S/ PETER K. LEE --------------------------------------- Name:Peter K. Lee Title:Vice President MERRILL LYNCH PRIME RATE PORTFOLIO, BY MERRILL LYNCH ASSET MANAGEMENT, L.P., AS INVESTMENT ADVISOR, by /S/ GILLES MARCHAND --------------------------------------- Name:Gilles Marchand Title:CFA, Authorized Signatory 136 MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., by /S/ GILLES MARCHAND --------------------------------------- Name:Gilles Marchand Title:CFA, Authorized Signatory NATEXIS BANQUE BFCE, by /S/ CYNTHIA E. SACHS --------------------------------------- Name:Cynthia E. Sachs Title:Vice President, Group Manager by /S/ KEVIN MCOWEN --------------------------------------- Name:Kevin McOwen Title:Assistant Treasurer OCTAGON LOAN TRUST By: Octagan Credit Investors As Manager, by /S/ JOYCE C. DELUCCA --------------------------------------- Name:Joyce C. DeLucca Title:Managing Director PARIBAS, by /S/ JOHN J. MCCORMICK, III --------------------------------------- Name:John J. McCormick, III Title:Vice President by /S/ DOUGLAS R. GOUCHOE --------------------------------------- Name:Douglas R. Gouchoe Title:Director PNC BANK, NATIONAL ASSOCIATION, by /S/ MARK W. RUTHERFORD --------------------------------------- Name:Mark W. Rutherford Title:Vice President 137 THE ROYAL BANK OF SCOTLAND PLC, by /S/ SCOTT BARTON --------------------------------------- Name:Scott Barton Title:Vice President THE SAKURA BANK, LIMITED, by /S/ YOSHIKAZU NAGURA --------------------------------------- Name:Yoshikazu Nagura Title:Vice President THE SANWA BANK, LIMITED, by /S/ DOMINIC J. SORRESSO --------------------------------------- Name:Dominic J. Sorresso Title:Vice President SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor, by /S/ PAYSON F. SWAFFIELD --------------------------------------- Name:Payson F. Swaffield Title:Vice President SENIOR HIGH INCOME PORTFOLIO, INC., by /S/ GILLES MARCHAND --------------------------------------- Name:Gilles Marchand Title:CFA, Authorized Signatory SOCIETE GENERALE, by /S/ JERRY PARISI --------------------------------------- Name:Jerry Parisi Title:Director THE SUMITOMO BANK, LIMITED, by /S/ J. BRUCE MEREDITH --------------------------------------- Name:J. Bruce Meredith Title:Senior Vice President 138 THE TOKAI BANK LIMITED - NEW YORK BRANCH, by /S/ SHINICHI NAKATANI --------------------------------------- Name:Shinichi Nakatani Title:Assistant General Manager THE TRAVELERS INDEMNITY COMPANY, by /S/ JOHN W. PETCHLER --------------------------------------- Name:John W. Petchler Title:Second Vice President THE TRAVELERS INSURANCE COMPANY, by /S/ JOHN W. PETCHLER --------------------------------------- Name:John W. Petchler Title:Second Vice President THE TRAVELERS LIFE AND ANNUITY COMPANY, by /S/ JOHN W. PETCHLER --------------------------------------- Name:John W. Petchler Title:Second Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, by /S/ JEFFREY W. MAILLET --------------------------------------- Name:Jeffrey W. Maillet Title:Senior Vice President & Director STRATA FUNDING LTD., by /S/ JOHN CULLINANE --------------------------------------- Name:John Cullinane Title:Director SCHEDULE A
LIBOR MARGIN TRANCHE A REIMBURSEMENT ABR MARGIN PERMITTED LOANS AND TRANCHE A OTHER REVOLVING REMBURSEMENT LIBOR ACQUISITIONS LOANS/L/C LOANS AND MARGIN ABR MARGIN EXCESS CASH AND SPECIFIED LEVERAGE PARTICIPATION REVOLVING TRANCHE B TRANCHE B FLOW SWEEP PERMITTED RATIO FEE LOANS TERM LOANS TERM LOANS PERCENTAGE TRANSACTIONS greater than 2.75% 1.75% 3.25% 2.25% 75% $75,000,000 or equal to 2.75:1.0 greater than 2.75% 1.75% 3.25% 2.25% 50% $75,000,000 or equal to 2.5:1.0 and less than 2.75:1.0 greater than 2.50% 1.50% 3.25% 2.25% 50% $100,000,000 or equal to 2.0:1.0 and less than 2.5:1.0 less than 2.25% 1.25% 3.25% 2.25% 50% $125,000,000 2.0:1.0
The LIBOR Margin, the ABR Margin, the L/C Participation Fee, the applicable percentage of Excess Cash Flow referred to in Section 2.12(e) and the aggregate amount of Permitted Other Acquisitions and Specified Permitted Transactions for any date shall be determined by reference to the Leverage Ratio as of the last day of the fiscal quarter most recently ended as of such date and for the period (the "MEASURED PERIOD") referred to in Section 6.12 for which such last day is the measuring date (and computed as provided in Section 6.12 with respect to each such Measured Period), and any change shall become effective upon the delivery to the Administrative Agent of a certificate of the Borrower signed by a Responsible Officer of the Borrower (which certificate may be delivered prior to delivery of the relevant financial statements) with respect to the financial statements to be delivered pursuant to Section 5.04 for the most recently ended fiscal quarter (a) setting forth in reasonable detail the calculation of the Leverage Ratio for such Measured Period and at the end of such fiscal quarter and (b) stating that the signer has reviewed the terms of this Agreement and other Loan Documents and has made, or caused to be made under his or her supervision, a review in reasonable detail of the transactions and condition of UCAR, the Borrower and the Subsidiaries during the accounting period, and that the signer does not have knowledge of the existence as at the date of such officer's certificate of any Event of Default or Default and shall apply (i) in the case of the applicable LIBOR Margin, to Eurodollar Loans made on and after such delivery date (including pursuant to any conversion or continuation pursuant to Section 2.10), (ii) in the case of the applicable ABR Margin, to ABR Loans made on or after such delivery date (including pursuant to any conversion or continuation pursuant to Section 2.10) and (iii) in the case of the L/C Participation Fee, the applicable percentage of Excess Cash Flow referred to in Section 2.12(e) and Permitted Other Acquisitions and Specified Permitted Transactions, on and after such delivery date. It is understood that the foregoing certificate of a Responsible Officer shall be permitted to be delivered prior to, but in no event later than, the time of the actual delivery of the financial statements required to be delivered pursuant to Section 5.04. Notwithstanding the foregoing, at any time during which the Borrower has failed to deliver the certificate required under Section 5.04(c) with respect to a fiscal quarter following the date the delivery thereof is due, the Leverage Ratio shall be deemed, solely for the purposes of this Schedule A, to be greater than 2.75, until such time as Borrower shall deliver such compliance certificate. Schedule 2.01(a) LENDERS, COMMITMENTS AND OUTSTANDINGS ON DATE HEREOF
INSTITUTION OUTSTANDING TRANCHE A OUTSTANDING REVOLVING CREDIT TRANCHE A TERM REIMBURSEMENT TRANCHE B TERM COMMITMENTS AS LOANS AS OF DATE COMMITMENTS AS LOANS AS OF DATE OF DATE HEREOF HEREOF OF DATE HEREOF HEREOF THE CHASE MANHATTAN BANK $1,023,392.13 $10,976,607.86 $17,853,142.86 $12,499,999.94 ABN AMRO BANK, N.V. 669,141.03 7,177,012.82 0 8,173,076.92 AMSOUTH BANK OF ALABAMA 551,057.32 5,910,481.14 0 6,730,769.24 BANCA COMMERCIALE ITALIANA, NEW YORK BRANCH 551,057.32 5,910,481.14 0 6,730,769.24 BANKBOSTON, N.A. 393,612.36 4,221,772.24 0 4,807,692.32 BANK OF AMERICA NT&SA 551,057.32 5,910,481.14 0 6,730,769.24 THE BANK OF NEW YORK 669,141.03 7,177,012.82 0 8,173,076.92 THE BANK OF NOVA SCOTIA 669,141.03 7,177,012.82 0 8,173,076.92 BANK OF TOKYO-MITSUBISHI TRUST COMPANY 669,141.03 7,177,012.82 0 8,173,076.92 BANQUE NATIONALE DE PARIS 551,057.32 5,910,481.14 0 6,730,769.24 BHF-BANK AKTIENGESELLSCHAFT 669,141.03 7,177,012.82 0 8,173,076.92 CERES FINANCE LTD. 0 0 12,281,142.87 0 CIBC INC. 669,141.03 7,177,012.82 0 8,173,076.92 CORESTATES BANK, N.A. 0 0 0 0 CREDIT AGRICOLE INDOSUEZ 472,334.84 5,066,126.70 0 5,769,230.76 CREDIT LYONNAIS NEW YORK BRANCH 826,585.98 8,865,721.71 0 10,096,153.84 THE DAI-ICHI KANGYO BANK, LIMITED 551,057.32 5,910,481.14 0 6,730,769.24 FIRST AMERICAN NATIONAL BANK 393,612.37 4,221,772.25 0 4,807,692.30 FIRST UNION NATIONAL BANK OF NORTH CAROLINA 669,141.03 7,177,012.82 0 0 FIRST UNION NATIONAL BANK, SUCCESSOR BY MERGER TO CORESTATES BANK, N.A. 551,057.32 5,910,481.14 0 14,903,846.16 FLEET NATIONAL BANK 669,141.03 7,177,012.82 0 8,173,076.92 GENERAL ELECTRIC CAPITAL CORPORATION 551,057.32 5,910,481.14 0 6,730,769.24 THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH 669,141.03 7,177,012.82 0 8,173,076.92 ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A. 393,612.37 4,221,772.25 0 4,807,692.30 KBC BANK, N.V., FORMERLY KREDIETBANK, N.V., NEW YORK BRANCH 472,334.84 5,066,126.70 0 5,769,230.76 THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH 669,141.03 7,177,012.82 0 8,173,076.92 MELLON BANK, N.A. 551,057.32 5,910,481.14 0 6,730,769.24 MERRILL LYNCH PRIME RATE PORTFOLIO, BY: MERRILL LYNCH ASSET MANAGEMENT, L.P., AS INVESTMENT ADVISOR 0 0 14,328,000.00 0 MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. 0 0 10,120,571.44 0 NATEXIS BANQUE BFCE 551,057.32 5,910,481.14 0 6,730,769.24 OCTAGON CREDIT INVESTOR LOAN PORTFOLIO 0 0 16,914,999.99 0 PARIBAS 669,141.03 7,177,012.82 0 8,173,076.92 PNC BANK, NATIONAL ASSOCIATION 551,057.32 5,910,481.14 0 6,730,769.24 THE ROYAL BANK OF SCOTLAND PLC 551,057.32 5,910,481.14 0 6,730,769.24 THE SAKURA BANK, LIMITED 551,057.32 5,910,481.14 0 6,730,769.24 THE SANWA BANK, LIMITED 551,057.32 5,910,481.14 0 6,730,769.24 SENIOR DEBT PORTFOLIO BY: BOSTON MANAGEMENT AND RESEARCH AS INVESTMENT ADVISOR 0 0 7,959,999.99 0 SENIOR HIGH INCOME PORTFOLIO, INC. 0 0 3,411,428.57 0 SOCIETE GENERALE 551,057.32 5,910,481.14 0 6,730,769.24 STRATA FUNDING LTD. 0 0 1,705,714.29 0 THE SUMITOMO BANK, LIMITED 551,057.32 5,910,481.14 0 6,730,769.24 THE TOKAI BANK,LIMITED - NEW YORK BRANCH 472,334.84 5,066,126.70 0 5,769,230.76 THE TRAVELERS INDEMNITY COMPANY 78,722.47 844,354.45 1,989,999.99 961,538.46 THE TRAVELERS INSURANCE COMPANY 283,400.90 3,039,676.02 7,959,999.99 3,461,538.46 THE TRAVELERS LIFE AND ANNUITY COMPANY 31,488.99 337,741.78 0 384,615.38 VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST 0 0 24,875,000.01 0 $20,467,843.22 $219,532,156.78 $119,400,000.00 $250,000,000.00 TOTAL:
Schedule 2.01(b)
LENDERS, COMMITMENTS AND OUTSTANDINGS ON EFFECTIVE DATE (GIVING PRO FORMA EFFECT TO PREFUNDING AND PREPAYMENT OF 12/31/98 REQUIRED AMORTIZATION) INSTITUTION OUTSTANDING TRANCHE A OUTSTANDING REVOLVING CREDIT TRANCHE A TERM REIMBURSEMENT TRANCHE B TERM COMMITMENTS AS LOANS AS OF COMMITMENTS AS LOANS AS OF OF DATE HEREOF EFFECTIVE DATE OF DATE HEREOF EFFECTIVE DATE THE CHASE MANHATTAN BANK $23,392.16 $10,976,607.86 $17,793,333.35 $12,499,999.94 ABN AMRO BANK, N.V. 15,294.87 7,177,012.82 0 8,173,076.92 AMSOUTH BANK OF ALABAMA 12,595.78 5,910,481.14 0 6,730,769.24 BANCA COMMERCIALE ITALIANA, NEW YORK BRANCH 12,595.78 5,910,481.14 0 6,730,769.24 BANKBOSTON, N.A. 8,996.98 4,221,772.24 0 4,807,692.32 BANK OF AMERICA NT&SA 12,595.78 5,910,481.14 0 6,730,769.24 THE BANK OF NEW YORK 15,294.87 7,177,012.82 0 8,173,076.92 THE BANK OF NOVA SCOTIA 15,294.87 7,177,012.82 0 8,173,076.92 BANK OF TOKYO-MITSUBISHI TRUST COMPANY 15,294.87 7,177,012.82 0 8,173,076.92 BANQUE NATIONALE DE PARIS 12,595.78 5,910,481.14 0 6,730,769.24 BHF-BANK AKTIENGESELLSCHAFT 15,294.87 7,177,012.82 0 8,173,076.92 CERES FINANCE LTD. 0 0 12,240,000.01 0 CIBC INC. 15,294.87 7,177,012.82 0 8,173,076.92 CORESTATES BANK, N.A. 0 0 0 0 CREDIT AGRICOLE INDOSUEZ 10,796.38 5,066,126.70 0 5,769,230.76 CREDIT LYONNAIS NEW YORK BRANCH 18,893.67 8,865,721.71 0 10,096,153.84 THE DAI-ICHI KANGYO BANK, LIMITED 12,595.78 5,910,481.14 0 6,730,769.24 FIRST AMERICAN NATIONAL BANK 8,996.99 4,221,772.25 0 4,807,692.30 FIRST UNION NATIONAL BANK OF NORTH CAROLINA 15,294.87 0 0 0 FIRST UNION NATIONAL BANK, SUCCESSOR BY MERGER TO CORESTATES BANK, N.A. 12,595.78 13,087,493.96 0 14,903,846.16 FLEET NATIONAL BANK 15,294.87 7,177,012.82 0 8,173,076.92 GENERAL ELECTRIC CAPITAL CORPORATION 12,595.78 5,910,481.14 0 6,730,769.24 THE INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH 15,294.87 7,177,012.82 0 8,173,076.92 ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A. 8,996.99 4,221,772.25 0 4,807,692.30 KBC BANK, N.V., FORMERLY KREDIETBANK, N.V., NEW YORK BRANCH 10,796.38 5,066,126.70 0 5,769,230.76 THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH 15,294.87 7,177,012.82 0 8,173,076.92 MELLON BANK, N.A. 12,595.78 5,910,481.14 0 6,730,769.24 MERRILL LYNCH PRIME RATE PORTFOLIO, BY: MERRILL LYNCH ASSET MANAGEMENT, L.P., AS INVESTMENT ADVISOR 0 0 14,280,000.00 0 MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. 0 0 10,086,666.68 0 NATEXIS BANQUE BFCE 12,595.78 5,910,481.14 0 6,730,769.24 OCTAGON CREDIT INVESTOR LOAN PORTFOLIO 0 0 16,858,333.32 0 PARIBAS 15,294.87 7,177,012.82 0 8,173,076.92 PNC BANK, NATIONAL ASSOCIATION 12,595.78 5,910,481.14 0 6,730,769.24 THE ROYAL BANK OF SCOTLAND PLC 12,595.78 5,910,481.14 0 6,730,769.24 THE SAKURA BANK, LIMITED 12,595.78 5,910,481.14 0 6,730,769.24 THE SANWA BANK, LIMITED 12,595.78 5,910,481.14 0 6,730,769.24 SENIOR DEBT PORTFOLIO BY: BOSTON MANAGEMENT AND RESEARCH AS INVESTMENT ADVISOR 0 0 7,933,333.32 0 SENIOR HIGH INCOME PORTFOLIO, INC. 0 0 3,400,000.00 0 SOCIETE GENERALE 12,595.78 5,910,481.14 0 6,730,769.24 STRATA FUNDING LTD. 0 0 1,700,000.00 0 THE SUMITOMO BANK, LIMITED 12,595.78 5,910,481.14 0 6,730,769.24 THE TOKAI BANK, LIMITED - NEW YORK BRANCH 10,796.38 5,066,126.70 0 5,769,230.76 THE TRAVELERS INDEMNITY COMPANY 1,799.40 844,354.45 1,983,333.32 961,538.46 THE TRAVELERS INSURANCE COMPANY 6,477.83 3,039,676.02 7,933,333.32 3,461,538.46 THE TRAVELERS LIFE AND ANNUITY COMPANY 719.76 337,741.78 0 384,615.38 VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST 0 0 24,791,666.68 0 $467,843.22 $219,532,156.78 $119,000,000.00 $250,000,000.00 TOTAL:
SCHEDULE 2.20 LETTERS OF CREDIT TRANCHE A L/C COMMITMENTS PERCENTAGE FRONTING BANKS COMMITMENTS OF FACILITY The Chase Manhattan Bank $219,532,156.78 100.00% TRANCHE A LETTERS OF CREDIT PERCENTAGE Credit Party STATED AMOUNT OF FACILITY UCAR Holdings S.A. $134,953,333.33 61.4731506 UCAR S.p.A. 32,240,000.00 14.6857756 UCAR Electrodos S.L. 28,209,090.00 12.8496392 UCAR Inc. 20,563,333.35 9.3668890 Foreign Currency Reserve Component 3,566,400.10 1.62454565 REVOLVING L/C COMMITMENTS PERCENTAGE FRONTING BANKS COMMITMENTS OF FACILITY The Chase Manhattan Bank $200,000,000 100.00% SCHEDULE 3.08 of UCAR International Inc. and Outstanding Subscriptions, Options and Warrants - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION INTERNATIONAL INC. - -------------------------------------------------------------------------------- 1. UCAR Global Delaware 100% Enterprises Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR GLOBAL NAME OF SUBSIDIARY INCORPORATION ENTERPRISES INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2. UCAR Carbon Company Inc. Delaware 100% 3. UCAR Holdings II Inc. Delaware 100% 4. UCAR Carbon S.A. Brazil 95.30% 5. UCAR S.A. Switzerland 99.9%(a) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR CARBON NAME OF SUBSIDIARY INCORPORATION COMPANY INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 6. UCAR Holdings Inc. Delaware 100% 7. UCAR Limited United Kingdom 100%(b) 8. EMSA (Pty.) Ltd. South Africa 100%(c) 9. Carbographite Limited South Africa 100%(c) 10. UCAR International Trading Inc. Delaware 100% 11. UCAR Carbon Technology Corporation Delaware 100% 12. UCAR Carbon Foreign Sales Virgin Islands 100% Corporation 13. UCAR Composites California 100% Inc. 14. Union Carbide Grafito, Inc. New York 100% 15. Unicarbon Brazil 100% Comercial Ltda. 16. UCAR Carbon (Malaysia) Sdn. Bhd. Malaysia 100% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS II - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 17. UCAR Holdings III Delaware 100% Inc. 18. UCAR Holdings S.A. France 100%(d) 19. UCAR Electrodos, Spain 100%(e) S.L. 20. UCAR Inc. Canada 100% 21. UCAR Elektroden Germany 70% GmbH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS GMBH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 22. UCAR Grafit OAO Russia 96.27% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 23. UCAR Mexicana, S.A. de C.V. Mexico 100%(f) 24. UCAR S.p.A. Italy 100%(g) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS S.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 25. UCAR S.N.C. France 100%(h) 26. Carbone Savoie France 70% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION MEXICANA, S.A. DE C.V. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 27. UCAR Carbon Mexicana, S.A. de C.V. Mexico 100%(i) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR CARBON NAME OF SUBSIDIARY INCORPORATION MEXICANA, S.A. DE C.V. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 28. Servicios Administratoes Carmex, Mexico 99.9% S.A. de C.V. 29. Servicios DYC, S.A. de C.V. Mexico 99.9% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF NAME OF SUBSIDIARY INCORPORATION OWNERSHIP BY UCAR S.P.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 30. UCAR Energia S.r.l. Italy 100% 31. UCAR Specialties Italy 100% S.r.l. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR CARBON NAME OF SUBSIDIARY INCORPORATION S.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 32. UCAR Produtos de Carbono S.A. Brazil 99.9% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UNICARBON NAME OF SUBSIDIARY INCORPORATION COMERCIAL LTDA. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 33. UCAR Carbon S.A. Brazil 2.33% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF NAME OF SUBSIDIARY INCORPORATION OWNERSHIP BY UCAR S.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 34. UCAR Holding GmbH Austria 100% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (a) 99.9% owned by UCAR Global Enterprises Inc. Nominees own three shares of UCAR S.A. (b) 99.9% owned by UCAR Carbon Company Inc. A nominee owns one share of UCAR Limited. (c) On April 21, 1997, UCAR Carbon Company Inc. (the "Company") purchased the 50% interest in EMSA (Pty.) Ltd. ("EMSA") and Carbographite Limited ("Carbographite") that it did not already own from Samancor Limited, a South African company. Commencing April 22, 1997, EMSA's and Carbographite's assets, liabilities and results of operations are included in the Consolidated Financial Statements. (d) 99.4% owned by UCAR Holdings II Inc. UCAR International Inc., UCAR Global Enterprises Inc., UCAR Carbon Company Inc. and three nominees each own one share of UCAR Holdings S.A. (e) 99.9% owned by UCAR Holdings II Inc. UCAR Carbon Company Inc. owns 0.1% of UCAR Electrodos S.L. (f) 99.9% owned by UCAR Holdings Inc. UCAR Carbon Company Inc. owns one share of UCAR Mexicana, S.A. de C.V. (g) 99.9% owned by UCAR Holdings Inc. and UCAR Carbon Company Inc. owns 0.1% of UCAR S.p.A. (h) 99.9% owned by UCAR Holdings S.A. UCAR Holdings III Inc. owns one share of UCAR S.N.C. (i) 99.9% owned by UCAR Mexicana, S.A. de C.V. UCAR Carbon Company Inc. owns 0.1% of UCAR Carbon Mexicana, S.A. de C.V. SCHEDULE 3.09 PENDING LITIGATION OR PROCEEDINGS ANTITRUST CASES AND PROCEEDINGS DOFASCO INC. V. UCAR CARBON CANADA INC., ET AL., Court File No. 98-CV-149864, Ontario Court (General Division), Canada. This case has been settled in principle. An agreement is being prepared and the case has not yet been dismissed. ELLWOOD QUALITY STEELS CO. V. SGL CARBON CORPORATION, ET AL., Civil Action No. 98-1063 (United States District Court for the Western District of Pennsylvania). This case has been settled in principle. An agreement is being prepared and the case has not yet been dismissed. NUCOR CORP. V. THE CARBIDE GRAPHITE GROUP, INC., ET AL., Civil Action No. 98- 1789 (United States District Court for the Eastern District of Pennsylvania). This case has been settled. An agreement has been signed but the case has not yet been dismissed. REPUBLIC ENGINEERED STEELS, INC. V. SHOWA DENKO CARBON, INC., ET AL., Civil Action No. 98 CV-0902 (United States District Court for the Northern District of Ohio, Eastern Division (Akron)). This case has been settled in principle. An agreement is being prepared and the case has not yet been dismissed. IN RE GRAPHITE ELECTRODES ANTITRUST LITIGATION, Master File No. 97-CV-4182 (United States District Court for the Eastern District of Pennsylvania). This case has been settled. An agreement has been signed and the class has been conditionally certified. The opt-out period expires on November 27, 1998. The settlement has been preliminarily approved by the Court, with final approval expected in December 1998. The case has not yet been dismissed. IN RE SIMETCO, INC., Case No. 93-61772 (United States Bankruptcy Court for the Northern District of Ohio at Canton). Motion by bankruptcy trustee (representing debtor SiMETCO, Inc.) for a Rule 2004 Examination. SHAREHOLDER DERIVATIVE CASE JAROSLAWICZ V. KRASS, ET AL., CV-98-033117 S (Conn. Super. Ct., J.D. of Stamford-Norwalk); SECURITIES CLASS ACTION IN RE UCAR INTERNATIONAL INC. SECURITIES LITIGATION, 98-CV-0600 (JBA)(United States District Court for the District of Connecticut) ANTITRUST INVESTIGATIONS The Directorate General IV of the European Union, the antitrust enforcement authorities of the European Union (the "EU authorities"), is conducting an investigation into whether graphite electrode producers, including the Borrower's French subsidiary, violated Article 85-1 of the Treaty of Rome, the antitrust law of the European Union. The Canadian Competition Bureau (the "Competition Bureau") has commenced a criminal investigation as to whether there has been any violation of the Canadian Competition Act (the "Canadian Act") by producers of graphite electrodes. Under Section 45 of the Canadian Act, the maximum fine is Cdn$10 million. Under Section 46 of the Canadian Act, the amount of the fine is discretionary and there is no maximum. UCAR and its subsidiaries have been required by the Competition Bureau to produce documents and witnesses in Canada. UCAR believes that Japanese antitrust authorities have commenced an investigation of producers and distributors of graphite electrodes. Neither UCAR nor its subsidiaries have any facilities or employees in Japan or have sold a material quantity of graphite electrodes in Japan. The independent distributor of their products in Japan has been required to produce documents and witnesses in Japan. THREATENED LITIGATION UCAR and its subsidiaries have received oral and written notices or claims from various domestic and foreign customers concerning recovery for alleged violations of antitrust laws. SCHEDULE 3.14 CREDIT AGREEMENT TAXES (a) None. (b) UCAR has waived or extended the statutes of limitation in the following jurisdictions: EXTENSION JURISDICTION YEAR ENTITY DATE Federal 1993 UCAR Carbon Company, Inc. and Subsidiaries 3/31/99 Federal 1994 UCAR International Inc. Consolidated Group 3/31/99 California 1994 UCAR International Inc. Unitary Group 3/15/00 New York 1992/93 UCAR Carbon Company Inc. 6/30/99 New York 1994 UCAR Carbon Company Inc. 12/31/99 (c) UCAR INTERNATIONAL INC. UCAR is currently under federal income tax audit for the years 1993, 1994 and 1995. No adjustment has been proposed by the IRS as of the Effective Date. UCAR S.P.A. UCAR S.p.A. has appeals still outstanding for the years 1972 and 1975. The results of a tax inspection covering the years 1986 and 1987, completed on April 20, 1989, are still pending. In addition, UCAR S.p.A. has appeals outstanding for the year 1989 that are expected to close without any payment. UCAR S.p.A. has accrued ITL 2,400 million (approx. $1,456,000) which it believes will adequately cover the estimated tax liabilities related to all pending tax appeals for UCAR S.p.A. (d) None, other than included in paragraph (c). SCHEDULE 3.17 CREDIT AGREEMENT ENVIRONMENTAL MATTERS Union Carbide Corporation had a license to process radioactive material at UCAR's current Lawrenceburg, Tennessee site ("UCAR Lawrenceburg") and did so in the 1960's and 1970's. The process was shut down and the license was closed in the mid-1970's. The Nuclear Regulatory Commission ("NRC") has been reviewing closed licenses to determine if additional clean-up is warranted. the NRC reviewed its records for the UCAR Lawrenceburg site and mandated that testing be conducted to ascertain whether regulated levels of residual radiological contamination exist there. Samples of the soil, water and surfaces at UCAR Lawrenceburg were collected and analyzed. UCAR hired a radiological remediation contractor, Nuclear Fuel Services ("NFS"), to review the analytical data and determine whether contamination is present. NFS has reported to UCAR that, based upon its review of the data collected, levels of contamination are above current NRC closure criteria. UCAR commissioned NFS to develop a draft decommissioning plan which was submitted to the NRC on August 20, 1998. The NRC is currently reviewing the plan but has not indicated when we may expect their comments. The plan may need to be modified based on the NRC's comments. Based upon cost estimates received from NFS, UCAR has accrued a liability in the amount of $1,300,000 to cover the cost to this clean-up and related fees and expenses. Schedule 3.18 to Credit Agreement CAPITALIZATION 1) UCAR International Inc. (i) Authorized Capital Stock: 10,000,000 shares of Preferred Stock 100,000,000 shares of Common Stock (ii) Par Value: $.01 per share (iii) Authorized Capital Stock Issued and Outstanding (as of 10/30/98) 44,979,425 2) UCAR Global Enterprises Inc. (i) Authorized Capital Stock 1,500 shares of Common Stock (ii) Par Value $.01 per share (iii) Authorized Capital Stock Issued and Outstanding 100 shares of Common Stock SCHEDULE 3.20 CREDIT AGREEMENT LABOR MATTERS None. SCHEDULE 3.23(a) CREDIT AGREEMENT LOCATION OF REAL PROPERTY OWNER LOCATION UCAR S.N.C. Rue des Garennes F-62100 Calais France UCAR Electrodos, S.L. Carretera de Astrain S/N E-31171 Ororbia Navarra, (Espana) (Spain) UCAR Mexicana S.A. de C.V. Carretara Miguel Alemar Km. 20 #600. Ote. Apodaca, Nuera Leon Mexico 66600 Calle Miguel Barragan No. 702 Pte. Co. Industrial Entre La Calle Amado Nerro y Av. Universidad C.P. 64440 Municipio Monterrey Estado Nuevo Leon Pais Mexico UCAR Inc. 65 Canal Bank St. Welland, Ontario L3B 5R8 UCAR S.p.A. Caserta Via dell Industria 1-81100 Casseta Italy UCAR Specialties S.r.l. Strada Statale Passo del Vivione, 1 I-25040 Malonno, Brescia Italy UCAR Carbon Company Inc. Highway 43 South Lawrenceburg, TN 38464 Phillippi Pike Armoore, WV 26323 Highway 7 Santa Fe Pike Columbia, TN 38401 Hwt 79N @ Hampton Station Road Clarksville, TN 37040 3625 Highland Avenue Niagara Falls, NY 14305 Rural Route 3 Robinson, IL 62454 12900 Snow Road Parma, OH 44130 11709 Madison Avenue Lakewood, OH 44107 UNION Carbide Grafito, Inc. Yabucoa, Puerto Rico EMS (Pty.) Ltd. Kookfontein Farm Meyerton, 1960 Gauteng South Africa UCAR Productos de Carbono S.A. Estrada Salvador-Mataripe Km. 39-Candeias Brahia, Brazil 43800-000 UCAR Productos de Carbono S.A. Av. Brigadeiro Faria Lima, 1461 & UCAR S.A. 9(degree) andar-ej. 9I3e94 01451-000 Sao Paulo-SP Brazil UCAR Limited Claywheels Lane Wadsley Bridge Shiffield, S6 INF England Carbone Savoie 30, rue Louis Jouvei BP 16 Venissieux Codex F-69631 France Carbone Savoie/UCAR S.N.C. Usine de Notre-Dame-de-Braincon La Lechere F-73264 Aigueblanche Cedex France SCHEDULE 3.23(b) CREDIT AGREEMENT LOCATION OF LEASED PREMISES OWNER LOCATION UCAR S.N.C. Usine de Notre-Dame-de-Braincon La Lechere F-73264 Aigueblanche Cedex France (Lessor is Carbone Savoie) 4 Place des Estas-Unis SILIC 214 F-94518 RUNGIS, Cedex France UCAR S.A. 33 Ave. do Mont Blanc Case Postale 630 CH-1196 Gland Switzerland UCAR Electrodos, S.L. Avda Lendakari Aguirre, 11-3(degree) 35-D 43014-Bilbao Spain UCAR S.p.A. Via Dunini 28 20122, Milano UCAR Specialties S.r.l. Forno Allione: Portion of building in North section of Plan with access and connections to water and power UCAR Carbon Company Inc. 39 Old Ridgebury Road J-4 Danbury, CT 06817 UCAR Composites Inc. 5 Burroughs Irvine, CA 92718 UCAR Elektroden GmbH Herzbergstrasse 128 D-10365 Berlin Germany EMSA (Pty.) Ltd. Barphil Building 15 Loch Street Meyerton, 1960 South Africa UCAR GRAFIT OAO 35 Usacheva Street Moscow Russia 119048 UCAR International Trading Inc. Jianguo Men Wai Ave., Room 3067 Beijing, China 9 Penang Road #10-02 Park Mall Singapore Unit B on 13th Floor The Prudential Assurance Tower No. 79 Chatham Road South Tsimshatsui, Kowloon Hong Kong Schedule 4.01 Local Jurisdictions (1) Montgomery County, Tennessee (2) Maury County, Tennessee (3) Lawrence County, Tennessee (4) Cuyahoga County, Ohio (5) Crawford County, Illinois (6) Harrison County, W. Virginia (7) Niagra County, New York
SCHEDULE 6.01 - INDEBTEDNESS @ 10/30/98* * BORROWER LENDER TYPE U.S. $ OR EQUIV. UCAR CARBON S.A.(BRAZIL) UNIBANCO IMPORT FINANCE $699,611.10 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) BFB IMPORT FINANCE $589,244.96 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) BFB(1) IMPORT FINANCE $1,955,505.78 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) CCF IMPORT FINANCE $2,245,722.65 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) BOSTON(1)(2) IMPORT FINANCE $1,999,342.72 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) BFB IMPORT FINANCE $690,946.33 @ OCT 30,1998 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) UNIBANCO ACC - IMPORT/EXPORT $620,804.13 @ OCT 30,1998 FINANCING NOTE @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) UNIBANCO DISCOUNTED A/R $813,684.23 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) MERCANTIL DISCOUNTED A/R $838,306.28 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) REAL DISCOUNTED A/R $1,415,912.64 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) BOSTON DISCOUNTED A/R $1,309,364.58 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) REAL DISCOUNTED A/R $2,837,988.53 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) SUMITOMO DISCOUNTED A/R $1,192,129.28 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) TOKIO DISCOUNTED A/R $1,559,313.26 @ OCT 30,1998 SUBTOTAL BRAZIL $18,767,876.47 UCAR ELEKTRODEN(Germany) BHF FAC CREDIT AGREEMENT $10,447,400.24 @ OCT 30,1998 UCAR SPA(Italy) BANCA NATIONALE DEL LAVORO BANK GUARANTY $246,558.58 @ OCT 30,1998 UCAR SPA(Italy) BANCA COMMERCIALE ITALIANO(IMI) BANK GUARANTY $734,781.28 @ OCT 30,1998 UCAR SPA(Italy) INSTITUTO MOBLIERE ITALIANO IND DEV FINANCE $1,210,156.01 @ OCT 30,1998 UCAR SPECIALTIES SRI BANCA POPOLARE DI SONDRIO OVERDRAFT LINE $1,524,625.27 @ OCT 30,1998 UCAR GLOBAL ENTERPRISES UCAR INTERNATIONAL INTERCO LOAN $116,548,792.47 @ OCT 30,1998 UCAR GLOBAL ENTERPRISES UCAR INC.(Canada) INTERCO LOAN $5,000,000.00 @ OCT 30,1998 UCAR GLOBAL ENTERPRISES UCAR MEXICANA S.A.(Mexico) INTERCO LOAN $27,000,000.00 @ OCT 30,1998 UCAR GLOBAL ENTERPRISES UCAR HOLDINGS ll INTERCO LOAN $37,636,768.13 @ OCT 30,1998 UCAR CARBON COMPANY UCAR ELECTRODOS(Spain) INTERCO LOAN $35,171,508.63 @ OCT 30,1998 UCAR CARBON COMPANY UCAR SNC(France) INTERCO LOAN $43,400,000.00 @ OCT 30,1998 UCAR CARBON COMPANY UCAR LTD(U.K.) INTERCO LOAN $23,792,136.36 @ OCT 30,1998 UCAR CARBON COMPANY UCAR SPA(Italy) INTERCO LOAN $10,172,203.24 @ OCT 30,1998 UCAR CARBON COMPANY UCAR EMSA(So.Africa) INTERCO LOAN $29,746,183.12 @ OCT 30,1998 UCAR HOLDINGS UCAR GLOBAL ENTERPRISES INTERCO LOAN $66,470,056.09 @ OCT 30,1998 UCAR INTERNATIONAL UCAR GLOBAL ENTERPRISES INTERCO LOAN $511,565,445.00 @ OCT 30,1998 UCAR CARBON COMPANY UCAR INTERNATIONAL INTERCO LOAN(NOTE) $172,878,070.94 @ OCT 30,1998 UCAR GLOBAL ENTERPRISES UCAR CARBON COMPANY INTERCO LOAN $2,912,141.00 @ OCT 30,1998 UCAR S.A.(Switzerland) UCAR GLOBAL ENTERPRISES INTERCO LOAN $83,403,591.00 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) UCAR PRODUCTS de CARBONO S.A. INTERCO LOAN $12,307,388.08 @ OCT 30,1998 UCAR SNC(FRANCE) CARBONE SAVOIE INTERCO LOAN $15,300,000.00 @ OCT 30,1998 UCAR SNC(FRANCE) UCAR HOLDINGS S.A.(FRANCE) INTERCO LOAN $35,365,000.00 @ OCT 30,1998
** BALANCES ARE PRESENTED AS OF10/30/98 AND ARE SUBJECT TO CHANGES IN THE ORDINARY COURSE OF BUSINESS OCCURING BETWEEN 10/30/98 AND THE EFFECTIVE DATE , WHICH ARE NOT MATERIAL. SCHEDULE 6.02 EXISTING LIENS
BRAZIL 10/16/96 TAX LITIGATION HYSTER , FORKLIFT R $ $45,000.00 STATE OF BAHIA TRUCK US $ $37,957.00 10/16/96 TAX LITIGATION HYSTER , FORKLIFT R $ $95,000.00 STATE OF BAHIA TRUCK US $ $80,132.00 8/22/97 LABOR HYSTER , FORKLIFT R $ $79,000.00 LITIGATION TRUCK US $ $66,636.00 8/22/97 LABOR HYSTER , FORKLIFT R $ $71,000.00 LITIGATION TRUCK US $ $59,888.00 TOTAL R $ $290,000.00 TOTAL US $ $244,613.00 UCAR INC. (CANADA) SECURED PARTY DESCRIPTION 1 MUNICIPAL SAVINGS & LOAN EQUIPMENT 7100 WOODBINE AVE. SUITE 400 1 KONICA 4145 COPIER MARKHAM, ONTARIO WI/RADF AND ALL PROCEEDS OF THE FOREGOING 2 AT & T CAPITAL CANADA INC. EQUIPMENT AND OTHER 900 3650 VICTORIA PARK AVE. WILLOWDALE, ONTARIO 3 AT & T CAPITAL CANADA INC. EQUIPMENT AND OTHER 600 - 3760 14TH AVE. MARKHAM, ONTARIO 4 CHASE MANHATTAN BANK OF CANADA INVENTORY, EQUIPMENT, ACCOUNTS & OTHER SUITE 6900, 100 KING STREET WEST (MOTOR VEHICLES INCLUDED) TORONTO, ONTARIO 5 MTC LEASING EQUIPMENT 3310 SOUTH SERVICE ROAD PHOTOCOPIER SYSTEM 10379-42705 BURLINGTON, ONTARIO UCAR CARBON SECURED PARTY DESCRIPTION CANADA INC. 1 MUNICIPAL FINANCIAL LEASING CORP. EQUIPMENT 7100 WOODBINE AVE. SUITE 400 1 RICOH, MODEL FT6750 COPIER & PROCEEDS MARKHAM, ONTARIO OF THE FOREGOING 2 TRIATHLON LEASING INC EQUIPMENT AND OTHER 2300 YONGE ST. SUITE 3000 (MOTOR VEHICLES INCLUDED) TORONTO, ONTARIO AND GENERAL ELECTRIC CAPITAL CANADA EQUIPMENT AND OTHER LEASING 2300 MEADOWVALE BLVD. 2ND FLOOR (MOTOR VEHICLES INCLUDED) MISSISSAUGA, ONTARIO UCAR SpA MORTGAGE AND PRIVILIGE AT ITL 2,080,000,000.00 CASERTA, ITALY PLANT FIXED ASSETS SECURING DEBT US$ 1,200,000.00 TO INSTITUTO MOBILIARE ITALIANO UCAR SNC USUAL REGISTRATIONS OF LEASING AGREEMENTS : PHOTOCOPIER AND SOFTWARE CARBONE SAVOIE USUAL REGISTRATIONS OF LEASING AGREEMENTS : COMPUTER EQUIPMENT, PHOTOCOPIERS, STAMPING EQUIPMENT, COMMERCIAL VEHICLES, TRUCKS MINORITY SHAREHOLDER HAS A RIGHT OF FIRST REFUSAL FOR PURCHASE OF UCAR'S SHARES IN CARBONE SAVOIE UCAR ELEKTRODEN GMBH MINORITY SHAREHOLDER HAS A RIGHT OF FIRST REFUSAL FOR PURCHASE OF UCAR'S SHARES IN UCAR ELEKTRODEN GMBH
SCHEDULE 6.04 CREDIT AGREEMENT INVESTMENTS None. SCHEDULE 6.07 CREDIT AGREEMENT TRANSACTIONS WITH AFFILIATES UCAR Elektroden GmbH (for purposes of the Schedule, "Elektroden") has a tolling agreement with UCAR Grafit OAO (for purposes of this Schedule, "Grafit") whereby Elektroden supplies molded ungraphitized electrodes to Grafit for graphitization and Grafit returns the graphitized electrodes, scrap and rejects to Elektroden. Under this agreement, Elektroden is required to supply up to 13,900 metric tons of ungraphitized electrodes, and, based upon shipment of 13,900 metric tons by Elektroden, Grafit is expected to return approximately 10,000 metric tons of graphitized electrodes. The tolling price paid to Grafit is 1,960 DM per metric ton for finished product. Prices for burnt scrap and rejects and graphitized scrap and rejects are 820 DM per metric ton and 1,268 DM per metric ton, respectively. The agreement expires on December 31, 1998. Carbone Savoie is a party to the following agreements involving UCAR Subsidiaries: (i) A Sub-Contracting Agreement with UCAR SNC whereby UCAR SNC manufactures all of Carbone Savoie's products. The price term of the agreement includes the cost of raw material, direct labor and variable expense. (ii) A Lease Agreement for real property whereby Carbone Savoie leases to UCAR SNC certain real property used in conjunction with UCAR SNC's obligations under the subcontracting agreement referred to in (i) above. See also Schedule 3.23(b) for reference to leased property. (iii) A Technology License Agreement whereby Carbone Savoie licenses certain technical information and patent rights to UCAR. Carbon Company Inc. (for purposes of this Schedule, `UCAR Carbon"). (iv) A Research and Development, License and Services Agreement among Carbone Savoie, UCAR Carbon and Aluminium Pecheney whereby (i) the parties agree to cooperate for their mutual benefits in certain research and development activities, (ii) UCAR Carbon licenses its technical information and patent rights for the manufacture, use and sale of certain products to Carbone Savoie, (iii) Aluminium Pecheney agrees to cooperate in the marketing and sales of certain products by Carbone Savoie and (iv) UCAR Carbon agrees to provide certain training and instruction of personnel of Carbone Savoie. The consideration for the contributions to this agreement made by Aluminium Pechiney and UCAR Carbon is a percentage of the sales of Carbone Savoie during the term of the agreement. SCHEDULE 6.09 CREDIT AGREEMENT RESTRICTIVE AGREEMENTS Pursuant to the Articles of Association of UCAR Elektroden GmbH, a vote of 75% of the votes polled at a duly convened shareholder's meeting is required to distribute profits. For purposes of such a determination, 75% of the total share capital must be represented to constitute a quorum. Schedule 9.01 Fronting Banks and Credit Parties (other than the Borrower) CREDIT PARTIES 1. UCAR HOLDINGS S.A. 4 Place des Etates-Unis SILIC 214 F-94518 Rungis, Cedex France Attn: Chairman Telecopy 33-1-46-87-4008 2. UCAR S.p.A. Via Vittor Pisani, 10 20124 Milano Italy Attn: Chairman Telecopy 39-2-775-7237 3. UCAR ELECTRODOS, S.L. Carretera de Astrain S\N 31171 Ororbia Navarra, Spain Telecopy 34-948-322-184 4. UCAR INC. 65 Canal Bank Rd. Welland, Ontario L3B5R8 Canada Telecopy 416-732-5144 5. UCAR MEXICANA S.A. de C.V. Carretera Miguel Aleman Km.20 #600, OTE. Apodaca, Neuva Leon 66600 Mexico Telecopy 5283861303 FRONTING BANK 1. The Chase Manhattan Bank January 7, 1999 The undersigned institution, a Lender under the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997, and November 10, 1998, among UCAR International Inc. ("Holdco"), UCAR Global Enterprises Inc. (the "Borrower"), the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and as collateral agent (the "Restated Agreement"), and/or the Credit Agreement dated as of November 10, 1998, among Holdco, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and as collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (the "Tranche C Agreement" and collectively with the Restated Agreement, the "Credit Agreements"), hereby consents to the existence of an asserted lien on the assets of Holdco in favor of the United States Department of Justice (the "DOJ") securing the obligation of Holdco under its settlement agreement with the DOJ to pay a fine in a remaining amount of $90,000,000, constituting a portion of the Litigation Liabilities (as defined in the Credit Agreements). Consent Under the Restated Agreement Lender /s/ ---------------------------- by ------------------------- Name: Title: Consent Under the Tranche C Agreement Lender /s/ ---------------------------- by ------------------------- Name: Title: EX-10.1(A) 7 EXHIBIT 10.1(a) CONFORMED COPY ------------------------------------------------------------ CREDIT AGREEMENT Dated as of November 10, 1998 Among UCAR INTERNATIONAL INC., UCAR GLOBAL ENTERPRISES INC., UCAR S.A., THE LENDERS PARTY HERETO, THE CHASE MANHATTAN BANK, as Administrative Agent and Collateral Agent, CREDIT SUISSE FIRST BOSTON, as Syndication Agent, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Syndication Agent ------------------------------------------------------------ CHASE SECURITIES INC., as Lead Arranger ------------------------------------------------------------ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms................................................. 2 SECTION 1.02. Terms Generally............................................... 32 ARTICLE II THE CREDITS SECTION 2.01. Commitments................................................... 33 SECTION 2.02. Loans......................................................... 33 SECTION 2.03. Borrowing Procedure........................................... 35 SECTION 2.04. Evidence of Debt; Repayment of Loans.......................... 35 SECTION 2.05. Fees.......................................................... 36 SECTION 2.06. Interest on Loans............................................. 36 SECTION 2.07. Default Interest.............................................. 37 SECTION 2.08. Alternate Rate of Interest.................................... 37 SECTION 2.09. Termination and Reduction of Commitments...................... 37 SECTION 2.10. Conversion and Continuation of Borrowings..................... 38 SECTION 2.11. Repayment of Borrowings....................................... 39 SECTION 2.12. Prepayment.................................................... 40 SECTION 2.13. Reserve Requirements; Change in Circumstances................. 42 SECTION 2.14. Change in Legality............................................ 44 SECTION 2.15. Indemnity..................................................... 45 SECTION 2.16. Pro Rata Treatment............................................ 45 SECTION 2.17. Sharing of Setoffs............................................ 46 SECTION 2.18. Payments...................................................... 46 SECTION 2.19. Taxes......................................................... 46 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Organization; Powers.......................................... 50 SECTION 3.02. Authorization................................................. 50 SECTION 3.03. Enforceability................................................ 51 SECTION 3.04. Governmental Approvals........................................ 51 SECTION 3.05. Financial Statements.......................................... 51 SECTION 3.06. No Material Adverse Change.................................... 52 SECTION 3.07. Title to Properties; Possession Under Leases.................. 52 SECTION 3.08. Subsidiaries.................................................. 52 SECTION 3.09. Litigation; Compliance with Laws.............................. 53 SECTION 3.10. Agreements.................................................... 53 SECTION 3.11. Federal Reserve Regulations................................... 53 SECTION 3.12. Investment Company Act; Public Utility Holding Company Act.... 54 SECTION 3.13. Use of Proceeds............................................... 54 SECTION 3.14. Tax Returns................................................... 54 SECTION 3.15. No Material Misstatements..................................... 54 SECTION 3.16. Employee Benefit Plans........................................ 55 SECTION 3.17. Environmental Matters......................................... 56 SECTION 3.18. Capitalization of UCAR and the Borrower....................... 57 SECTION 3.19. Security Documents............................................ 57 SECTION 3.20. Labor Matters................................................. 58 SECTION 3.21. No Foreign Assets Control Regulation Violation................ 59 SECTION 3.22. Insurance..................................................... 59 SECTION 3.23. Location of Real Property and Leased Premises................. 59 SECTION 3.24. Litigation Liabilities........................................ 59 SECTION 3.25. Year 2000..................................................... 60 ARTICLE IV CONDITIONS SECTION 4.01. Effective Date................................................ 60 SECTION 4.02. Each Borrowing................................................ 63 ARTICLE V AFFIRMATIVE COVENANTS SECTION 5.01. Existence; Businesses and Properties.......................... 63 SECTION 5.02. Insurance..................................................... 64 SECTION 5.03. Taxes......................................................... 66 SECTION 5.04. Financial Statements, Reports, etc............................ 66 SECTION 5.05. Litigation and Other Notices.................................. 68 SECTION 5.06. Employee Benefits............................................. 68 SECTION 5.07. Maintaining Records; Access to Properties and Inspections..... 69 SECTION 5.08. Use of Proceeds............................................... 69 SECTION 5.09. Compliance with Environmental Laws............................ 70 SECTION 5.10. Preparation of Environmental Reports.......................... 70 SECTION 5.11. Further Assurances............................................ 70 SECTION 5.12. Significant Subsidiaries...................................... 70 SECTION 5.13. Fiscal Year................................................... 71 SECTION 5.14. Dividends..................................................... 71 SECTION 5.15. Interest/Exchange Rate Protection Agreements.................. 71 SECTION 5.16. Corporate Separateness........................................ 71 ARTICLE VI NEGATIVE COVENANTS SECTION 6.01. Indebtedness.................................................. 71 SECTION 6.02. Liens......................................................... 75 SECTION 6.03. Sale and Lease-Back Transactions.............................. 78 SECTION 6.04. Investments, Loans and Advances............................... 78 SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions..... 80 SECTION 6.06. Dividends and Distributions................................... 83 SECTION 6.07. Transactions with Affiliates.................................. 84 SECTION 6.08. Business of UCAR, the Borrower and the Subsidiaries........... 85 SECTION 6.09. Indebtedness and Other Material Agreements.................... 85 SECTION 6.10. Capital Expenditures.......................................... 86 SECTION 6.11. Interest Coverage Ratio....................................... 87 SECTION 6.12. Leverage Ratio................................................ 87 SECTION 6.13. Capital Stock of the Subsidiaries............................. 87 ARTICLE VII EVENTS OF DEFAULT............................................. 88 ARTICLE VIII THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT....................................... 91 ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices...................................................... 94 SECTION 9.02. Survival of Agreement........................................ 95 SECTION 9.03. Binding Effect............................................... 95 SECTION 9.04. Successors and Assigns....................................... 95 SECTION 9.05. Expenses; Indemnity.......................................... 99 SECTION 9.06. Right of Setoff..............................................101 SECTION 9.07. Applicable Law...............................................101 SECTION 9.08. Waivers; Amendment...........................................101 SECTION 9.09. Interest Rate Limitation.....................................103 SECTION 9.10. Entire Agreement.............................................103 SECTION 9.11. Waiver of Jury Trial.........................................103 SECTION 9.12. Severability.................................................103 SECTION 9.13. Counterparts.................................................104 SECTION 9.14. Headings.....................................................104 SECTION 9.15. Jurisdiction; Consent to Service of Process..................104 SECTION 9.16. Conversion of Currencies.....................................105 SECTION 9.17. Confidentiality .............................................105 SECTION 9.18. Release of Liens and Guarantees..............................105 EXHIBITS AND SCHEDULES Exhibit A Form of Administrative Questionnaire Exhibit B Form of Assignment and Acceptance Exhibit C Form of Borrowing Request Exhibit D Form of Indemnity, Subrogation and Contribution Agreement Exhibit E Form of Parent Guarantee Agreement Exhibit F Form of Domestic Pledge Agreement Exhibit G Form of Subsidiary Guarantee Agreement Exhibit H Form of Domestic Security Agreement Exhibit I Form of Intellectual Property Security Agreement Exhibit J-1 Form of Opinion of Kelley Drye & Warren LLP Exhibit J-2 Form of Opinion of General Counsel Exhibit J-3 Forms of Opinion of Local Counsel Schedule A Adjustments Schedule 2.01 Lenders and Commitments Schedule 3.08 Subsidiaries and outstanding subscriptions, options, warrants, etc. Schedule 3.09 Litigation Schedule 3.14 Taxes Schedule 3.17 Environmental Matters Schedule 3.18 Capitalization Schedule 3.20 Labor Matters Schedule 3.23(a) Location of Real Property and Mortgages Schedule 3.23(b) Location of Leased Premises Schedule 4.01 Local Jurisdictions Where Opinion Required Schedule 6.01 Indebtedness Schedule 6.02 Liens Schedule 6.04 Investments Schedule 6.07 Transactions with Affiliates Schedule 6.09 Restrictive Agreements CREDIT AGREEMENT (this "AGREEMENT") dated as of November 10, 1998, among UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation (the "BORROWER"), UCAR S.A., a Swiss corporation (the "SWISS BORROWER"), the LENDERS party hereto, THE CHASE MANHATTAN BANK, as administrative agent (in such capacity, the "ADMINISTRATIVE AGENT") and as collateral agent (in such capacity, the "COLLATERAL AGENT"), CREDIT SUISSE FIRST BOSTON, as syndication agent, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as syndication agent. Effective on the Effective Date (such term, and each other capitalized term used and not otherwise defined herein, having the meaning assigned to it in Article I), the Existing Credit Agreement will be amended in the form of and replaced with two credit agreements, consisting of (a) the Existing Credit Agreement, as amended and restated, and (b) this Agreement, under which the Lenders or the lenders under the Existing Credit Agreement, as applicable, will maintain existing credit and extend new credit to the Borrower and certain Subsidiaries in an aggregate original principal amount as of the Effective Date of $819,400,000. From and after the Effective Date, (a) this Agreement will govern the Tranche C Term Loans and (b) the Existing Credit Agreement will govern the commitments, loans and letters of credit referred to therein. The Credit Parties have requested the Lenders to extend credit hereunder in the form of (a) U.S. Term Loans to the Borrower on the Effective Date, in an aggregate principal amount of $125,000,000, and (b) Swiss Term Loans to the Swiss Borrower on the Effective Date, in an aggregate principal amount of $85,000,000. The proceeds of the Loans will be used for general corporate purposes of the Borrower and the Subsidiaries, including (a) the repayment on the Effective Date of $88,600,000 of outstanding revolving loans under the Existing Credit Agreement, (b) the prefunding and payment on the Effective Date of $20,400,000 of fourth quarter 1998 amortization payments to become due under the Existing Credit Agreement, (c) the financing of Litigation Payments and (d) the payment of transaction fees and expenses. The Lenders are willing to extend such credit to the Credit Parties on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows: 2 ARTICLE I DEFINITIONS SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings specified below: "ABR BORROWING" shall mean a Borrowing comprised of ABR Loans. "ABR LOAN" shall mean any Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II. "ADJUSTED LIBO RATE" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves. "ADMINISTRATIVE AGENT FEES" shall have the meaning given such term in Section 2.05(b). "ADMINISTRATIVE QUESTIONNAIRE" shall mean an Administrative Questionnaire in the form of Exhibit A. "AFFILIATE" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified. "AGENT LETTER" shall mean the letter agreement dated October 9, 1998, between the Borrower and The Chase Manhattan Bank. "ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate, including the failure of the Federal Reserve Bank of New York to publish rates or the inability of the Administrative Agent to obtain quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. 3 "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent and the Borrower, in the form of Exhibit B or such other form as shall be approved by the Administrative Agent. "BOARD" shall mean the Board of Governors of the Federal Reserve System of the United States. "BORROWING" shall mean a group of Loans of a single Class and Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. "BORROWING REQUEST" shall mean a request by a Credit Party in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C. "BRAZIL" shall mean UCAR Carbon S.A., a Brazilian corporation and the direct or indirect owner of virtually all of the business of the Borrower and the Subsidiaries in Brazil. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; PROVIDED, HOWEVER, that when used in connection with a Eurodollar Loan, the term "BUSINESS DAY" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "CAPITAL EXPENDITURES" shall mean, for any person in respect of any period, the sum of (a) the aggregate of all expenditures by such person during such period that, in accordance with GAAP, are or should be included in "additions to property, plant or equipment" or similar items reflected in the statement of cash flows of such person and (b) to the extent not covered by clause (a) above, the aggregate of all expenditures by such person to acquire by purchase or otherwise the business or fixed assets of, or stock or other evidence of beneficial ownership of, any other person (other than the Borrower or any person that is a Wholly Owned Subsidiary prior to such acquisition); PROVIDED, HOWEVER, that Capital Expenditures for the Borrower and the Subsidiaries shall not include (i) expenditures made to make any acquisition constituting a Specified Permitted Transaction or Permitted Other Acquisition, (ii) expenditures to the extent they are made (A) with the proceeds of the issuance of Capital Stock of UCAR after the Original Closing Date (to the extent not previously used to prepay Indebtedness (other than revolving loans and swingline loans under the Existing Credit Agreement), make any investment or capital expenditure or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any fiscal year) or (B) with funds that if not so spent would constitute Net Proceeds under clause (a) of the definition of "NET PROCEEDS" (subject to the limitation set forth in the second proviso to such clause (a)), 4 (iii) expenditures of proceeds of insurance settlements, condemnation awards and other settlements in respect of lost, destroyed, damaged or condemned assets, equipment or other property to the extent such expenditures are made to replace or repair such lost, destroyed, damaged or condemned assets, equipment or other property or otherwise to acquire assets or properties useful in the business of the Borrower and the Subsidiaries within 12 months of receipt of such proceeds, (iv) expenditures that are accounted for as capital expenditures of such person and that actually are paid for by a third party (excluding UCAR or any subsidiary thereof) and for which neither UCAR nor any subsidiary thereof has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such third party or any other person (whether before, during or after such period), (v) the book value of any asset owned by such person prior to or during such period to the extent that such book value is included as a capital expenditure during such period as a result of such person reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period; PROVIDED that any expenditure necessary in order to permit such asset to be reused shall be included as a Capital Expenditure during the period that such expenditure actually is made and such book value shall have been included in Capital Expenditures when such asset was originally acquired or (vi) expenditures made in respect of closures of the Welland, Canada and Berlin, Germany facilities in an aggregate amount not in excess of $11,000,000 (as evidenced by a certificate of the Borrower signed by a Responsible Officer of the Borrower). "CAPITAL LEASE OBLIGATIONS" of any person shall mean the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP and, for purposes hereof, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "CAPITAL STOCK" of any person shall mean any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such person, including any preferred stock, any limited or general partnership interest and any limited liability company membership interest, but excluding any debt securities convertible into such equity. "CASH INTEREST EXPENSE" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis for any period, Interest Expense for such period less the sum of (a) pay-in-kind Interest Expense, (b) to the extent included in Interest Expense, the amortization of fees paid by UCAR, the Borrower or any Subsidiary on or prior to the Original Closing Date in connection with the transactions consummated on such 5 date, on or prior to the Second Closing Date in connection with the transactions consummated on such date or on or prior to the Effective Date in connection with the Transactions and (c) the amortization of debt discounts, if any, or fees in respect of Interest/Exchange Rate Protection Agreements. "CERCLA" shall have the meaning given such term in the definition of "ENVIRONMENTAL LAW". A "CHANGE IN CONTROL" shall be deemed to have occurred if (a) UCAR should fail to own directly, beneficially and of record, free and clear of any and all Liens (other than Liens in favor of the Collateral Agent pursuant to the Domestic Pledge Agreement), 100% of the issued and outstanding capital stock of the Borrower; (b) any person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the Effective Date), other than members of management of UCAR or the Borrower holding voting stock of UCAR or options to acquire such stock on the Effective Date (collectively, the "DESIGNATED PERSONS"), shall own beneficially, directly or indirectly, shares representing more than 25% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of UCAR at a time when Designated Persons fail to own beneficially, directly or indirectly, shares representing at least a majority of the aggregate ordinary voting power represented by the issued and outstanding capital stock of UCAR; (c) a majority of the seats (excluding vacant seats) on the board of directors of UCAR shall at any time after the Effective Date be occupied by persons who were neither (i) nominated by any one or more Designated Persons or by a majority of the board of directors of UCAR, nor (ii) appointed by directors so nominated; or (d) a change in control with respect to UCAR or the Borrower (or similar event, however denominated) shall occur under and as defined in the Senior Subordinated Indenture or the Refinancing Note Indenture (in each case so long as any Indebtedness for borrowed money is outstanding thereunder) or in any other indenture or agreement in respect of Indebtedness in an aggregate outstanding principal amount in excess of $7,500,000 to which UCAR, the Borrower or any Subsidiary is party. For purposes of clause (b) of this definition, the term "DESIGNATED PERSON" shall be deemed to include any other holder or holders of shares of UCAR having ordinary voting power if UCAR shall have the power to vote (or cause to be voted at its discretion), pursuant to contract, irrevocable proxy or otherwise, the shares held by such holder. "CLASS", when used in reference to any Borrowing, refers to whether the Loans comprising such Borrowing are U.S. Term Loans or Swiss Term Loans and, when used in reference to any Commitment, refers to whether such Commitment is a U.S. Term Loan Commitment or a Swiss Term Loan Commitment. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. 6 "COLLATERAL" shall mean all the "Collateral" as defined in any Security Document. "COLLATERAL REQUIREMENT" shall mean, at any time, that: (a)(i) the Domestic Pledge Agreement (or a supplement thereto) shall have been duly executed and delivered by UCAR, the Borrower and each domestic Subsidiary existing at such time and directly owning any outstanding Capital Stock or Indebtedness of any other Subsidiary, and there shall have been duly and validly pledged to the Collateral Agent thereunder, for the ratable benefit of the Secured Parties, as security for all the Obligations, (A) all the outstanding Capital Stock of or other equity interests in each domestic Subsidiary owned directly by UCAR, the Borrower or any domestic Subsidiary and (B) 65% of the outstanding Capital Stock of or other equity interests in (or, in each case, such lesser percentages as shall be owned by UCAR, the Borrower and the domestic Subsidiaries) each foreign Subsidiary owned in whole or in part directly by UCAR, the Borrower or any domestic Subsidiary and (C) all Indebtedness in excess of $10,000,000 of UCAR, the Borrower or any Subsidiary owed to UCAR, the Borrower or any domestic Subsidiary; (ii) one or more other Pledge Agreements shall have been duly executed and delivered by the Swiss Borrower, and by each foreign Subsidiary that is required pursuant to the terms hereof to Guarantee the Obligations of the Swiss Borrower in respect of the Swiss Term Loans, and there shall have been duly and validly pledged thereunder, for the ratable benefit of the Secured Parties holding Obligations of the Swiss Borrower or such foreign Guarantor in respect of such Swiss Term Loans or Guarantees, as security for all such Obligations of the Swiss Borrower or such foreign Guarantor (but not as security for the Obligations of the Borrower or any other Subsidiary) (A) all the outstanding Capital Stock of or other equity interests in any Subsidiary that is at such time directly owned by the Swiss Borrower or such foreign Guarantor, (B) all the outstanding Capital Stock of or other equity interests in the Swiss Borrower or such foreign Guarantor, and of any Subsidiary directly or indirectly owning any outstanding Capital Stock of or other equity interests in the Swiss Borrower or such foreign Guarantor that shall not have been pledged pursuant to the Domestic Pledge Agreement and (C) all Indebtedness in excess of $10,000,000 of UCAR, the Borrower or any Subsidiary owed to the Swiss Borrower or such foreign Guarantor; (iii) one or more other Pledge Agreements shall have been duly executed and delivered by each domestic Guarantor directly owning any Capital Stock of the Swiss Borrower or a foreign Guarantor referred to in clause (ii) above, and there shall have been duly and validly pledged thereunder, for the ratable benefit of the Secured Parties holding Obligations of the Swiss Borrower or such foreign Guarantor in respect of such Swiss Term Loans or Guarantees, as security for all such Obligations of the Swiss Borrower or such foreign Guarantor (but not as security for the Obligations of the Borrower or any other Subsidiary) all the outstanding Capital Stock of or other equity interests in the 7 Swiss Borrower or such foreign Guarantor that shall not have been pledged pursuant to the Domestic Pledge Agreement; and (iv) certificates or other instruments representing the shares or Indebtedness pledged under the Pledge Agreements, accompanied by stock powers or other instruments of transfer endorsed in blank, shall be in the actual possession of the Collateral Agent and all other steps required under applicable law or requested by the Collateral Agent to ensure that the Pledge Agreements create valid, first priority, perfected Liens on all the Collateral subject thereto shall have been taken; (b)(i) the Domestic Security Agreement (or a supplement thereto) shall have been duly executed and delivered by UCAR, the Borrower and each domestic Subsidiary existing at such time, and the Domestic Security Agreement shall create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, as security for all the Obligations, perfected security interests in (subject only to the Liens permitted by Section 6.02 and by the Existing Credit Agreement) all the Collateral (as such term is defined in the Domestic Security Agreement) owned by UCAR, the Borrower and each domestic Subsidiary; (ii) one or more other Security Agreements shall have been duly executed and delivered by the Swiss Borrower, and by each foreign Subsidiary that is required pursuant to the terms hereof to Guarantee the Obligations of the Swiss Borrower in respect of the Swiss Term Loans, and such Security Agreements shall create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties holding Obligations of the Swiss Borrower or such foreign Guarantor in respect of such Swiss Term Loans or Guarantees, as security for all such Obligations of the Swiss Borrower or such foreign Guarantor (but not as security for the Obligations of the Borrower or any other Subsidiary), perfected security interests in (subject only to Liens permitted by Section 6.02 and by the Existing Credit Agreement) all the Collateral (as such term is defined in such Security Agreements) owned by the Swiss Borrower or such foreign Guarantor; and (iii) all steps required under applicable law or requested by the Collateral Agent to ensure that the Security Agreements create valid, first priority, perfected Liens (subject only to the Liens permitted by Section 6.02 and by the Existing Credit Agreement) on all the Collateral subject thereto shall have been taken; (c)(i) all real properties owned or leased directly by UCAR, the Borrower or any domestic Subsidiary are Mortgaged Properties, and all steps required under applicable law or requested by the Collateral Agent to ensure that the Mortgages on such Mortgaged Properties create in favor of the Collateral Agent for the benefit of the Secured Parties, as security for all the Obligations, perfected Liens on and security interests in (subject only to the Liens permitted by Section 6.02 and by the Existing Credit Agreement) (A) such Mortgaged Properties and (B) all proceeds thereof shall have been taken; and (ii) all real properties owned or leased directly by the Swiss Borrower, and by each foreign Subsidiary that is required to Guarantee the Obligations of the Swiss Borrower in respect of Swiss Term Loans, 8 are Mortgaged Properties, and all steps required under applicable law or requested by the Collateral Agent to ensure that the Mortgages on such Mortgaged Properties create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties holding Obligations of the Swiss Borrower or such foreign Guarantor in respect of such Swiss Term Loans or Guarantees, as security for all such Obligations of the Swiss Borrower or such foreign Guarantor (but not as security for the Obligations of the Borrower or any other Subsidiary), perfected Liens on and security interests in (subject only to the Liens permitted by Section 6.02 and by the Existing Credit Agreement) (A) such Mortgaged Properties and (B) all proceeds thereof shall have been taken; PROVIDED that, notwithstanding the foregoing, it is understood that leasehold mortgages will not be obtained in respect of any real property leased by a Loan Party unless the Collateral Agent, in its discretion, shall request that a leased property become a Mortgaged Property (in which case any such Mortgage shall be subject to such limitations as may be contained in the lease relating to such real property); and (d) the Intellectual Property Security Agreement (or a supplement thereto) shall have been duly executed and delivered by UCAR, the Borrower and each domestic Subsidiary existing at such time, and that all steps required under applicable law or requested by the Collateral Agent to ensure that the Intellectual Property Security Agreement creates in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, as security for all the Obligations, perfected security interests in (subject only to the Liens permitted by Section 6.02 and by the Existing Credit Agreement) all the Collateral (as such term is defined in the Intellectual Property Security Agreement) owned by UCAR, the Borrower and each domestic Subsidiary shall have been taken; PROVIDED that a Collateral Requirement with respect to the Swiss Borrower or a foreign Subsidiary shall not be required to be satisfied hereunder to the extent that (i) satisfaction of such Collateral Requirement is not permitted under applicable law or (ii) the Administrative Agent determines that the expense, tax consequences or difficulty of satisfying such Collateral Requirement does not justify satisfying such Collateral Requirement. "COMMITMENTS" shall mean, with respect to any Lender, such Lender's U.S. Term Loan Commitment and Swiss Term Loan Commitment. "COMMITMENT FEE" shall have the meaning given such term in Section 2.05(a). "CONTROL" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and "CONTROLLING" and "CONTROLLED" shall have meanings correlative thereto. 9 "CREDIT PARTIES" shall mean the Borrower and the Swiss Borrower. "CURRENT ASSETS" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis at any date of determination, all assets (other than cash and Permitted Investments or other cash equivalents) which would, in accordance with GAAP, be classified on a consolidated balance sheet of UCAR, the Borrower and the Subsidiaries as current assets at such date of determination. "CURRENT LIABILITIES" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis at any date of determination, all liabilities which would, in accordance with GAAP, be classified on a consolidated balance sheet of UCAR, the Borrower and the Subsidiaries as current liabilities at such date of determination, other than (a) the current portion of long term debt, (b) accruals of Interest Expense (excluding Interest Expense which is due and unpaid), (c) revolving loans or swingline loans under the Existing Credit Agreement classified as current and (d) accruals prior to the Effective Date of any costs or expenses related to severance or termination of employees. "DEBT SERVICE" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis for any period, Interest Expense for such period PLUS scheduled principal amortization of Total Debt for such period (whether or not such payments are made). "DEFAULT" shall mean any event or condition which upon notice, lapse of time or both would constitute an Event of Default. "DESIGNATED LENDERS" shall mean, at any time, Lenders having Loans and unused Commitments representing at least 66-2/3% of the sum of all Loans outstanding and unused Commitments at such time. "DOLLARS" or "$" shall mean lawful money of the United States of America. "DOMESTIC PLEDGE AGREEMENT" shall mean the Pledge Agreement dated as of October 19, 1995, as amended and restated as of November 10, 1998, substantially in the form of Exhibit F, among UCAR, the Borrower, certain domestic Subsidiaries and the Collateral Agent for the benefit of the Secured Parties. "DOMESTIC SECURITY AGREEMENT" shall mean the Security Agreement dated as of April 22, 1998, as amended and restated as of November 10, 1998, substantially in the form of Exhibit H, among UCAR, the Borrower and the domestic Subsidiaries and the Collateral Agent for the benefit of the Secured Parties. 10 "EBITDA" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis for any period, the consolidated net income of UCAR, the Borrower and the Subsidiaries for such period PLUS, to the extent deducted in computing such consolidated net income, without duplication, the sum of (a)(i) income tax expense and (ii) withholding tax expense incurred in connection with cross border transactions involving non-domestic subsidiaries, (b) interest expense, (c) depreciation and amortization expense, (d) any special charges (including, without limitation, any non-cash fees or expenses incurred in connection with the Recapitalization, the redemption of subordinated notes in September 1995, the refinancing effected on October 19, 1995, the refinancing effected on March 19, 1997 or the Transactions) and any extraordinary or non-recurring losses, (e) other noncash items reducing consolidated net income and (f) noncash exchange, translation or performance losses relating to any foreign currency hedging transactions or currency fluctuations, MINUS, to the extent added in computing such consolidated net income, without duplication, (i) interest income, (ii) extraordinary or non-recurring gains, (iii) other noncash items increasing consolidated net income and (iv) noncash exchange, translation or performance gains relating to any foreign currency hedging transactions or currency fluctuations. "EFFECTIVE DATE" shall mean the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.08). "ENVIRONMENT" shall mean ambient air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, the workplace or as otherwise defined in any Environmental Law. "ENVIRONMENTAL CLAIM" shall mean any written accusation, allegation, notice of violation, claim, demand, order, directive, cost recovery action or other cause of action by, or on behalf of, any Governmental Authority or any person for damages, injunctive or equitable relief, personal injury (including sickness, disease or death), Remedial Action costs, tangible or intangible property damage, natural resource damages, nuisance, pollution, any adverse effect on the environment caused by any Hazardous Material, or for fines, penalties or restrictions, resulting from or based upon: (a) the threat, the existence, or the continuation of the existence of a Release (including sudden or non-sudden, accidental or non-accidental Releases); (b) exposure to any Hazardous Material; (c) the presence, use, handling, transportation, storage, treatment or disposal of any Hazardous Material; or (d) the violation or alleged violation of any Environmental Law or Environmental Permit. "ENVIRONMENTAL LAW" shall mean any and all applicable present and future treaties, laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any 11 Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the treatment, storage, disposal, Release or threatened Release of any Hazardous Material or to human health or safety, including the Hazardous Materials Transportation Act, 49 U.S.C. ss.ss. 1801 ET SEQ., the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601 ET SEQ. ("CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. ss.ss. 6901, ET SEQ., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. ss.ss. 1251 ET SEQ., the Clean Air ACt of 1970, as amended 42 U.S.C. ss.ss. 7401 ET SEQ., the Toxic Substances Control Act of 1976, 15 U.S.C. ss.ss. 2601 ET SEQ., thE Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss. 11001 ET SEQ., the National Environmental Policy Act of 1975, 42 U.S.C. ss.ss. 4321 ET SEQ., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. ss.ss. 300(f) ET SEQ., and any similar or implementing state or foreign law, and all amendments or regulations promulgated thereunder. "ENVIRONMENTAL PERMIT" shall mean any permit, approval, authorization, certificate, license, variance, filing or permission required by or from any Governmental Authority pursuant to any Environmental Law. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA AFFILIATE" shall mean any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414 of the Code. "EURODOLLAR BORROWING" shall mean a Borrowing comprised of Eurodollar Loans. "EURODOLLAR LOAN" shall mean any Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II. "EUROPEAN HOLDING COMPANY STRATEGY" shall have the meaning given such term in Section 6.04(m). "EVENT OF DEFAULT" shall have the meaning given such term in Article VII. "EXCESS CASH FLOW" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis for any fiscal year, EBITDA of UCAR, the Borrower and the Subsidiaries on a consolidated basis for such fiscal year, MINUS, without duplication, (a) Debt Service for such fiscal year, (b) permitted Capital Expenditures by the Borrower and the Subsidiaries on a consolidated basis during such fiscal year which are paid in 12 cash, (c) taxes paid in cash by UCAR, the Borrower and the Subsidiaries on a consolidated basis during such fiscal year, including income tax expense and withholding tax expense incurred in connection with cross border transactions involving non-domestic Subsidiaries, (d) an amount equal to any increase in Working Capital of UCAR, the Borrower and the Subsidiaries for such fiscal year, (e) Permitted Other Acquisitions and acquisitions constituting Specified Foreign Transactions during such fiscal year to the extent paid in cash, (f) cash expenditures made in respect of Interest/Exchange Rate Protection Agreements during such fiscal year, to the extent not reflected in the computation of EBITDA or Interest Expense, (g) permitted dividends or repurchase of its Capital Stock paid in cash by UCAR or the Borrower during such fiscal year and permitted dividends paid by any Subsidiary to any person other than the Borrower or any of its other Subsidiaries during such fiscal year, in each case in accordance with Section 6.06, (h) amounts paid in cash during such fiscal year on account of items that were accounted for as noncash reductions of consolidated net income of UCAR, the Borrower and the Subsidiaries in the current or a prior period, (i) special charges or any extraordinary or non-recurring loss paid in cash during such fiscal year, (j) to the extent not deducted in the computation of Net Proceeds in respect of any asset disposition or condemnation giving rise thereto, mandatory prepayments of Indebtedness (other than Indebtedness created hereunder or under any other Loan Document), (k) cash Restricted Debt Payments made pursuant to the first proviso contained in Section 6.09(b)(i) and (l) to the extent included in determining EBITDA, all items which did not result from a cash payment to UCAR, the Borrower and the Subsidiaries on a consolidated basis during such fiscal year PLUS, without duplication, (i) an amount equal to any decrease in Working Capital for such fiscal year, (ii) all proceeds received during such fiscal year of Capital Lease Obligations, purchase money Indebtedness, Sale and Lease- Back Transactions pursuant to Section 6.03(a) and any other Indebtedness to the extent used to finance any Permitted Other Acquisition, acquisition constituting a Specified Permitted Transaction or Capital Expenditure (other than Indebtedness under this Agreement or the Existing Credit Agreement to the extent there is no corresponding deduction to Excess Cash Flow above in respect of the use of such Indebtedness) and all proceeds received during such fiscal year of Sale and Lease-Back Transactions pursuant to Section 6.03(b), (iii) all amounts referred to in (b) and (e) above to the extent funded with the proceeds of the issuance of Capital Stock of UCAR after the Original Closing Date (to the extent not previously used to prepay Indebtedness (other than revolving loans or swingline loans under the Existing Credit Agreement), make any investment or capital expenditure or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any fiscal year) or any amount that would have constituted Net Proceeds under clause (a) of the definition of "NET PROCEEDS" if not so spent, in each case to the extent there is a corresponding deduction to Excess Cash Flow above, (iv) cash payments received in respect of Interest/Exchange Rate Protection Agreements during such fiscal 13 year to the extent not (A) included in the computation of EBITDA or (B) reducing Interest Expense, (v) any extraordinary or non-recurring gain realized in cash during such fiscal year (except to the extent such gain is subject to Section 2.12(d) of this Agreement or the Existing Credit Agreement), (vi) to the extent deducted in the computation of EBITDA, interest income and (vii) to the extent subtracted in determining EBITDA, all items which did not result from a cash payment by UCAR, the Borrower and the Subsidiaries on a consolidated basis during such fiscal year. "EXISTING CREDIT AGREEMENT" shall mean the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998, among UCAR, the Borrower, the subsidiary borrowers party thereto, the lenders party thereto, the fronting banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent. "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "FEES" shall mean the Commitment Fees and the Administrative Agent Fees. "FINANCIAL OFFICER" of any corporation shall mean the chief financial officer, principal accounting officer, Treasurer, Assistant Treasurer or Controller of such corporation. "GAAP" shall mean generally accepted accounting principles in effect from time to time in the United States applied on a consistent basis or, when reference is made to another jurisdiction, generally accepted accounting principles in effect from time to time in such jurisdiction applied on a consistent basis. "GOVERNMENTAL AUTHORITY" shall mean any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body or, in the case of references to "Governmental Authority" in Article II and Section 9.17, the National Association of Insurance Commissioners. "GUARANTEE" of or by any person shall mean (a) any obligation, contingent or otherwise, of such person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, and including any obligation of such person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness 14 (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay or otherwise) or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or (iv) entered into for the purpose of assuring in any other manner the holders of such Indebtedness of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such person securing any Indebtedness of any other person, whether or not such Indebtedness is assumed by such person; PROVIDED, HOWEVER, that the term "GUARANTEE" shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Effective Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement. "GUARANTEE AGREEMENTS" shall mean (a) the Parent Guarantee Agreement, (b) the Subsidiary Guarantee Agreement and (c) any other guarantee agreements or similar agreements with respect to the Obligations in form and substance reasonably satisfactory to the Collateral Agent. "GUARANTEE REQUIREMENT" shall mean, at any time, that (a) the Parent Guarantee Agreement shall have been duly executed by UCAR and the Borrower, shall have been delivered to the Collateral Agent and shall be in full force and effect; (b) the Subsidiary Guarantee Agreement (or a supplement thereto) shall have been duly executed by each domestic Subsidiary existing at such time, shall have been delivered to the Collateral Agent and shall be in full force and effect; (c) in respect of the Swiss Term Loans made to the Swiss Borrower, a Guarantee Agreement shall have been duly executed (i) by each foreign Subsidiary existing at such time that is a direct or indirect parent of the Swiss Borrower and (ii) by each other foreign Subsidiary, shall have been delivered to the Collateral Agent and shall be in full force and effect; and (d) the Indemnity, Subrogation and Contribution Agreement (or a supplement thereto) shall have been executed by UCAR, the Borrower and each Subsidiary party to the Subsidiary Guarantee Agreement or the Domestic Pledge Agreement, shall have been delivered to the Collateral Agent and shall be in full force and effect; PROVIDED that a Guarantee Requirement with respect to the Swiss Borrower or a foreign Subsidiary shall not be required to be satisfied hereunder to the extent that (i) satisfaction of such Guarantee Requirement is not permitted under applicable law or (ii) the Administrative Agent determines that the expense, tax consequences or difficulty of satisfying such Guarantee Requirement does not justify satisfying such Guarantee Requirement. 15 "GUARANTORS" shall mean UCAR, the Borrower and the Subsidiary Guarantors. "HAZARDOUS MATERIAL" shall mean any material meeting the definition of a "hazardous substance" in CERCLA 42 U.S.C. ss.9601(14) and all explosive or radioactive substances or wastes, toxic substances or wastes, pollutants, solid, liquid or gaseous wastes, including petroleum, petroleum distillates or fractions or residues, asbestos or asbestos containing materials, polychlorinated biphenyls ("PCBS") or materials or equipment containing PCBs in excess of 50 ppm, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law, or that reasonably could form the basis of an Environmental Claim. "INDEBTEDNESS" of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person upon which interest charges are customarily paid (other than trade payables incurred in the ordinary course of business), (d) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (g) all Guarantees by such person of Indebtedness of others, (h) all Capital Lease Obligations of such person, (i) all payments that such person would have to make in the event of an early termination, on the date Indebtedness of such person is being determined, in respect of outstanding interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements and (j) all obligations of such person as an account party in respect of letters of credit and bankers' acceptances. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the liability of such person in respect thereof; PROVIDED that, if the sole asset of such person is its general partnership interest in such partnership, the amount of such Indebtedness shall be deemed equal to the value of such general partnership interest and the amount of any Indebtedness in respect of any Guarantee of such partnership Indebtedness shall be limited to the same extent as such Guarantee may be limited. "INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT" shall mean the Indemnity, Subrogation and Contribution Agreement dated as of October 15, 1995, as amended and restated as of 16 November 10, 1998, substantially in the form of Exhibit D, among UCAR, the Borrower, the Subsidiary Guarantors and the Collateral Agent. "INFORMATION MEMORANDUM" shall have the meaning given such term in Section 3.15. "INSTALLMENT DATE" shall have the meaning given such term in Section 2.11(a). "INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall mean the Intellectual Property Security Agreement dated as of April 22, 1998, as amended and restated as of November 10, 1998, substantially in the form of Exhibit I, among UCAR, the Borrower, the domestic Subsidiaries and the Collateral Agent for the benefit of the Secured Parties. "INTEREST COVERAGE RATIO" shall have the meaning given such term in Section 6.11. "INTEREST EXPENSE" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis for any period, the sum of (a) gross interest expense of UCAR, the Borrower and the Subsidiaries for such period on a consolidated basis, including (i) the amortization of debt discounts, (ii) the amortization of all fees (including fees with respect to interest rate protection agreements) payable in connection with the incurrence of Indebtedness to the extent included in interest expense and (iii) the portion of any payments or accruals with respect to Capital Lease Obligations allocable to interest expense and (b) capitalized interest of UCAR, the Borrower and the Subsidiaries on a consolidated basis. For purposes of the foregoing, gross interest expense shall be determined after giving effect to any net payments made or received by the Borrower and the Subsidiaries with respect to interest rate protection agreements. "INTEREST PAYMENT DATE" shall mean, (a) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months' duration been applicable to such Borrowing, and, in addition, the date of any refinancing or conversion of such Borrowing with or to a Borrowing of a different Type and (b) with respect to any ABR Loan, the last day of each calendar quarter. "INTEREST PERIOD" shall mean as to any Eurodollar Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as the case may be, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the applicable Credit Party 17 may elect, and the date any Eurodollar Borrowing is converted to an ABR Borrowing in accordance with Section 2.10 or repaid or prepaid in accordance with Section 2.11 or 2.12; PROVIDED, HOWEVER, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. "INTEREST/EXCHANGE RATE PROTECTION AGREEMENT" shall mean any interest rate or currency hedging agreement or arrangement approved by the Administrative Agent (such approval not to be unreasonably withheld) entered into by the Borrower or a Subsidiary and designed to protect against fluctuations in interest rates or currency exchange rates. "LENDERS" shall mean the persons listed on Schedule 2.01 and any other person that shall have become a Lender hereunder pursuant to an Assignment and Acceptance, other than any person that ceases to be a Lender hereunder pursuant to an Assignment and Acceptance. "LEVERAGE RATIO" shall have the meaning given such term in Section 6.12. "LIBO RATE" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits approximately equal in principal amount to the Administrative Agent's portion of such Eurodollar Borrowing and for a maturity comparable to such Interest Period are offered to the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "LIEN" shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "LITIGATION LIABILITIES" shall mean liabilities and expenses of UCAR, the Borrower and the Subsidiaries associated with (a) antitrust investigations and related lawsuits, settlements and claims of the type described in UCAR's Annual Report on Form 10-K for the year ended December 31, 1997, and UCAR's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998 (together, the "SEC REPORTS"), (b) shareholder derivative lawsuits and claims of the type 18 described in the SEC Reports and (c) securities lawsuits and claims of the type described in the SEC Reports and any investigations that may arise relating to the subject matter of such securities lawsuits and claims. "LITIGATION PAYMENTS" shall mean payments, credits, discounts, transfers of assets and any other transfers of value made in respect of Litigation Liabilities which are or would be applied against the Reserves in accordance with GAAP. "LOAN DOCUMENTS" shall mean this Agreement, the Existing Credit Agreement, the Notes, if any, the notes, if any, issued under the Existing Credit Agreement, the Guarantee Agreements, the Security Documents, the Indemnity, Subrogation and Contribution Agreement, the Local Facility Loan Documents and the letters of credit issued under the Existing Credit Agreement. "LOAN PARTIES" shall mean the Borrower, the Swiss Borrower, the Guarantors and the Pledgors. "LOANS" shall mean the U.S. Term Loans and the Swiss Term Loans. "LOCAL FACILITY" shall mean each loan facility permitting borrowings by a credit party under the Existing Credit Agreement located outside the United States (a) which are made pursuant to a Local Facility Credit Agreement and supported by a Tranche A Letter of Credit or (b) which are supported by the Guarantee of any Guarantor or a pledge of or a security interest in any Collateral or in any assets of such credit party and the existence and terms of which (including the existence and terms of any such Guarantee, pledge or security interest) have been submitted for approval to the administrative agent under the Existing Credit Agreement by the Borrower and approved in writing by the administrative agent under the Existing Credit Agreement. "LOCAL FACILITY CREDIT AGREEMENT" shall mean each credit agreement between a foreign credit party under the Existing Credit Agreement and one or more lenders in substantially the form of Exhibit E to the Existing Credit Agreement, with such changes therefrom as shall in the reasonable judgment of the administrative agent under the Existing Credit Agreement be necessary or advisable under applicable law. "LOCAL FACILITY LENDERS" shall mean each lender under a Local Facility. "LOCAL FACILITY LOAN DOCUMENTS" shall mean each agreement or instrument evidencing or securing any obligation of a borrower under, guarantor of, or grantor of collateral to secure, any Local Facility that does not also evidence, guarantee or secure any other Obligation. "MARGIN STOCK" shall have the meaning given such term in Regulation U. 19 "MATERIAL ADVERSE EFFECT" shall mean (a) a materially adverse effect on the assets, business, properties, financial condition or results of operations of UCAR, the Borrower and the Subsidiaries, taken as a whole, (b) a material impairment of the ability of UCAR, the Borrower or any Subsidiary to perform any of its material obligations under any Loan Document (other than the Local Facility Loan Documents) to which it is or will be a party or (c) an impairment of the validity or enforceability of, or a material impairment of the material rights, remedies or benefits available to the Lenders, the Administrative Agent or the Collateral Agent under any Loan Document (other than Local Facility Loan Documents). "MATURITY DATE" shall mean December 31, 2003. "MOODY'S" shall mean Moody's Investors Service, Inc. "MORTGAGE" shall mean a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien on any Mortgaged Property or interest therein to secure all or a portion of the Obligations. Each Mortgage shall be reasonably satisfactory in form and substance to the Collateral Agent. "MORTGAGED PROPERTIES" shall mean, initially, each parcel of real property and improvements thereto owned by a Loan Party and identified on Schedule 3.23(a), and shall include each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.11. "MULTIEMPLOYER PLAN" shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "NET PROCEEDS" shall mean (a) 100% of the cash proceeds actually received by UCAR, the Borrower or any Subsidiary (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation awards, but only as and when received), net of (i) attorneys' fees, accountants' fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, required debt payments (other than pursuant hereto or pursuant to the Existing Credit Agreement), other customary expenses and brokerage, consultant and other customary fees actually incurred in connection therewith and (ii) taxes paid or payable as a result thereof (including withholding taxes incurred in connection with cross-border transactions, if applicable, and including taxes estimated by the Borrower to be payable as a result thereof or as a result of such 20 transactions), from any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition (including any sale and leaseback of assets and any lease of real property) to any person of any asset or assets of UCAR, the Borrower or any Subsidiary (other than those pursuant to Sections 6.03, 6.05(a), 6.05(b), 6.05(e), 6.05(f)and 6.05(h) or any other financing subject to clause (ii) of the definition of "EXCESS CASH FLOW"); PROVIDED HOWEVER that if the Borrower shall deliver a certificate of the Borrower signed by a Responsible Officer of the Borrower to the Administrative Agent promptly following receipt of any such proceeds setting forth the Borrower's intention to use any portion of such proceeds to purchase assets useful in the business of the Borrower and the Subsidiaries (including by way of a purchase of Capital Stock of any person holding such assets) within 12 months of such receipt, such portion of such proceeds shall not constitute Net Proceeds except to the extent not so used within such 12-month period; PROVIDED that the aggregate amount of net proceeds that may be excluded from Net Proceeds pursuant to the immediately preceding proviso shall not exceed 25% of the book value of Total Assets set forth in UCAR's and its subsidiaries' June 30, 1998 quarterly consolidated financial statements (which book value equals $1,273,000,000); and PROVIDED FURTHER that (x) no proceeds realized in a single transaction or series of related transactions shall constitute Net Proceeds unless such proceeds shall exceed $75,000 and (y) no such proceeds shall constitute Net Proceeds in any fiscal year until the aggregate amount of all such proceeds in such fiscal year shall exceed $1,000,000 or the aggregate of all such proceeds received after the Effective Date shall exceed $3,000,000, (b) 100% of the cash proceeds from the incurrence, issuance or sale by UCAR, the Borrower or any Subsidiary of any Indebtedness (other than Indebtedness permitted pursuant to Section 6.01), net of all taxes (including withholding taxes incurred in connection with cross-border transactions, if applicable, and including taxes estimated by the Borrower to be payable as a result thereof or as a result of such transactions) and fees (including investment banking fees), commissions, costs and other expenses incurred in connection with such incurrence, issuance or sale and (c) 50% of the cash proceeds from the issuance or the sale by UCAR of any equity security of UCAR (other than sales of Capital Stock of UCAR to directors, officers or employees of UCAR, the Borrower or any Subsidiary in connection with permitted employee compensation and incentive arrangements), net of all taxes and fees (including investment banking fees), commissions, costs and other expenses incurred in connection with such issuance or sale. For purposes of calculating "NET PROCEEDS", fees, commissions and other costs and expenses payable to UCAR or the Borrower or any Affiliate of either of them shall be disregarded. "NOTES" shall mean any promissory note of a Credit Party issued pursuant to this Agreement. "OBLIGATIONS" shall mean (a) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in this Agreement after the maturity of the Loans and interest accruing at the then applicable rate 21 provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (b) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Existing Credit Agreement after the maturity of the loans thereunder and interest accruing at the applicable rate provided in the Existing Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any borrower thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the loans under the Existing Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (c) each payment required to be made by any credit party under the Existing Credit Agreement, when and as due, including payments in respect of reimbursements of L/C disbursements, interest thereon and obligations to provide cash collateral, (d) each payment required to be made by any Credit Party under this Agreement, when and as due, and (e) all other obligations and liabilities of every nature of the Credit Parties and the credit parties under the Existing Credit Agreement from time to time owed to the Secured Parties or any of them, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), which may arise under, out of, or in connection with, this Agreement, the Existing Credit Agreement, any Guarantee Agreement, any Security Document or any other Loan Document and any obligation of the Borrower to a Lender or a lender under the Existing Credit Agreement under an Interest/Exchange Rate Protection Agreement or under any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by UCAR, a Credit Party or a credit party under the Existing Credit Agreement pursuant to the terms of this Agreement, the Existing Credit Agreement, any Guarantee Agreement, any Security Document, any other Loan Document or any Interest/Exchange Rate Protection Agreement with a Lender or a lender under the Existing Credit Agreement). "ORIGINAL CLOSING DATE" shall mean October 19, 1995. "PARENT GUARANTEE AGREEMENT" shall mean the Parent Guarantee Agreement dated as of October 19, 1995, as amended and restated as of November 10, 1998, substantially in the form of Exhibit E, made by UCAR and the Borrower in favor of the Collateral Agent for the benefit of the Secured Parties. 22 "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "PERMITTED BUSINESS ACQUISITION" shall mean any acquisition of all or substantially all the assets of, or shares or other equity interests in, a person or division or line of business of a person (or any subsequent investment made in a previously acquired Permitted Business Acquisition) and any investment in Brazil if immediately after giving effect thereto: (a) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (b) all transactions related thereto shall be consummated in accordance with applicable laws, (c) at least 90% of the outstanding Capital Stock of any acquired or newly formed corporation, partnership, association or other business entity are owned directly by the Borrower or a domestic Wholly Owned Subsidiary (unless there is a material tax or legal or other economic disadvantage in not having a foreign Subsidiary hold such Capital Stock, in which case such Capital Stock may be held directly by a foreign Subsidiary) and all actions required to be taken, if any, with respect to such acquired or newly formed Subsidiary under Section 5.11 shall have been taken, (d) UCAR shall be in compliance, on a PRO FORMA basis after giving effect to such acquisition or formation, with the covenants contained in Sections 6.11 and 6.12 recomputed as at the last day of the most recently ended fiscal quarter of UCAR as if such acquisition had occurred on the first day of each relevant period for testing such compliance, and the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower to such effect, together with all relevant financial information for such subsidiary or assets, (e) the Total Revolving Credit Commitment shall exceed the Aggregate Revolving Credit Exposure by at least $75,000,000 following such acquisition and payment of all related costs and expenses, (f) the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower representing that in the Borrower's good faith judgment, based on such analysis as it shall deem appropriate, it will have liquidity it deems adequate following such acquisition or formation, and (g) any acquired or newly formed subsidiary shall not be liable for any Indebtedness (except for Indebtedness permitted by Section 6.01). "PERMITTED FOREIGN TRANSFER" shall mean (a) any Specified Permitted Transaction or (b) the transfer by means of Indebtedness, investment or otherwise (PROVIDED that each transfer of cash (other than a transfer pursuant to clause (iii) below) shall be made by means of intercompany Indebtedness (which shall be pledged to the extent required under the Pledge Agreements if no material tax disadvantage shall result therefrom) unless there is a material tax or other economic or legal disadvantage in structuring the transfer as Indebtedness instead of as an equity investment) from the Borrower or any Subsidiary to any foreign Subsidiary at least 90% of the outstanding Capital Stock of which is owned by the Borrower or a Wholly Owned Subsidiary of (i) inventory and equipment in the ordinary course of business consistent with past 23 practice; (ii) cash to fund (A) working capital needs and capital expenditures, in each case in accordance with the strategic plan described in the Information Memorandum or in the ordinary course of business consistent with past practice, and (B) debt service on Indebtedness permitted under this Agreement paid in the ordinary course of business, and, in the case of any transaction under clause (A) or clause (B), solely to the extent internally generated funds of the applicable transferee are insufficient for such purposes and the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower to such effect; and (iii) any cash borrowed in one jurisdiction and transferred to another to repay Indebtedness under any Local Facility or the Existing Credit Agreement as a direct consequence of any reallocation made pursuant to Section 2.11(b) of the Existing Credit Agreement. "PERMITTED INVESTMENTS" shall mean: (a) direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof; (b) time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits aggregating in excess of $250,000,000 (or the foreign currency equivalent thereof) and whose long-term debt, or whose parent holding company's long-term debt, is rated A at the time of deposit (or such similar equivalent rating or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act of 1933, as amended)); (c) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above; (d) commercial paper, maturing not more than 180 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Borrower) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moody's, or A-1 (or higher) according to S&P; (e) securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by S&P or A2 by Moody's; (f) in the case of any Subsidiary organized in a jurisdiction outside the United States: (i) direct obligations of the sovereign nation (or any agency thereof) in which such Subsidiary is organized and is conducting business or in obligations fully and unconditionally guaranteed by such sovereign nation (or any agency thereof); PROVIDED that such obligations have a rating of at least A by S&P or A2 by Moody's (or the equivalent thereof from comparable foreign rating agencies), (ii) investments of the type and maturity described in clauses (a) through (e) above of foreign obligors, which investments or obligors (or the parents 24 of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies or (iii) investments of the type and maturity described in clauses (a) through (e) above of foreign obligors (or the parents of such obligors), which investments or obligors (or the parents of such obligors) are not rated as provided in such clauses or in clause (ii) above but which are, in the reasonable judgment of the Borrower, comparable in investment quality to such investments and obligors (or the parents of such obligors); PROVIDED that the aggregate face amount outstanding at any time of such investments of all foreign Subsidiaries made pursuant to clause (iii) does not exceed $50,000,000; (g) mutual funds whose investment guidelines restrict such funds' investments to those satisfying the provisions of clauses (a) through (e) above; and (h) time deposit accounts, certificates of deposit and money market deposits in an aggregate face amount not in excess of 1/2 of 1% of Total Assets as of the end of the Borrower's most recently completed fiscal year. "PERMITTED OTHER ACQUISITIONS" shall mean acquisitions of any assets of, or any shares or other equity interests in, a person or division or line of business of any person if immediately after giving effect thereto: (a) no Default or Event of Default shall have occurred and be continuing, (b) all transactions related thereto shall be consummated in accordance with applicable laws, (c) the Borrower shall on or prior to the making of such acquisition have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower designating such acquisition as a Permitted Other Acquisition for purposes of this Agreement, (d) either (i) the acquisition shall constitute a Permitted Business Acquisition, (ii) the acquired asset shall constitute or be held in an Unrestricted Subsidiary or (iii) solely if at the time of acquisition thereof the Borrower shall not be entitled to make any additional Capital Expenditure pursuant to Section 6.11, the acquisition shall be of real property, improvements thereto or equipment; PROVIDED that if such acquisition shall be an acquisition of the type described in clause (ii) or (iii) above, (A) UCAR shall be in compliance, on a PRO FORMA basis after giving effect to such acquisition, with the covenants contained in Sections 6.11 and 6.12 recomputed as of the last day of the most recently ended fiscal quarter of UCAR as if such acquisition had occurred on the first day of each relevant period for testing such compliance, and the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower to such effect, together with all relevant information for such acquisition, (B) the Total Revolving Credit Commitment shall exceed the Aggregate Revolving Credit Exposure by at least $75,000,000 following the acquisition and the payment of all related costs and expenses, and (C) the Borrower shall have delivered a certificate of the Borrower signed by a Responsible Officer of the Borrower representing that in the Borrower's good faith judgment, based on such analysis as it shall deem adequate, it will have liquidity it deems adequate following the acquisition. 25 "PERSON" shall mean any natural person, corporation, limited liability company, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof. "PLAN" shall mean any employee pension benefit plan, as defined in Section 3(2) of ERISA (other than a Multiemployer Plan), subject to the provisions of Title IV of ERISA or Section 412 of the Code and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "PLEDGE AGREEMENTS" shall mean (a) the Domestic Pledge Agreement and (b) any other pledge agreements or similar agreements securing the Obligations or a Guarantee thereof in form and substance reasonably satisfactory to the Collateral Agent. "PLEDGORS" shall mean UCAR, the Borrower and each Subsidiary that becomes party to a Pledge Agreement, a Security Agreement, the Intellectual Property Security Agreement or a Mortgage. "PRIME RATE" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective. "RECAPITALIZATION" shall mean the recapitalization of UCAR on January 26, 1995, and the related transactions, as defined in the Credit Agreement of UCAR and the Borrower dated as of January 26, 1995. "REFINANCING NOTE INDENTURE" shall mean one or more indentures pursuant to which the Refinancing Notes are issued. "REFINANCING NOTES" shall mean one or more series of subordinated debentures or notes issued by the Borrower, the net proceeds of which are used by the Borrower to redeem or repurchase Senior Subordinated Notes. "REGISTER" shall have the meaning given such term in Section 9.04(d). "REGULATION D" shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. 26 "REGULATION X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "RELATED BUSINESS" shall mean any business or business activity conducted by UCAR or its subsidiaries on the date hereof and any business or business activities incidental or related thereto or incidental or related to the procurement, manufacture or sale of products or services manufactured or provided by UCAR or any of its subsidiaries on the date hereof. "RELATED FUND" shall mean, with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "RELEASE" shall have the meaning given such term in CERCLA, 42 U.S.C. ss.9601(22). "REMEDIAL ACTION" shall mean (a) "remedial action" as such term is defined in CERCLA, 42 U.S.C. ss. 9601(24), and (b) all other actions, including studies and investigations, required by any Governmental Authority or voluntarily undertaken to: (i) clean up, remove, treat, abate or in any other way respond to any Hazardous Material in the environment; or (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material. "REPORTABLE EVENT" shall mean any reportable event as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414). "REQUIRED LENDERS" shall mean, at any time, Lenders having Loans and unused Commitments representing at least 51% of the sum of all Loans outstanding and unused Commitments at such time. "REQUIRED SECURED PARTIES" shall mean, at any time, (a) the Required Lenders under this Agreement (unless all Commitments under this Agreement shall have expired or been terminated and the principal of and interest on each Loan, all Fees and other amounts payable hereunder shall have been paid in full and (b) the "Required Lenders" under the Existing Credit Agreement (unless all commitments under the Existing Credit Agreement shall have expired or been terminated and the principal of and interest on each loan, all fees and other amounts payable under the Existing Credit Agreement shall have been paid in full and all letters of credit issued hereunder shall have been cancelled or expired and all amounts drawn thereunder shall have been reimbursed in full). "RESERVES" shall mean, with respect to UCAR, the Borrower and its subsidiaries on a consolidated basis at any date 27 of determination, all reserves in respect of Litigation Liabilities which are or would be disclosed on a consolidated balance sheet of UCAR, the Borrower and its subsidiaries prepared in accordance with GAAP at such date of determination. "RESPONSIBLE OFFICER" of any corporation shall mean any executive officer or Financial Officer of such corporation and any other officer or similar official thereof responsible for the administration of the obligations of such corporation in respect of this Agreement. "RESTRICTED DEBT PAYMENTS" shall have the meaning given such term in Section 6.09(b)(i). "RESTRICTED EQUITY PAYMENTS" shall have the meaning given such term in Section 6.06. "RESTRICTED JUNIOR PAYMENT AMOUNT" shall mean, with respect to any fiscal year, an amount equal to (a) $15,000,000 for the 1999 fiscal year and (b) $20,000,000 for each fiscal year thereafter. "RESTRICTED JUNIOR PAYMENTS" shall mean the collective reference to Restricted Equity Payments made pursuant to Section 6.06(c) and Restricted Debt Payments made pursuant to the first proviso contained in Section 6.09(b)(i). The amount of Restricted Equity Payments made pursuant to Section 6.06(c) shall be determined without double counting in the case of Restricted Equity Payments made to UCAR, the Borrower or any Subsidiary to the extent used by such person to make a Restricted Equity Payment. "REVOLVING L/C EXPOSURE" shall mean the Revolving L/C Exposure under the Existing Credit Agreement. "S&P" shall mean Standard & Poor's Ratings Group. "SALE AND LEASE-BACK TRANSACTION" shall have the meaning given such term in Section 6.03. "SEC REPORTS" shall have the meaning given such term in the definition of "Litigation Liabilities". "SECOND CLOSING DATE" shall mean March 19, 1997. "SECURED PARTIES" shall mean the Lenders, the lenders under the Existing Credit Agreement, the lenders under the Local Facility Credit Agreements, the fronting banks under the Existing Credit Agreement, the Administrative Agent, the administrative agent under the Existing Credit Agreement, the administrative agent under the Local Facility Credit Agreements and the Collateral Agent. "SECURITY AGREEMENTS" shall mean (a) the Domestic Security Agreement and (b) any other security agreements or similar 28 agreements securing the Obligations or a Guarantee thereof in form and substance reasonably satisfactory to the Collateral Agent. "SECURITY DOCUMENTS" shall mean the Security Agreements, the Intellectual Property Security Agreement, the Pledge Agreements, the Mortgages and each of the agreements and other instruments and documents executed and delivered pursuant thereto or pursuant to Section 5.11. "SENIOR SUBORDINATED GUARANTEE" shall mean the senior subordinated Guarantee by UCAR in effect on the Original Closing Date, and any subsequent senior subordinated Guarantee by UCAR on terms no less favorable to the Lenders, of the Indebtedness of the Borrower under the Senior Subordinated Notes or the Refinancing Notes. "SENIOR SUBORDINATED INDENTURE" shall mean the indenture pursuant to which the Senior Subordinated Notes were issued, dated as of January 15, 1995, among the Borrower, UCAR, as guarantor, and United States Trust Company of New York, as Trustee, as amended from time to time in accordance with Section 6.09. "SENIOR SUBORDINATED NOTES" shall mean up to $200,000,000 aggregate principal amount of Senior Subordinated Notes of the Borrower issued pursuant to the Senior Subordinated Indenture. "SIGNIFICANT SUBSIDIARY" shall mean the Borrower, any other Credit Party and any other subsidiary of UCAR that at the date of any determination (a) accounts for 2.5% or more of the consolidated assets of UCAR, (b) has accounted for 2.5% or more of EBITDA for each of the two consecutive periods of four fiscal quarters immediately preceding the date of determination or (c) has been designated by the Borrower in writing to the Administrative Agent as a Significant Subsidiary and such designation has not subsequently been withdrawn. "SPECIFIED PERMITTED TRANSACTION" shall mean, if immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom: (a) any acquisition of Capital Stock of a person that (i) does not constitute a Permitted Business Acquisition solely because after giving effect thereto less than 90% of the outstanding Capital Stock of such person is owned as required under clause (b) of the definition of "Permitted Business Acquisition" but (ii) after giving effect to which at least 70% of the outstanding Capital Stock of such person is owned directly by the Borrower or a domestic Wholly Owned Subsidiary (unless there is a material tax or legal or other economic disadvantage in not having a foreign Subsidiary hold such Capital Stock, in which case such Capital Stock may be held directly by a foreign Subsidiary), (b) any acquisition of Capital Stock of a person that (i) does not constitute a Permitted Business Acquisition solely because after giving effect thereto less than 90% of the outstanding Capital Stock of such person is owned as required under clause (b) of the 29 definition of "Permitted Business Acquisition" but (ii) after giving effect to which at least 50% of the outstanding Capital Stock of such person is owned directly by the Borrower or a domestic Wholly Owned Subsidiary (unless there is a material tax or legal or other economic disadvantage in not having a foreign Subsidiary hold such Capital Stock, in which case such Capital Stock may be held directly by a foreign Subsidiary); PROVIDED that the aggregate amount of consideration (whether cash or property, valued at the time each such investment is made) for acquisitions made in reliance on this clause (b) shall not exceed $125,000,000, (c) any acquisition (or redemption or repurchase) of additional Capital Stock of UCAR Elektroden GmbH, Carbone Savoie, UCAR Grafit OAO or any other Subsidiary acquired in a Specified Permitted Transaction by the Borrower or any Subsidiary, unless such transaction shall constitute a Permitted Business Acquisition, and (d) any advance, loan or capital contribution by the Borrower or any Subsidiary to UCAR Elektroden GmbH, Carbone Savoie, UCAR Grafit OAO or any other Subsidiary acquired in a Specified Permitted Transaction at any time prior to such person becoming a Wholly Owned Subsidiary (other than a Permitted Foreign Transfer of the type described in clause (b) of the definition thereof); PROVIDED that after giving effect to any transaction described in clause (a), (b),(c) or (d) above, (i) UCAR shall be in compliance, on a PRO FORMA BASIS after giving effect to such transaction, with the covenants contained in Sections 6.11 and 6.12 recomputed as of the last day of the most recently ended fiscal quarter of UCAR as if such acquisition had occurred on the first day of each relevant period for testing such compliance, and the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower to such effect, together with all relevant financial information for such transaction, (ii) the Total Revolving Credit Commitment shall exceed the Aggregate Revolving Credit Exposure by $75,000,000 following such transaction and payment of all related costs and expenses and (iii) the Borrower shall have delivered to the Administrative Agent a certificate of the Borrower signed by a Responsible Officer of the Borrower representing that in the Borrower's good faith judgment, it will have liquidity it deems adequate following such transaction. For purposes of determining compliance with Section 6.04(k), the aggregate outstanding amount of Specified Permitted Transactions at any time shall mean the sum at such time of (i) the aggregate outstanding principal amount of advances and loans made under clause (d) of the immediately preceding sentence and (ii) the aggregate amount (net of return of capital of (but not return on) any such investment) of capital contributions made under clause (d) of the immediately preceding sentence and consideration paid in respect of acquisitions (or redemptions or repurchases) of Capital Stock made under clause (a), (b) or (c) of the immediately preceding sentence; PROVIDED that the aggregate amount of Specified Permitted Transactions in respect of any person (A) made under clause (a), (b) and (c) shall be deemed to be zero after any acquisition in respect of such person that constitutes a Permitted Business Acquisition (it being understood that the aggregate amount of all prior such transactions in respect of such person shall thereafter be treated as Permitted Other 30 Acquisitions for purposes of Section 6.04(k)) and (B) made under clause (d) shall be zero at any time that such person is a Wholly Owned Subsidiary. "STATUTORY RESERVES" shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent is subject with respect to Eurocurrency Liabilities (as defined in Regulation D of the Board) or other categories of liabilities or deposits by reference to which the LIBO Rate is determined. Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets which may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "SUBSIDIARY" shall mean, with respect to any person (herein referred to as the "parent"), any corporation, partnership, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, directly or indirectly, owned, controlled or held, or (b) which is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "SUBSIDIARY" shall mean each subsidiary of the Borrower. "SUBSIDIARY GUARANTEE AGREEMENT" shall mean the Subsidiary Guarantee Agreement date as of October 15, 1995, as amended and restated as of November 10, 1998, substantially in the form of Exhibit G, made by the domestic Subsidiary Guarantors in favor of the Collateral Agent for the benefit of the Secured Parties. "SUBSIDIARY GUARANTOR" shall mean any Subsidiary that is a party to a Guarantee Agreement. "SWISS TERM LOAN" shall mean a Loan made pursuant to clause (b) of Section 2.01 . "SWISS TERM LOAN COMMITMENT" shall mean, with respect to each Lender, the commitment of such Lender to make a Swiss Term Loan hereunder on the Effective Date, expressed as an amount representing the maximum principal amount of the Swiss Term Loan to be made by such Lender hereunder, as such commitment may be (a) 31 reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Swiss Term Loan Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Swiss Term Loan Commitment, as applicable. The initial aggregate amount of the Lenders' Swiss Term Loan Commitments is $85,000,000. "TAX SHARING AGREEMENT" means (a) that certain agreement dated January 26, 1995, between the Borrower and UCAR, and (b) any other tax allocation agreement by the Borrower or any of its Subsidiaries and the Borrower or UCAR with respect to consolidated or combined tax returns including the Borrower or any of its Subsidiaries but only to the extent that amounts payable from time to time by the Borrower or any such Subsidiary under any such agreement do not exceed the corresponding tax payments that the Borrower or such Subsidiary would have been required to make to any relevant taxing authority had the Borrower or such Subsidiary not joined in such consolidated or combined return, but instead had filed returns including only the Borrower or its Subsidiaries (PROVIDED that any such agreement may provide that, if the Borrower or any such Subsidiary ceases to be a member of the affiliated group of corporations of which UCAR is the common parent for purposes of filing a consolidated federal income tax return (such cessation, a "DECONSOLIDATION EVENT"), then the Borrower or such Subsidiary will indemnify UCAR with respect to any Federal, state or local income, franchise or other tax liability (including any related interest, additions or penalties) imposed on UCAR as the result of an audit or other adjustment with respect to any period prior to such Deconsolidation Event that is attributable to the Borrower, such Subsidiary or any predecessor business thereof (computed as if the Borrower, such Subsidiary or such predecessor business, as the case may be, were a stand-alone entity that filed separate tax returns as an independent corporation), but only to the extent that any such tax liability exceeds any liability for taxes recorded on the books of the Borrower or such Subsidiary with respect to any such period). "TOTAL ASSETS" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis at any date of determination, all assets which would, in accordance with GAAP, be classified on a consolidated balance sheet of UCAR, the Borrower and the Subsidiaries as assets at such date of determination. "TOTAL DEBT" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis at any time, all Capital Lease Obligations, Indebtedness for borrowed money and Indebtedness in respect of the deferred purchase price of property or services of UCAR, the Borrower and the Subsidiaries at such time. "TRANCHE A EXPOSURE" shall mean the Tranche A Exposure under the Existing Credit Agreement. 32 "TRANCHE A LETTER OF CREDIT" shall mean a Tranche A Letter of Credit issued under the Existing Credit Agreement. "TRANCHE A REIMBURSEMENT LOANS" shall mean the Tranche A Reimbursement Loans made under the Existing Credit Agreement. "TRANCHE C TERM LOANS" shall mean the U.S. Term Loans and the Swiss Term Loans. "TRANSACTIONS" shall have the meaning given such term in Section 3.02. "TYPE", when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term "RATE" shall include the Adjusted LIBO Rate and the Alternate Base Rate. "UNRESTRICTED SUBSIDIARY" shall mean (a) any subsidiary of UCAR (other than the Borrower) or any other direct or indirect investment by UCAR or any such subsidiary in the Capital Stock of any other person (other than the Borrower) so long as (i) none of the Capital Stock or other ownership interests of such subsidiary or other person is owned by the Borrower or any of the Subsidiaries, (ii) UCAR shall have notified the Administrative Agent of its acquisition or creation of such subsidiary or such other investment and its ownership interest therein concurrently with such acquisition, creation or investment and the intended purposes of such subsidiary or investment, (iii) any such subsidiary (unless it is a foreign subsidiary) shall have entered into the Tax Sharing Agreement existing at the time of such acquisition or creation (or another tax sharing agreement containing terms which, in the reasonable judgment of the Administrative Agent, are customary in similar circumstances to provide an appropriate allocation of tax liabilities and benefits), (iv) except in the case of UCAR as permitted in the proviso below, none of UCAR, the Borrower and the Subsidiaries shall have any contingent liability in respect of such subsidiary or investment and (v) any such subsidiary or investment shall be capitalized solely from the following sources: (A) any investment by any person other than UCAR, the Borrower and the Subsidiaries; (B) Indebtedness issued by such subsidiary or any of its subsidiaries that is nonrecourse to UCAR, the Borrower and the Subsidiaries (except in the case of UCAR as otherwise permitted by the proviso below), or proceeds thereof; (C) Capital Stock of such subsidiary or any other Unrestricted Subsidiary, or proceeds thereof; (D) proceeds of Capital Stock of UCAR issued by UCAR after the Original Closing Date remaining after making the prepayment of Obligations required under Section 2.12(d) (to the extent not previously used to prepay Indebtedness (other than revolving loans or swingline loans under the Existing Credit Agreement), make any investment or capital expenditure or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any fiscal year); and (E) investments permitted to be made in Unrestricted Subsidiaries pursuant to Section 6.04; PROVIDED that UCAR may incur 33 a contingent liability or Indebtedness in a specified and limited amount in respect of such a subsidiary or investment if it would at the time of such incurrence be permitted to make an additional investment in such subsidiary or investment in the amount of such incurrence and the amount so incurred shall thereafter constitute an investment in such subsidiary or investment in such amount for purposes of calculating compliance with Section 6.04; and (b) any subsidiary of an Unrestricted Subsidiary. "U.S. TERM LOAN" shall mean a Loan made pursuant to clause (a) of Section 2.01. "U.S. TERM LOAN COMMITMENT" shall mean, with respect to each Lender, the commitment of such Lender to make a U.S. Term Loan hereunder on the Effective Date, expressed as an amount representing the maximum principal amount of the U.S. Term Loan to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's U.S. Term Loan Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its U.S. Term Loan Commitment, as applicable. The initial aggregate amount of the Lenders' U.S. Term Loan Commitments is $125,000,000. "WHOLLY OWNED SUBSIDIARY" means a Subsidiary of the Borrower, (a) at least 99% of the Capital Stock of which (other than directors' qualifying shares) is owned by the Borrower or another Wholly Owned Subsidiary or (b) solely in the case of any Subsidiary included in Brazil or UCAR Grafit OAO, at least 97% of the Capital Stock of which (other than directors' qualifying shares) is owned by the Borrower or another Wholly Owned Subsidiary. "WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. "WORKING CAPITAL" shall mean, with respect to UCAR, the Borrower and the Subsidiaries on a consolidated basis at any date of determination, Current Assets at such date of determination MINUS Current Liabilities at such date of determination. SECTION 1.02. TERMS GENERALLY. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, 34 (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time and (b) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; PROVIDED, HOWEVER, that for purposes of determining compliance with the covenants contained in Section 2.12(e) and Article VI all accounting terms herein shall be interpreted and all accounting determinations hereunder (in each case, unless otherwise provided for or defined herein) shall be made in accordance with GAAP as in effect on the Effective Date and applied on a basis consistent with the application used in the financial statements referred to in Section 3.05; and PROVIDED FURTHER that if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Section 2.12(e) or Article VI or any related definition to eliminate the effect of any change in GAAP occurring after the date of this Agreement on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Section 2.12(e) or Article VI or any related definition for such purpose), then (i) the Borrower and the Administrative Agent shall negotiate in good faith to agree upon an appropriate amendment to such covenant and (ii) the Borrower's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective until such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders. For the purposes of determining compliance under Sections 6.01, 6.02, 6.04, 6.05 and 6.10 with respect to any amount in a currency other than Dollars, such amount shall be deemed to equal the Dollar equivalent thereof at the time such amount was incurred or expended, as the case may be (except that, where measurement of a financial statement amount is contemplated, such determination shall be based upon currency translation rules according to GAAP). ARTICLE II THE CREDITS SECTION 2.01. COMMITMENTS. Subject to the terms and conditions and relying upon the representations and warranties of UCAR and the Borrower set forth herein, each Lender agrees, severally and not jointly (a) to make a U.S. dollar-denominated U.S. Term Loan to the Borrower on the Effective Date, in a principal amount not exceeding its U.S. Term Loan Commitment and (b) to make a U.S. dollar-denominated Swiss Term Loan to the Swiss Borrower on the Effective Date, in a principal amount not exceeding its Swiss Term Loan Commitment. Amounts paid or prepaid in respect of the Loans may not be reborrowed. SECTION 2.02. LOANS. (a) Each Loan shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their Commitments of the applicable Class; PROVIDED, HOWEVER, that the failure of any Lender to make any Loan shall not relieve any other Lender of its 35 obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). (b) Subject to Sections 2.08 and 2.14, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the applicable Credit Party may request pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; PROVIDED that any exercise of such option shall not affect the obligation of the applicable Credit Party to repay such Loan in accordance with the terms of this Agreement and such Lender shall not be entitled to any amounts payable under Section 2.13 or Section 2.19 in respect of increased costs arising as a result of such exercise (and that would not have arisen but for such exercise). At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. Borrowings of more than one Type may be outstanding at the same time; PROVIDED, HOWEVER, that the Credit Parties shall not be entitled to request any Borrowing which, if made, would result in more than twenty Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings. (c) Subject to Section 2.10, each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer to such account as the Administrative Agent may designate in federal funds not later than 11:00 a.m., New York City time, and the Administrative Agent shall by 12:00 (noon), New York City time, credit the amounts so received to an account designated by the applicable Credit Party in the applicable Borrowing Request; PROVIDED, HOWEVER, that if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, the Administrative Agent shall return the amounts so received to the respective Lenders. (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and may, in reliance upon such assumption, make available to the applicable Credit Party on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the applicable Credit Party severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the applicable Credit Party until the date such amount is repaid to the Administrative Agent, at (i) in the case of the applicable Credit Party, the interest rate 36 applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. SECTION 2.03. BORROWING PROCEDURE. In order to request a Borrowing, a Credit Party shall hand deliver or telecopy to the Administrative Agent a duly completed Borrowing Request substantially in the form of Exhibit C (a) in the case of a Eurodollar Borrowing, not later than 12:00 (noon), New York City time, three Business Days before a proposed Borrowing and (b) in the case of an ABR Borrowing, not later than 12:00 (noon), New York City time, one Business Day before a proposed Borrowing. Each Borrowing Request shall be irrevocable, shall be signed by or on behalf of the applicable Credit Party and shall specify the following information: (i) the name of the applicable Credit Party; (ii) whether the Borrowing then being requested is to be a U.S. Term Borrowing or a Swiss Term Borrowing, and whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing; (iii) the date of such Borrowing (which shall be a Business Day), (iv) the number and location of the account to which funds are to be disbursed (which account shall be maintained in the United States of America); (v) the amount of such Borrowing; and (vi) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto; PROVIDED, HOWEVER, that, notwithstanding any contrary specification in any Borrowing Request, each requested Borrowing shall comply with the requirements set forth in Section 2.02. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the applicable Credit Party shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall promptly (and in any event on the same day that the Administrative Agent receives such notice, if received by 1:00 p.m., New York City time, on such day) advise the Lenders of any notice given pursuant to this Section 2.03 and of each Lender's portion of the requested Borrowing. SECTION 2.04. EVIDENCE OF DEBT; REPAYMENT OF LOANS. The outstanding principal balance of each Loan shall be payable as provided in Section 2.11. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. 37 (c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from any Credit Party to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from any Credit Party and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) and (c) of this Section 2.04 shall be prima facie evidence of the existence and amounts of the obligations therein recorded; PROVIDED, HOWEVER, that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of any Credit Party to repay the Loans in accordance with their terms. (e) Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive a Note as provided in Section 9.04(h) or otherwise the interests represented by that Note shall at all times (including after any assignment of all or part of such interests pursuant to Section 9.04) be represented by one or more Notes payable to the payee named therein or its registered assigns. SECTION 2.05. FEES. (a) The Borrower agrees to pay to each Lender, through the Administrative Agent, on the last day of March, June, September and December in each year, and on the date on which the Commitments of all the Lenders shall be terminated as provided herein, a commitment fee (a "COMMITMENT FEE") on the average daily unused amount of the Commitments of such Lender during the preceding quarter (or other period commencing with the date of this Agreement or ending with the date on which the last of the Commitments of such Lender shall be terminated) at the rate of 0.50% per annum. All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as applicable. The Commitment Fee due to each Lender shall commence to accrue on the date of this Agreement and shall cease to accrue on the date on which the last of the Commitments of such Lender shall be terminated as provided herein. (b) The Borrower agrees to pay to the Administrative Agent, for its own account, the fees set forth in the Agent Letter at the times specified therein (the "ADMINISTRATIVE AGENT FEES"). (c) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders. Once paid, none of the Fees shall be refundable under any circumstances. SECTION 2.06. INTEREST ON LOANS. (a) Subject to the provisions of Section 2.07, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, 38 when determined by reference to the Prime Rate and over a year of 360 days at all other times) at a rate per annum equal to the Alternate Base Rate PLUS, 2.25%. (b) Subject to the provisions of Section 2.07, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing PLUS, 3.25%. (c) Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. The Administrative Agent shall give the Borrower prompt notice of each such determination. SECTION 2.07. DEFAULT INTEREST. If any Credit Party shall default in the payment of the principal of or interest on any Loan or any other amount becoming due hereunder, by acceleration or otherwise, such Credit Party shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount for the period beginning on the date of such default up to (but not including) the date of actual payment (after as well as before judgment) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to (a) in the case of (i) overdue Loans, overdue interest thereon, overdue Commitment Fees or other overdue amounts owing in respect of Loans (or the related Commitments), the rate that would otherwise be applicable to ABR Loans pursuant to Section 2.06 PLUS 2% or (b) in the case of any other overdue amount, the Alternate Base Rate PLUS 2%. SECTION 2.08. ALTERNATE RATE OF INTEREST. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined that dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or that the rates at which such dollar deposits are being offered will not adequately and fairly reflect the cost to any Lender of making or maintaining its Eurodollar Loan during such Interest Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give written or telecopy notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a request for an 39 ABR Borrowing. Each determination by the Administrative Agent hereunder shall be conclusive absent manifest error. SECTION 2.09. TERMINATION AND REDUCTION OF COMMITMENTS. (a) Unless previously terminated, the Commitments shall terminate at 5:00 p.m., New York City time, on the Effective Date. (b) Upon at least three Business Days' prior irrevocable written or telecopy notice to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Commitments of any Class; PROVIDED, HOWEVER, that (i) each partial reduction of any Commitments shall be in an integral multiple of $1,000,000 and in a minimum principal amount of $5,000,000 (or, if less, the remaining amount of the Commitments of the applicable Class). (c) Each reduction in a Class of Commitments hereunder shall be made ratably among the Lenders in accordance with their respective Commitments for such Class. The Borrower shall pay to the Administrative Agent for the account of the Lenders, on the date of each termination or reduction, the Commitment Fees on the amount of the Commitments so terminated or reduced accrued to but excluding the date of such termination or reduction. SECTION 2.10. CONVERSION AND CONTINUATION OF BORROWINGS. A Credit Party shall have the right at any time upon prior irrevocable notice to the Administrative Agent (a) not later than 12:00 (noon), New York City time, one Business Day prior to conversion, to convert any Eurodollar Borrowing into an ABR Borrowing, (b) not later than 10:00 a.m., New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Borrowing or to continue any Eurodollar Borrowing as a Eurodollar Borrowing for an additional Interest Period, and (c) not later than 10:00 a.m., New York City time, three Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Borrowing to another permissible Interest Period, subject in each case to the following: (i) each conversion or continuation shall be made pro rata among the relevant Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Borrowing; (ii) if less than all the outstanding principal amount of any Borrowing shall be converted or continued, then each resulting Borrowing shall satisfy the limitations specified in Section 2.02(b) regarding the principal amount and maximum number of Borrowings of the relevant Type; (iii) each conversion shall be effected by each Lender by recording for the account of such Lender the new Loan of such Lender resulting from such conversion and reducing the Loan, (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on a Loan (or 40 portion thereof) being converted shall be paid by the applicable Credit Party at the time of conversion; (iv) if any Eurodollar Borrowing is converted at a time other than the end of the Interest Period applicable thereto, the applicable Credit Party shall pay, upon demand, any amounts due to the Lenders pursuant to Section 2.15; (v) any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Borrowing; (vi) any portion of a Eurodollar Borrowing which Borrowing cannot be converted into or continued as a Eurodollar Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing; and (vii) no Interest Period may be selected for any Eurodollar Borrowing that would end later than an Installment Date occurring on or after the first day of such Interest Period if, after giving effect to such selection, the aggregate outstanding amount of (A) the Eurodollar Borrowings made pursuant to the same Commitments with Interest Periods ending on or prior to such Installment Date and (B) the ABR Borrowings made pursuant to the same Commitments would not be at least equal to the principal amount of Borrowings made pursuant to the same Commitments to be paid on such Installment Date. Each notice pursuant to this Section 2.10 shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that the applicable Credit Party requests be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the date of such conversion (which shall be a Business Day) and (iv) if such Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, the applicable Credit Party shall be deemed to have selected an Interest Period of one month's duration. The Administrative Agent shall advise the other Lenders of any notice given pursuant to this Section 2.10 and of each Lender's portion of any converted or continued Borrowing. If the applicable Credit Party shall not have given notice in accordance with this Section 2.10 to continue any Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be continued or converted into an ABR Borrowing. 41 SECTION 2.11. REPAYMENT OF BORROWINGS. (a) The Borrowings shall be payable as to principal in the aggregate annual amounts set forth below in consecutive quarterly installments on each March 31, June 30, September 30 and December 31 (each an "INSTALLMENT DATE"), commencing March 31, 1999, with 40% of each annual amount being paid or reduced on each June 30 and each December 31 and 10% of each annual amount being paid or reduced on each March 31 and September 30: INSTALLMENT DATE AMOUNT December 31, 1999 1,000,000 December 31, 2000 1,000,000 December 31, 2001 1,000,000 December 31, 2002 1,000,000 December 31, 2003 206,000,000 (b) Each prepayment of principal of the Borrowings pursuant to Section 2.12 shall be applied to (i) the U.S. Term Borrowings and (ii) the Swiss Term Borrowings ratably in accordance with the respective outstanding amounts thereof and shall reduce scheduled payments and reductions required under paragraph (a) above after the date of such prepayment or reduction in the scheduled order of maturity. Amounts to be repaid under this Section 2.11 on each Installment Date shall be allocated to the U.S. Term Borrowings and the Swiss Term Borrowings ratably in accordance with the respective outstanding amounts thereof. To the extent not previously paid or reduced, all Borrowings shall be due and payable on the Maturity Date. Each payment of Borrowings pursuant to this Section 2.11 shall be accompanied by accrued interest on the principal amount paid to but excluding the date of payment. SECTION 2.12. PREPAYMENT. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, upon at least three Business Days' prior written or telecopy notice (or telephone notice promptly confirmed by written or telecopy notice) to the Administrative Agent before 11:00 a.m., New York City time; PROVIDED, HOWEVER, that (i) each partial prepayment or reduction shall be in an amount which is an integral multiple of $1,000,000 and not less than $5,000,000 (or, if less, the aggregate outstanding amount under the applicable Class of Loans), (ii) each prepayment of Borrowings shall be applied as set forth in paragraph (b) of Section 2.11 and (iii) if the Borrower shall prepay any Borrowing hereunder prior to January 1, 2000, it shall pay to the Administrative Agent, for the account of the Lenders, a premium equal to 1% of the amount so prepaid. (b) [INTENTIONALLY LEFT BLANK] (c) [INTENTIONALLY LEFT BLANK] 42 (d) The Borrower shall apply all Net Proceeds (minus an amount equal to the lesser of (i) the amount of such Net Proceeds applied to prepay loans and reduce exposure under the Existing Credit Agreement and (ii) the amount of such Net Proceeds multiplied by a fraction the numerator of which is the aggregate principal and stated amount of outstanding term loans (excluding Tranche A Reimbursement Loans) and Tranche A Exposure under the Existing Credit Agreement and the denominator of which is the aggregate principal and stated amount of (A) outstanding term loans (excluding Tranche A Reimbursement Loans) and Tranche A Exposure under the Existing Credit Agreement and (B) outstanding Loans, promptly upon receipt thereof by UCAR, the Borrower or any Subsidiary, to prepay Borrowings. (e) Not later than 90 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 1998, the Borrower shall calculate Excess Cash Flow for such fiscal year and shall apply (i) the applicable percentage (determined as set forth in Schedule A) of such Excess Cash Flow (the "EXCESS CASH FLOW PREPAYMENT AMOUNT") less (ii) (A) any voluntary prepayments of Loans during the period beginning on April 1 of such fiscal year and ending on March 31 of the immediately succeeding fiscal year (if such difference is positive) and (B) an amount equal to the lesser of (i) the amount of such Excess Cash Flow Prepayment Amount applied to prepay loans and reduce exposure under the Existing Credit Agreement and (ii) such Excess Cash Flow Prepayment Amount multiplied by a fraction the numerator of which is the aggregate principal and stated amount of outstanding term loans (excluding Tranche A Reimbursement Loans) and Tranche A Exposure under the Existing Credit Agreement and the denominator of which is the aggregate principal and stated amount of (x) outstanding term loans (excluding Tranche A Reimbursement Loans) and Tranche A Exposure under the Existing Credit Agreement and (y) outstanding Loans to prepay Borrowings. Not later than the date on which the Borrower is required to deliver financial statements with respect to the end of each fiscal year under Section 5.04(a), the Borrower will deliver to the Administrative Agent a certificate of the Borrower signed by a Financial Officer of the Borrower setting forth the amount, if any, of Excess Cash Flow for such fiscal year and the calculation thereof in reasonable detail. (f) At the time of any prepayment of the term loans or reduction of Tranche A Exposure pursuant to Section 2.12 of the Existing Credit Agreement, the Borrower shall prepay the Loans in an aggregate amount bearing the same proportion to the aggregate amount of Loans hereunder as the amount of term loans prepaid and/or Tranche A Exposure reduced pursuant to Section 2.12 of the Existing Credit Agreement bears to the aggregate amount of term loans (excluding Tranche A Reimbursement Loans) and Tranche A Exposure under the Existing Credit Agreement. (g) Each notice of prepayment pursuant to this Section 2.12 shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the applicable Credit Party to 43 prepay such Borrowing and to reduce the Tranche A Exposure by the amount stated therein on the date stated therein. All prepayments and reductions under this Section 2.12 shall be subject to Section 2.12(a)(iii) and Section 2.15 but otherwise shall be made without premium or penalty. All prepayments under this Section 2.12 shall be accompanied by accrued interest on the principal amount being prepaid to but excluding the date of payment. (h) In the event the amount of any prepayment required to be made above shall exceed the aggregate principal amount of ABR Loans of the applicable Class outstanding and required to be prepaid (the amount of any such excess being called the "EXCESS AMOUNT"), the Borrower shall have the right, in lieu of making such prepayment in full, to prepay all the outstanding applicable ABR Loans and to deposit an amount equal to the Excess Amount with the Collateral Agent in a cash collateral account maintained (pursuant to documentation reasonably satisfactory to the Administrative Agent) by and in the sole dominion and control of the Collateral Agent. Any amounts so deposited shall be held by the Collateral Agent as collateral for the Obligations and applied to the prepayment of the applicable Eurodollar Loans at the end of the current Interest Periods applicable thereto. On any Business Day on which (i) collected amounts remain on deposit in or to the credit of such cash collateral account after giving effect to the payments made on such day pursuant to this Section 2.12(h) and (ii) the Borrower shall have delivered to the Collateral Agent a written request or a telephonic request (which shall be promptly confirmed in writing) that such remaining collected amounts be invested in the Permitted Investments specified in such request, the Collateral Agent shall use its reasonable efforts to invest such remaining collected amounts in such Permitted Investments; PROVIDED, HOWEVER, that the Collateral Agent shall have continuous dominion and full control over any such investments (and over any interest that accrues thereon) to the same extent that it has dominion and control over such cash collateral account and no Permitted Investment shall mature after the end of the Interest Period for which it is to be applied. The Borrower shall not have the right to withdraw any amount from such cash collateral account until the applicable Eurodollar Loans and accrued interest thereon are paid in full or if a Default or Event of Default then exists or would result. SECTION 2.13. RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES. (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to any Lender in respect of the principal of or interest on any Eurodollar Loan made by such Lender or any Fees or other amounts payable hereunder (other than changes in respect of (i) taxes imposed on the overall net income of such Lender by the jurisdiction in which such Lender has its principal office or by any political subdivision or taxing 44 authority therein and (ii) any Taxes described in Section 2.19), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets or deposits with or for the account of or credit extended by such Lender (except any such reserve requirement which is reflected in the Adjusted LIBO Rate) or shall impose on such Lender or the interbank eurodollar market any other condition affecting this Agreement or any Eurodollar Loans of such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then from time to time the Borrower or the applicable Credit Party will pay to such Lender upon demand such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) If any Lender shall have determined that the adoption after the date hereof of any law, rule, regulation or guideline regarding capital adequacy, or any change after the date hereof in any of the foregoing or in the interpretation or administration of any of the foregoing by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any lending office of such Lender) or any Lender's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) made or issued after the date hereof by any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or its obligations pursuant hereto to a level below that which such Lender or such Lender's holding company would have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time the Borrower or the applicable Credit Party shall pay to such Lender upon demand such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of each Lender setting forth such amount or amounts as shall be necessary to compensate such Lender or its holding company as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Borrower through the Administrative Agent and shall be conclusive absent manifest error. The Borrower or the applicable Credit Party shall pay each Lender the amount shown as due on any such certificate delivered by it within 10 days after the Borrower's receipt of the same. (d) In the event any Lender delivers a notice pursuant to paragraph (e) below, the Borrower or the applicable Credit Party may require, at the Borrower's or the applicable Credit Party's expense and subject to Section 2.15, such Lender to assign, at par 45 plus accrued interest and fees, without recourse (in accordance with Section 9.04) all its interests, rights and obligations hereunder (including all of its Commitments and the Loans at the time owing to it) to a financial institution specified by the Borrower; PROVIDED that (i) such assignment shall not conflict with or violate any law, rule or regulation or order of any court or other Governmental Authority, (ii) the Borrower or the applicable Credit Party shall have received the written consent of the Administrative Agent (which consent shall not be unreasonably withheld) to such assignment and (iii) the Borrower or the applicable Credit Party shall have paid to the assigning Lender all monies accrued and owing hereunder to it (including pursuant to this Section 2.13). (e) Promptly after any Lender has determined, in its sole judgment, that it will make a request for increased compensation pursuant to this Section 2.13, such Lender will notify the Borrower thereof. Failure on the part of any Lender so to notify the Borrower or to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of such Lender's right to demand compensation with respect to such period or any other period; PROVIDED that the Borrower or the applicable Credit Party shall not be under any obligation to compensate any Lender under paragraph (b) above with respect to increased costs or reductions with respect to any period prior to the date that is six months prior to such request if such Lender knew or could reasonably have been expected to be aware of the circumstances giving rise to such increased costs or reductions and of the fact that such circumstances would in fact result in a claim for increased compensation by reason of such increased costs or reductions; PROVIDED FURTHER that the foregoing limitation shall not apply to any increased costs or reductions arising out of the retroactive application of any law, regulation, rule, guideline or directive as aforesaid within such six month period. The protection of this Section 2.13 shall be available to each Lender regardless of any possible contention as to the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed. SECTION 2.14. CHANGE IN LEGALITY. (a) Notwithstanding any other provision herein, if the adoption of or any change in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent, such Lender may: (i) declare that Eurodollar Loans will not thereafter be made by such Lender hereunder, whereupon any request by a Credit Party for a Eurodollar Borrowing shall, as to such Lender only, be deemed a request for an ABR Loan unless such declaration shall be subsequently withdrawn; and 46 (ii) require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any Lender shall exercise its rights under subparagraphs (i) and (ii) above, all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans. (b) For purposes of this Section 2.14, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower. SECTION 2.15. INDEMNITY. The Borrower shall indemnify each Lender against any loss or expense (other than taxes) which such Lender may sustain or incur as a consequence of (a) any failure by a Credit Party to fulfill on the date of any Borrowing or proposed Borrowing hereunder the applicable conditions set forth in Article IV, (b) any failure by a Credit Party to borrow or to refinance, convert or continue any Loan hereunder after irrevocable notice of such Borrowing, refinancing, conversion or continuation has been given pursuant to Section 2.03 or 2.10, (c) any payment, prepayment or conversion of a Eurodollar Loan required by any other provision of this Agreement or otherwise made or deemed made on a date other than the last day of the Interest Period applicable thereto, (d) any default in payment or prepayment of the principal amount of any Loan or any part thereof or interest accrued thereon, as and when due and payable (at the due date thereof, whether by scheduled maturity, acceleration, irrevocable notice of prepayment or otherwise) or (e) the occurrence of any Event of Default, including, in each such case, any loss or reasonable expense sustained or incurred or to be sustained or incurred in liquidating or employing deposits from third parties acquired to effect or maintain such Loan or any part thereof as a Eurodollar Loan. Such loss or reasonable expense shall exclude loss of margin hereunder but shall include an amount equal to the excess, if any, as reasonably determined by such Lender, of (i) its cost of obtaining the funds for the Loan being paid, prepaid, converted or not borrowed, converted or continued (assumed to be the Adjusted LIBO Rate applicable thereto) for the period from the date of such payment, prepayment, conversion or failure to borrow, convert or continue to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the Interest Period for such Loan which would have commenced on the date of such failure) over (ii) the amount of interest (as reasonably determined by such Lender) that would be realized by such Lender in reemploying the funds so paid, prepaid, converted or not borrowed, converted or continued for such period or Interest 47 Period, as the case may be. A certificate of any Lender setting forth any amount or amounts which such Lender is entitled to receive pursuant to this Section 2.15 (and the reasons therefor) shall be delivered to the Borrower through the Administrative Agent and shall be conclusive absent manifest error. SECTION 2.16. PRO RATA TREATMENT. Except as required under Section 2.14 and subject to Section 2.11, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each payment of the Commitment Fees, each reduction of the Commitments, and each refinancing of any Borrowing with, conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders in accordance with their respective applicable Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their applicable outstanding Loans). Each Lender agrees that in computing such Lender's portion of any Borrowing, the Administrative Agent may, in its discretion, round each Lender's percentage of such Borrowing, computed in accordance with Section 2.01, to the next higher or lower whole dollar amount. SECTION 2.17. SHARING OF SETOFFS. Each Lender agrees to be bound by the provisions of Section 2.17 of the Existing Credit Agreement as if such provisions were set forth herein. SECTION 2.18. PAYMENTS. (a) The Borrower and each other Loan Party shall make each payment without set off or counterclaim (including principal of or interest on any Borrowing or any Fees or other amounts) required to be made by it hereunder and under any other Loan Document (excluding the Local Facility Loan Documents) not later than 12:00 noon, New York City time, on the date when due in Dollars to the Administrative Agent at its offices at 270 Park Avenue, New York, New York, Attention of The Loan and Agency Services Group, in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. (b) Whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder or under any other Loan Document (excluding the Local Facility Loan Documents) shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day (except in the case of payment of principal of a Eurodollar Borrowing if the effect of such extension would be to extend such payment into the next succeeding month, in which event such payment shall be due on the immediately preceding Business Day), and such extension of time shall in such case be included in the computation of interest or Fees, if applicable. SECTION 2.19. TAXES. (a) Any and all payments by the Borrower or any other Loan Party to the Administrative Agent or the Lenders hereunder or under any other Loan Document (excluding payments by the applicable borrower under a Local Facility Credit Agreement) shall be made free and clear of and without deduction 48 for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING (i) in the case of each Lender and the Administrative Agent, taxes that would not be imposed but for a connection between such Lender or the Administrative Agent (as the case may be) and the jurisdiction imposing such tax, other than a connection arising solely by virtue of the activities of such Lender or the Administrative Agent (as the case may be) pursuant to or in respect of this Agreement or under any other Loan Document, including entering into, lending money or extending credit pursuant to, receiving payments under, or enforcing, this Agreement or any other Loan Document, and (ii) in the case of each Lender and the Administrative Agent, any United States withholding taxes payable with respect to any payments made hereunder or under the other Loan Documents under laws (including any statute, treaty, ruling, determination or regulation) in effect on the Initial Date (as hereinafter defined) applicable to such Lender or the Administrative Agent, as the case may be, but not excluding any United States withholding taxes payable solely as a result of any change in such laws occurring after the Initial Date (all such non- excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "TAXES"). For purposes of this Section 2.19, the term "INITIAL DATE" shall mean (i) in the case of the Administrative Agent or any Lender, the date on which such person became a party to this Agreement and (ii) in the case of any assignment, including any assignment by a Lender to a new lending office, the date of such assignment. If any Taxes shall be required by law to be deducted from or in respect of any sum payable hereunder or under any other Loan Document (excluding sums payable by the applicable borrower under a Local Facility Credit Agreement) to any Lender or the Administrative Agent, (i) the sum payable by the Borrower or any other Loan Party, as the case may be, shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.19) such Lender or the Administrative Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or such Loan Party, as the case may be, shall make such deductions and (iii) the Borrower or such Loan Party, as the case may be, shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. The Borrower and the other Loan Parties shall not, however, be required to pay any amounts pursuant to clause (i) of the preceding sentence to any Lender or the Administrative Agent (in the case of payments to be made by the Borrower) not organized under the laws of the United States of America or a state thereof (or, in the case of payments to be made by another Loan Party, not organized under the laws of such Loan Party's jurisdiction) if such Lender or the Administrative Agent fails to comply with the requirements of paragraph (f) or (g), as the case may be, and paragraph (h) of this Section 2.19. (b) In addition, the Borrower and each other Loan Party agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which 49 arise from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (excluding those arising from such actions by the applicable borrower under a Local Facility Credit Agreement) (hereinafter referred to as "OTHER TAXES"). (c) The Borrower and each other Loan Party, as applicable, will indemnify each Lender and the Administrative Agent for the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.19) paid by such Lender or the Administrative Agent, as the case may be, and any liability (including penalties, interest and expenses including reasonable attorney's fees and expenses) arising therefrom or with respect thereto whether or not such Taxes or Other Taxes were correctly or legally asserted. A certificate as to the amount of such payment or liability prepared by a Lender or the Administrative Agent, absent manifest error, shall be final, conclusive and binding for all purposes; PROVIDED, that if the Borrower or another Loan Party, as applicable, reasonably believes that such Taxes were not correctly or legally asserted, such Lender or the Administrative Agent, as the case may be, shall use reasonable efforts to cooperate with the Borrower or such other Loan Party, as applicable, to obtain a refund of such Taxes or Other Taxes. Such indemnification shall be made within 10 days after the date any Lender or the Administrative Agent, as the case may be, makes written demand therefor. If a Lender or the Administrative Agent shall become aware that it is entitled to receive a refund in respect of Taxes or Other Taxes, it shall promptly notify the Borrower or such other Loan Party, as applicable, of the availability of such refund and shall, within 30 days after receipt of a request by the Borrower or such other Loan Party, pursue or timely claim such refund at the Borrower's or such other Loan Party's expense. If any Lender or the Administrative Agent receives a refund in respect of any Taxes or Other Taxes for which such Lender or the Administrative Agent has received payment from the Borrower or another Loan Party hereunder, it shall promptly repay such refund (plus any interest received) to the Borrower or such other Loan Party, as applicable (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.19 with respect to the Taxes or Other Taxes giving rise to such refund); PROVIDED that the Borrower or such other Loan Party, upon the request of such Lender or the Administrative Agent, agrees to return such refund (plus any penalties, interest or other charges required to be paid) to such Lender or the Administrative Agent in the event such Lender or the Administrative Agent is required to repay such refund to the relevant taxing authority. (d) Within 30 days after the date of any payment of Taxes or Other Taxes withheld by the Borrower or another Loan Party, as the case may be, in respect of any payment to any Lender or the Administrative Agent, the Borrower or such Loan Party, as the case may be, will furnish to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. 50 (e) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section 2.19 shall survive the payment in full of principal and interest hereunder and the termination of the Commitments. (f) In the case of any Borrowing by the Borrower, this paragraph (f) shall apply. Each Lender and the Administrative Agent that is not organized under the laws of the United States of America or a state thereof agrees that at least 10 days prior to the first Interest Payment Date following the Initial Date in respect of such Lender, it will deliver to the Borrower and the Administrative Agent (if appropriate) two duly completed copies of either (i) United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, certifying, as applicable, that such Lender or the Administrative Agent, as the case may be, is entitled to receive payments under this Agreement and the other Loan Documents payable to it without deduction or withholding of any United States federal income taxes and backup withholding taxes or is entitled to receive such payments at a reduced rate pursuant to a treaty provision or (ii) in the case of a Lender that is not a "bank" within the meaning of Section 881(c)(3) of the Code, (A) deliver to the Borrower and the Administrative Agent (I) a statement under penalties of perjury that such Lender (w) is not a "bank" under Section 881(c)(3)(A) of the Code, is not subject to regulatory or other legal requirements as a bank in any jurisdiction, and has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any Governmental Authority, any application made to a rating agency or qualification for any exemption from tax, securities law or other legal requirements, (x) is not a 10-percent shareholder within the meaning of Section 881(c)(3)(B) of the Code, (y) is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(c) of the Code and (z) is not a "conduit entity" within the meaning of U.S. Treasury Regulations Section 1.881-3 and (II) an Internal Revenue Service Form W-8 or successor applicable form; (B) deliver to the Borrower and the Administrative Agent a further copy of said Form W-8, or any successor applicable form or other manner of certification on or before the date that any such Form W-8 expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by such Lender; and (C) obtain such extensions of time for filing and completing such forms or certifications as may be reasonably requested by the Borrower or the Administrative Agent; unless in any such case an event (including any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders any such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States Federal income taxes or is entitled to receive such payments at a reduced rate pursuant 51 to a treaty provision and (ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. Each person that shall become a participant pursuant to Section 9.04 shall, upon the effectiveness of the related transfer, be required to provide all the forms and statements required pursuant to this paragraph (f) to the Lender from which the related participation shall have been purchased. Unless the Borrower and the Administrative Agent have received forms, certificates and other documents required by this Section 2.19(f) indicating that payments hereunder or under any other Loan Document to or for any Lender not incorporated under the laws of the United States or a state thereof are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower (or the applicable Domestic Subsidiary Borrower) or the Administrative Agent shall withhold such taxes from such payments at the applicable statutory rate. (g) In the event any Loan Party (other than the Borrower) is required to pay additional amounts pursuant to this Section 2.19, this paragraph (g) shall apply. Each Lender and the Administrative Agent that is not incorporated within or under the laws of the jurisdiction of such Loan Party and that is claiming such additional amounts agrees that within a reasonable period of time following the request of such Loan Party it will, to the extent it is legally entitled to a reduction in the rate of or exemption from withholding taxes in the jurisdiction of such Loan Party, deliver to such Loan Party and the Administrative Agent any form or document required under the laws, regulations, official interpretations or treaties enacted by, made or entered into with such jurisdiction properly completed and duly executed by such Lender or Administrative Agent establishing that any payments hereunder are exempt from withholding tax or subject to a reduced rate of withholding tax in such jurisdiction as the case may be; PROVIDED that, in the sole determination of such Lender or the Administrative Agent, such form or document shall not be otherwise disadvantageous to such Lender or the Administrative Agent. (h) Any Lender claiming any additional amounts payable pursuant to this Section 2.19 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested in writing by the Borrower or any affected Credit Party to change the jurisdiction of its applicable lending office, if the making of such a filing or change would avoid the need for or reduce the amount of any such additional amounts which would be payable or may thereafter accrue and would not, in the sole determination of such Lender, be otherwise disadvantageous to such Lender. (i) Nothing contained in this Section 2.19 shall require any Lender or the Administrative Agent to make available any of its tax returns (or any other information that it deems to be confidential or proprietary). 52 ARTICLE III REPRESENTATIONS AND WARRANTIES Each of UCAR and the Borrower represents and warrants to each of the Lenders that: SECTION 3.01. ORGANIZATION; POWERS. Each of UCAR, the Borrower and each of the Subsidiaries (a) is a corporation duly organized, validly existing and in good standing (or, if applicable in a foreign jurisdiction, enjoys the equivalent status under the laws of any jurisdiction of organization outside the United States) under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect, and (d) has the corporate power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Credit Parties, to borrow hereunder. SECTION 3.02. AUTHORIZATION. The execution, delivery and performance by UCAR, the Borrower and each of the Subsidiaries of each of the Loan Documents to which it is or will be a party and, in the case of the Credit Parties, the borrowings hereunder, and the other transactions contemplated hereby and thereby (collectively, the "TRANSACTIONS") (a) have been duly authorized by all corporate and stockholder action required to be obtained by UCAR, the Borrower and the Subsidiaries and (b) will not (i) violate (A) any provision of any law, statute, rule or regulation or of the certificate or articles of incorporation or other constitutive documents or by-laws of UCAR, the Borrower or any Subsidiary, (B) any applicable order of any court or any rule, regulation or order of any Governmental Authority or (C) any provision of any indenture, certificate of designation for preferred stock, agreement or other instrument to which UCAR, the Borrower or any Subsidiary is a party or by which any of them or any of their property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any such indenture, certificate of designation for preferred stock, agreement or other instrument, where any such conflict, violation, breach or default referred to in clause (i) or (ii) of this Section 3.02, individually or in the aggregate could reasonably be expected to have a Material Adverse Effect, or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by UCAR, the Borrower or any Subsidiary, other than the Liens created by the Loan Documents. SECTION 3.03. ENFORCEABILITY. This Agreement has been duly executed and delivered by UCAR, the Borrower and each other Credit Party which is party hereto and constitutes, and each other 53 Loan Document when executed and delivered by UCAR, the Borrower and each other Loan Party which is party thereto will constitute, a legal, valid and binding obligation of UCAR, the Borrower and such Loan Party enforceable against UCAR, the Borrower and such Loan Party in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). SECTION 3.04. GOVERNMENTAL APPROVALS. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required in connection with the Transactions, except for (a) filings and recording necessary to satisfy the Collateral Requirement, (b) such as have been made or obtained and are in full force and effect and (c) such actions, consents, registrations, filings and approvals the failure to obtain or make which could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.05. FINANCIAL STATEMENTS. UCAR has heretofore furnished to the Lenders its consolidated balance sheets and consolidated statements of operations, cash flows and stockholders' equity as of and for the fiscal year ended December 31, 1997, audited by and accompanied by the opinion of KPMG Peat Marwick LLP, independent public accountants. Such financial statements present fairly the financial condition and results of operations of UCAR and its consolidated subsidiaries as of such dates and for such periods. Except as disclosed in the Information Memorandum, none of UCAR, the Borrower and the Subsidiaries has or shall have as of the Effective Date any material Guarantee, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including any interest rate or foreign currency hedging transaction, which is not reflected in the foregoing statements or the notes thereto. Such financial statements were prepared in accordance with GAAP applied on a consistent basis. SECTION 3.06. NO MATERIAL ADVERSE CHANGE. There has been no material adverse change in the assets, liabilities (including contingent liabilities), business, properties, financial condition or results of operations of UCAR and its subsidiaries, taken as a whole, since December 31, 1997 (other than those matters specifically disclosed in the Information Memorandum and then only to the extent reflected in the financial projections contained therein; it being understood that general references in the Information Memorandum to the possibility of the development of adverse or worsening circumstances shall not constitute specific disclosure for purposes of this exception). SECTION 3.07. TITLE TO PROPERTIES; POSSESSION UNDER LEASES. (a) Each of UCAR, the Borrower and the Subsidiaries has good and marketable title to, or valid leasehold interests in, or easements or other limited property interests in, all its material 54 properties and assets, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes. All such material properties and assets are free and clear of Liens, other than Liens expressly permitted by Section 6.02. (b) Each of UCAR, the Borrower and the Subsidiaries has complied with all obligations under all material leases to which it is a party, except where the failure to comply would not have a Material Adverse Effect, and all such leases are in full force and effect, except leases in respect of which the failure to be in full force and effect could not reasonably be expected to have a Material Adverse Effect. Each of UCAR, the Borrower and the Subsidiaries enjoys peaceful and undisturbed possession under all such material leases, other than leases which, individually or in the aggregate, are not material to the Borrower and the Subsidiaries, taken as a whole, and in respect of which the failure to enjoy peaceful and undisturbed possession could not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect. (c) Each of UCAR, the Borrower and the Subsidiaries owns or has licenses to use, or could obtain ownership of or licenses to use, on terms not materially adverse to it, all patents, trademarks, service marks, trade names, copyrights and rights with respect thereto necessary for the present conduct of its business, without any known conflict with the rights of others, and free from any burdensome restrictions, except where such conflicts and restrictions could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 3.08. SUBSIDIARIES. (a) Schedule 3.08 sets forth as of the Effective Date the name and jurisdiction of incorporation of each Subsidiary and, as to each such Subsidiary, the percentage of each class of Capital Stock owned by the Borrower or by any Subsidiary. (b) As of the Effective Date, there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than those granted to employees, consultants or directors and directors' qualifying shares) of any nature relating to any Capital Stock of UCAR, the Borrower or any Subsidiary, except under the Loan Documents or as set forth on Schedule 3.08. SECTION 3.09. LITIGATION; COMPLIANCE WITH LAWS. (a) Except as set forth in Schedule 3.09, there are not any material actions, suits or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of the Borrower, threatened against or affecting UCAR, the Borrower or any Subsidiary or any business, property or rights of any such person (i) which involve any Loan Document or, as of the Effective Date, the Transactions or (ii) as to which there is a reasonable 55 possibility of an adverse determination and which, if adversely determined, could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (b) None of UCAR, the Borrower, the Subsidiaries and their respective material properties or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any law, rule or regulation (including any Environmental Law), or is in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default could reasonably be expected to result in a Material Adverse Effect. It is understood that the violations that occurred prior to March 13, 1998, and that gave rise to the Litigation Liabilities shall not be deemed a breach of this Section 3.09(b). SECTION 3.10. AGREEMENTS. (a) None of UCAR, the Borrower and the Subsidiaries is a party to any agreement or instrument or subject to any corporate restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect. (b) None of UCAR, the Borrower and the Subsidiaries is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other material agreement or instrument to which it is a party or by which it or any of its properties or assets are or may be bound, in either case where such default could reasonably be expected to result in a Material Adverse Effect. Immediately after giving effect to the Transactions, no Default or Event of Default shall have occurred and be continuing. SECTION 3.11. FEDERAL RESERVE REGULATIONS. (a) None of UCAR, the Borrower and the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. (b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose, or (ii) for any purpose which entails a violation of, or which is inconsistent with, the provisions of the Regulations of the Board, including Regulation U or X. SECTION 3.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. None of UCAR, the Borrower and the Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. 56 SECTION 3.13. USE OF PROCEEDS. The Credit Parties will use the proceeds of the Loans only for the purposes specified in the preamble to this Agreement. SECTION 3.14. TAX RETURNS. Each of UCAR, the Borrower and the Subsidiaries has timely filed or caused to be timely filed all Federal, and all material state and local, tax returns required to have been filed by it and has paid or caused to be paid all taxes shown thereon to be due and payable by it and all assessments in excess of $2,000,000 in the aggregate received by it, except taxes or assessments that are being contested in good faith by appropriate proceedings in accordance with Section 5.03 and for which such person has set aside on its books adequate reserves and taxes, assessments, charges, levies or claims in respect of property taxes for property that UCAR, the Borrower or a Subsidiary has determined to abandon where the sole recourse for such tax, assessment, charge, levy or claim is to such property. Each of UCAR, the Borrower and the Subsidiaries has paid in full or made adequate provision (in accordance with GAAP) for the payment of all taxes due with respect to all periods ending on or before the Effective Date, which taxes, if not paid or adequately provided for, could reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.14, as of the Effective Date, with respect to each of UCAR, the Borrower and the Subsidiaries, (a) no material claims are being asserted in writing with respect to any taxes, (b) no presently effective waivers or extensions of statutes of limitation with respect to taxes have been given or requested, (c) no tax returns are being examined by, and no written notification of intention to examine has been received from, the Internal Revenue Service or, with respect to any material potential tax liability, any other taxing authority and (d) no currently pending issues have been raised in writing by the Internal Revenue Service or, with respect to any material potential tax liability, any other taxing authority. For purposes hereof, "TAXES" shall mean any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any Governmental Authority. SECTION 3.15. NO MATERIAL MISSTATEMENTS. (a) The written information, reports, financial statements, exhibits and schedules furnished by or on behalf of UCAR, the Borrower or any of the Subsidiaries to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto (including the Confidential Information Memorandum (the "INFORMATION MEMORANDUM") dated October 1998 relating to UCAR and its subsidiaries), when taken as a whole, did not contain, and as they may be amended, supplemented or modified from time to time, will not contain, as of the Effective Date any material misstatement of fact and did not omit, and as they may be amended, supplemented or modified from time to time, will not omit, to state as of the Effective Date any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not materially misleading in their presentation of the refinancing (as 57 described in the Information Memorandum) or of UCAR, the Borrower, and the Subsidiaries, taken as a whole. (b) All financial projections concerning UCAR, the Borrower and the Subsidiaries that are or have been made available to the Administrative Agent or any Lender by UCAR, the Borrower or any Subsidiary, including those contained in the Information Memorandum, unless otherwise disclosed, have been or will be prepared in good faith based upon assumptions believed by UCAR and the Borrower to be reasonable. SECTION 3.16. EMPLOYEE BENEFIT PLANS. Each of UCAR, the Borrower and the ERISA Affiliates is in compliance with the applicable provisions of ERISA and the provisions of the Code relating to ERISA and the regulations and published interpretations thereunder and any similar applicable non-U.S. law except for such noncompliance which could not reasonably be expected to result in a Material Adverse Effect. No Reportable Event has occurred as to which UCAR, the Borrower or any ERISA Affiliate was required to file a report with the PBGC, other than reports for which the 30 day notice requirement is waived, reports that have been filed and reports the failure of which to file could not reasonably be expected to result in a Material Adverse Effect. As of the Effective Date, the present value of all benefit liabilities under each Plan of UCAR, the Borrower and the ERISA Affiliates (on a termination basis and based on the actual assumptions used by such Plan under Section 412 of the Code) did not, as of the last annual valuation date applicable thereto for which a valuation is available, exceed by more than $7,500,000 the value of the assets of such Plan, and the present value of all benefit liabilities of all underfunded Plans (based on the actual assumptions used by such Plan under Section 412 of the Code) did not, as of the last annual valuation dates applicable thereto for which valuations are available, exceed by more than $15,000,000 the value of the assets of all such underfunded Plans. None of UCAR, the Borrower and the ERISA Affiliates has incurred or could reasonably be expected to incur any Withdrawal Liability that could reasonably be expected to result in a Material Adverse Effect. None of UCAR, the Borrower and the ERISA Affiliates has received any written notification that any Multiemployer Plan is in reorganization or has been terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, where such reorganization or termination has resulted or could reasonably be expected to result, through increases in the contributions required to be made to such Plan or otherwise, in a Material Adverse Effect. SECTION 3.17. ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.17: (a) There has not been a Release or threatened Release of Hazardous Materials at, on, under or around the properties currently owned or currently or formerly operated by UCAR, the Borrower and the Subsidiaries (the "PROPERTIES") in amounts or concentrations which (i) constitute or constituted a violation of 58 Environmental Laws, except as could not reasonably be expected to have a Material Adverse Effect, (ii) would reasonably be expected to give rise to an Environmental Claim which, in any such case or in the aggregate, is reasonably likely to result in a Material Adverse Effect or (iii) could reasonably be expected to impair materially the fair saleable value of any material Property. (b) The Properties and all operations of UCAR, the Borrower and the Subsidiaries are in compliance, and in all prior periods have been in compliance, with all Environmental Laws, and all necessary Environmental Permits have been obtained and are in effect, except to the extent that such non-compliance or failure to obtain any necessary permits, in the aggregate, are not reasonably likely to result in a Material Adverse Effect. (c) None of UCAR, the Borrower and the Subsidiaries has received any written notice of an Environmental Claim in connection with the Properties or the operations of the Borrower or the Subsidiaries or with regard to any person whose liabilities for environmental matters UCAR, the Borrower or the Subsidiaries has retained or assumed, in whole or in part, contractually, by operation of law or otherwise, which, in either such case or in the aggregate, is reasonably likely to result in a Material Adverse Effect. (d) Hazardous Materials have not been transported from the Properties, nor have Hazardous Materials been generated, treated, stored or disposed of at, on, under or around any of the Properties in a manner that could reasonably be expected to give rise to liability of UCAR, the Borrower or any Subsidiary under any Environmental Law, nor have any of UCAR, the Borrower and the Subsidiaries retained or assumed any liability, contractually, by operation of law or otherwise, with respect to the generation, treatment, storage or disposal of Hazardous Materials, which, in each case, individually or in the aggregate, is reasonably likely to result in a Material Adverse Effect. (e) No Lien in favor of any Governmental Authority for (i) any liability under any Environmental Law or (ii) damages arising from or costs incurred by such Governmental Authority in response to a Release or threatened Release of Hazardous Materials into the environment has been recorded with respect to the Properties except for Liens permitted by Section 6.02 or by the Existing Credit Agreement. (f) During the period from the date of the environmental assessment report prepared by ENVIRON Corporation in connection with the Recapitalization to the Effective Date, no event has occurred or been discovered, no liability has been incurred and no Environmental Claim has been asserted that, had it been in existence at the time such report was issued, would have materially adversely altered the conclusions contained therein with respect to the properties, activities and operations covered thereby. 59 SECTION 3.18. CAPITALIZATION OF UCAR AND THE BORROWER. The authorized Capital Stock, the par value thereof and the amount of such authorized Capital Stock issued and outstanding for each of UCAR and the Borrower as of October 31, 1998 is set forth on Schedule 3.18 (except for changes in the outstanding common stock of UCAR due to exercises under employee stock option or employee stock purchase plans in the ordinary course since August 31, 1998). All outstanding shares of Capital Stock of the Borrower are fully paid and nonassessable, are owned beneficially and of record by UCAR and are free and clear of all Liens and encumbrances whatsoever other than the Liens created by the Loan Documents. SECTION 3.19. SECURITY DOCUMENTS. (a) Each Pledge Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties secured thereby, a legal, valid and enforceable security interest in the Collateral described therein and, when certificates or promissory notes representing the Collateral (as defined in the applicable Pledge Agreement) are delivered to the Collateral Agent and the other actions specified in such Pledge Agreement have been taken, each such Pledge Agreement will constitute a duly perfected first priority Lien on, and security interest in, all right, title and interest of each Pledgor thereunder in such Collateral, in each case prior and superior in right to any other person, subject to the agreements listed in Schedule 3.08. (b) Each Security Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties secured thereby, a legal, valid and enforceable security interest in the Collateral described therein and, when financing statements in appropriate form are filed in the offices specified on the schedules to each such Security Agreement and the other actions specified in such Security Agreement have been taken, each such Security Agreement will constitute a duly perfected Lien on, and security interest in, all right, title and interest of the Pledgors thereunder in such Collateral and, to the extent contemplated therein and subject to ss. 9-306 of the Uniform Commercial Code, the proceeds thereof, in each case prior and superior in right to any other person, other than with respect to Liens expressly permitted by Section 6.02 and by the Existing Credit Agreement. (c) Each Mortgage is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties secured thereby, a legal, valid and enforceable Lien on all of the Loan Parties' right, title and interest in and to the Mortgaged Properties thereunder and, to the extent contemplated therein and subject to ss. 9-306 of the Uniform Commercial Code, the proceeds thereof, and when each such Mortgage is filed in the offices specified on the schedules thereto, when financing statements in appropriate form are filed in the offices specified on the schedules thereto and when the other actions required by applicable law and specified on the schedules thereto have been taken, each Mortgage will constitute an enforceable mortgage Lien on, and duly perfected security interest in, all right, title and 60 interest of the Loan Parties in the Mortgaged Property subject thereto and, to the extent contemplated therein and subject to ss. 9- 306 of the Uniform Commercial Code, the proceeds thereof, in each case prior and superior in right to any other person, other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 6.02 and by the Existing Credit Agreement. (d) The Intellectual Property Security Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties secured thereby, a legal, valid and enforceable security interest in the Collateral described therein, and when financing statements in appropriate form are filed in the offices specified in the schedules thereto and the Intellectual Property Security Agreement is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Intellectual Property Security Agreement will constitute a duly perfected Lien on, and security interest in, all right, title and interest of the Pledgors in such Collateral and, to the extent contemplated therein and subject to ss. 9-306 of the Uniform Commercial Code, the proceeds thereof, in each case prior and superior in right to any other person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a lien on registered trademarks, trademark applications and copyrights acquired by the Pledgors after the date hereof), other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 6.02 and by the Existing Credit Agreement. SECTION 3.20. LABOR MATTERS. Except as set forth in Schedule 3.20, there are no strikes pending or threatened against UCAR, the Borrower or any Subsidiary which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. The hours worked and payments made to employees of UCAR, the Borrower and the Subsidiaries have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable law dealing with such matters. All material payments due from UCAR, the Borrower or any Subsidiary or for which any claim may be made against UCAR, the Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of UCAR, the Borrower or such Subsidiary to the extent required by GAAP. None of the consummation of the Recapitalization, the consummation of the refinancing effected in October 1995, the consummation of the refinancing effected in March 1997 and the Transactions has given or will give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which UCAR, the Borrower or any Subsidiary (or any predecessor) is a party or by which UCAR, the Borrower or any Subsidiary (or any predecessor) is bound, other than collective bargaining agreements which, individually or in the aggregate, are not material to UCAR, the Borrower and the Subsidiaries taken as a whole. 61 SECTION 3.21. NO FOREIGN ASSETS CONTROL REGULATION VIOLATION. None of the Transactions will result in a violation of any of the foreign assets control regulations of the United States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as amended (including the Foreign Assets Control Regulations, the Transaction Control Regulations, the Cuban Assets Control Regulations, the Foreign Funds Control Regulations, the Iranian Assets Control Regulations, the Nicaraguan Trade Control Regulations, the South African Transactions Regulations, the Libyan Sanctions Regulations, the Soviet Gold Coin Regulations, the Panamanian Transactions Regulations, the Kuwaiti Assets Control Regulations and the Iraqi Sanctions Regulations contained in said Chapter V), or any ruling issued thereunder or any enabling legislation or Presidential Executive Order granting authority therefor, nor will the proceeds of the Loans be used by any of the Credit Parties in a manner that would violate any thereof. SECTION 3.22. INSURANCE. Each of UCAR, the Borrower and the Subsidiaries carries and maintains with respect to its insurable properties insurance (including, to the extent consistent with past practices, self-insurance) with financially sound and reputable insurers of the types, to such extent and against such risks as is customary with companies in the same or similar businesses. SECTION 3.23. LOCATION OF REAL PROPERTY AND LEASED PREMISES. (a) Schedule 3.23(a) lists completely and correctly as of the Effective Date all real property owned by UCAR, the Borrower, each domestic Subsidiary, each Subsidiary that is a borrower under a Local Facility and each other Subsidiary that is required to grant a Mortgage pursuant to the Collateral Requirement and the address thereof. As of the Effective Date, UCAR, the Borrower and the Subsidiaries own in fee all the real property set forth as being owned by them on Schedule 3.23(a). (b) Schedule 3.23(b) lists completely and correctly as of the Effective Date, all real property leased by UCAR, the Borrower, each domestic Subsidiary, each Subsidiary that is a borrower under a Local Facility and each other Subsidiary that is required to grant a leasehold mortgage pursuant to the Collateral Requirement and the address thereof. As of the Effective Date, UCAR, the Borrower and the Subsidiaries have valid leases in all the real property set forth as being leased by them on Schedule 3.23(b). SECTION 3.24. LITIGATION LIABILITIES. The sum of the aggregate Litigation Payments plus Reserves in respect of Litigation Liabilities does not, and is not reasonably expected to, exceed $400,000,000 (including $90,000,000 (calculated on a present value basis) of payments to the Department of Justice); PROVIDED that it is understood that all other Litigation Payments and Reserves will be calculated on a gross dollar basis for purposes of determining the accuracy of this representation. 62 SECTION 3.25. YEAR 2000. Any reprogramming required to permit the proper functioning, in and following the year 2000, of (i) UCAR's, the Borrower's and each Subsidiaries' computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which their systems interface) and the testing of all such systems and equipment, as so reprogrammed, will be completed in all material respects by June 30, 1999. The cost to UCAR, the Borrower and each Subsidiary of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to UCAR, the Borrower and each Subsidiary (including, without limitation, reprogramming errors and the failure of others' systems or equipment) could not reasonably be expected to result in a Default or a Material Adverse Effect. Except for such of the reprogramming referred to in the preceding sentence as may be necessary, the computer and management information systems of UCAR, the Borrower and each Subsidiary are and, with ordinary course upgrading and maintenance, will continue for the term of this Agreement to be, sufficient to permit UCAR, the Borrower and each Subsidiary to conduct its businesses without Material Adverse Effect. ARTICLE IV CONDITIONS SECTION 4.01. EFFECTIVE DATE. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.08): (a) The Administrative Agent (or its counsel) shall have received from UCAR, the Borrower and each Lender either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent, the Collateral Agent and the Lenders and dated the Effective Date) of each of (i) Kelley Drye & Warren LLP, counsel for UCAR and the Borrower, substantially to the effect set forth in the form of Exhibit J-1, (ii) the General Counsel of UCAR and the Borrower, substantially to the effect set forth in the form of Exhibit J-2, and (iii) local counsel in each jurisdiction listed on Schedule 4.01, substantially to the effect set forth in the form of Exhibit J-3, and, in the case of each such opinion required by this paragraph, covering such other matters relating to the Loan Parties, the Loan Documents or the Transactions as the Required Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinions. 63 (c) The Administrative Agent shall have received (i) in the case of each domestic Loan Party, each of the items referred to in clauses (A), (B) and (C) below and, in the case of each other Loan Party, as requested by the Administrative Agent, the equivalent documentation in its jurisdiction of organization: (A) a copy of the certificate or articles of incorporation, including all amendments thereto, of each Loan Party, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of each Loan Party as of a recent date from such Secretary of State; (B) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Effective Date and certifying (w) that attached thereto is a true and complete copy of the by-laws of such Loan Party as in effect on the Effective Date and at all times since a date immediately prior to the date of the resolutions described in clause (x) below, (x) that attached thereto is a true and complete copy of the resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Credit Parties, the borrowings under this Agreement, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (y) that the certificate or articles of incorporation of such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (A) above, and (z) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; and (C) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to (B) above; and (ii) such other documents as the Lenders, Cravath, Swaine & Moore, counsel for the Administrative Agent, or, in the case of any Local Facility or foreign Credit Party, counsel for the Administrative Agent in the jurisdiction of such Local Facility or foreign Credit Party, may reasonably request. (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (b) and (c) of Section 4.02. (e) The Collateral Requirement shall have been satisfied. (f) The Guarantee Requirement shall have been satisfied. (g) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses 64 required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document. (h) The Lenders shall have received a reasonably satisfactory pro forma consolidated balance sheet of UCAR as of September 30, 1998, reflecting all pro forma adjustments as if the Transactions had been consummated on such date, together with a certificate of the Borrower signed by a Financial Officer of the Borrower to the effect that such balance sheet fairly presents the pro forma financial position of UCAR and its subsidiaries in accordance with GAAP, and such pro forma consolidated balance sheet shall be consistent in all material respects with the forecasts and other information previously provided to the Lenders. (i) All requisite material governmental authorities and all material third parties shall have been approved or consented to the Transactions and the other transactions contemplated hereby to the extent required and all applicable appeal periods shall have expired. (j) The Senior Subordinated Indenture shall have been amended so that, after giving effect to such amendment, the Senior Subordinated Indenture will not prohibit the incurrence of Indebtedness (including in the form of Guarantees) and the granting of liens under this Agreement, the Existing Credit Agreement and the other Loan Documents on terms reasonably satisfactory in form and substance to the Administrative Agent. (k) The Existing Credit Agreement and the other Loan Documents shall have been amended, to the satisfaction of the Administrative Agent, in order to effect the Transactions, including the incurrence of Indebtedness under (including in the form of Guarantees) and the granting of Liens in respect of Loans under this Agreement. (l) The amendment and restatement of the Existing Credit Agreement shall have become effective in accordance with its terms. (m) As of the Effective Date, immediately prior to giving effect to the amendment and restatement of the Existing Credit Agreement, no Default shall have occurred and be continuing under the Existing Credit Agreement. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.08) at or prior to 3:00 p.m., New York City time, on January 15, 1999 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). 65 SECTION 4.02. EACH BORROWING. On the date of each Borrowing, the following conditions must be satisfied (or waived pursuant to Section 9.08): (a) The Administrative Agent shall have received a notice of such Borrowing as required by Section 2.03. (b) The representations and warranties set forth in Article III hereof shall be true and correct in all material respects on and as of the date of such Borrowing with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date. (c) At the time of and immediately after such Borrowing, no Event of Default or Default shall have occurred and be continuing. (d) At the time of and immediately after such Borrowing, the Administrative Agent shall have received a certificate of the Borrower signed by a Financial Officer of the Borrower (i) certifying that each condition required to be met in connection with the incurrence of additional Indebtedness under Section 4.03(b), 4.03(c) and/or 4.03(f), as applicable, of the Senior Subordinated Indenture (or, if applicable, the analogous provision of each Refinancing Note Indenture) has been satisfied, (ii) certifying that the Loans to be made will constitute "Senior Indebtedness" for purposes of the Senior Subordinated Indenture and each applicable Refinancing Note Indenture and (iii) setting forth in reasonable detail the calculations necessary to certify as to such compliance. Each Borrowing shall be deemed to constitute a representation and warranty by UCAR and the Borrower on the date of such Borrowing as to the matters specified in paragraphs (b) and (c) of this Section 4.02. ARTICLE V AFFIRMATIVE COVENANTS Each of UCAR and the Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full, unless the Required Lenders shall otherwise consent in writing, each of UCAR and the Borrower will, and will cause each of the Subsidiaries to: SECTION 5.01. EXISTENCE; BUSINESSES AND PROPERTIES. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as 66 otherwise expressly permitted under Section 6.05, and except for the liquidation or dissolution of Subsidiaries if the assets of such corporations to the extent they exceed estimated liabilities are acquired by the Borrower or a Wholly Owned Subsidiary in such liquidation or dissolution; PROVIDED that Subsidiaries which are Guarantors may not be liquidated into Subsidiaries that are not Guarantors and domestic Subsidiaries may not be liquidated into foreign Subsidiaries. (b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; comply in all material respects with all applicable laws, rules, regulations (including any Environmental Law) and orders of any Governmental Authority, whether now in effect or hereafter enacted; and at all times maintain and preserve all property material to the conduct of such business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith, if any, may be properly conducted at all times (in each case except as expressly permitted by this Agreement). SECTION 5.02. INSURANCE. (a) Keep its insurable properties insured at all times by financially sound and reputable insurers in such amounts as shall be customary for similar businesses and maintain such other insurance (including, to the extent consistent with past practices, self-insurance), of such types, to such extent and against such risks, as is customary with companies in the same or similar businesses. (b) Cause all such property and casualty insurance policies with respect to the Mortgaged Properties to be endorsed or otherwise amended to include a "standard" or "New York" lender's loss payable endorsement, in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent, which endorsement shall provide that, from and after the Effective Date, if the insurance carrier shall have received written notice from the Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to the Borrower or the Loan Parties under such policies directly to the Collateral Agent; cause all such policies to provide that neither the applicable Loan Party, the Administrative Agent, the Collateral Agent nor any other party shall be a coinsurer thereunder and to contain a "Replacement Cost Endorsement", without any deduction for depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may reasonably (in light of a Default or a material development in respect of the insured Mortgaged Property) require from time to time to protect their interests; deliver original or certified copies of all such policies to the Collateral Agent; cause each such policy to provide that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium upon 67 not less than 10 days' prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent or (ii) for any other reason upon not less than 30 days' prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent; deliver to the Administrative Agent and the Collateral Agent, prior to the cancellation, modification or nonrenewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent and the Collateral Agent), or insurance certificate with respect thereto, together with evidence reasonably satisfactory to the Administrative Agent and the Collateral Agent of payment of the premium therefor. (c) If at any time the area in which the Premises (as defined in the Mortgages) are located is designated (i) a "flood hazard area" in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such reasonable total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time reasonably require, and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time, or (ii) a "Zone 1" area (as so designated in the National Ocean and Earthquake Risk Map), obtain earthquake insurance in such reasonable total amount as the Administrative Agent, the Collateral Agent or the Required Lenders may from time to time reasonably require. (d) With respect to each Mortgaged Property, carry and maintain comprehensive general liability insurance and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all claims, in no event for a combined single limit of less than $1,000,000, naming the Collateral Agent as an additional insured, on forms reasonably satisfactory to the Collateral Agent. (e) Notify the Administrative Agent and the Collateral Agent promptly whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.02 is taken out by UCAR, the Borrower or any Subsidiary; and promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of such policy or policies, or insurance certificate with respect thereto. (f) In connection with the covenants set forth in this Section 5.02, it is understood and agreed that: (i) none of the Administrative Agent, the Collateral Agent, the Lenders and their respective agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 5.02, it being understood that (A) the Borrower and the other Loan Parties shall look solely to their insurance 68 companies or any other parties other than the aforesaid parties for the recovery of such loss or damage and (B) such insurance companies shall have no rights of subrogation against the Administrative Agent, the Collateral Agent, the Lenders or their agents or employees. If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then each of UCAR and the Borrower hereby agree, to the extent permitted by law, to waive, and to cause each Subsidiary to waive, its right of recovery, if any, against the Administrative Agent, the Collateral Agent, the Lenders and their agents and employees; and (ii) the designation of any form, type or amount of insurance coverage by the Administrative Agent, the Collateral Agent or the Required Lenders under this Section 5.02 shall in no event be deemed a representation, warranty or advice by the Administrative Agent, the Collateral Agent or the Lenders that such insurance is adequate for the purposes of the business of UCAR, the Borrower and the Subsidiaries or the protection of their properties. SECTION 5.03. TAXES. Pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise which, if unpaid, might give rise to a Lien upon such properties or any part thereof; PROVIDED, HOWEVER, that such payment and discharge shall not be required with respect to any such tax, assessment, charge, levy or claim so long as (a) the validity or amount thereof shall be contested in good faith by appropriate proceedings and UCAR, the Borrower or the affected Subsidiary, as applicable, shall have set aside on its books adequate reserves with respect thereto, (b) such tax, assessment, charge, levy or claim is in respect of property taxes for property that UCAR, the Borrower or one of the Subsidiaries has determined to abandon and the sole recourse for such tax, assessment, charge, levy or claim is to such property or (c) the amount of such taxes, assessments, charges, levies and claims and interest and penalties thereon does not exceed $1,000,000 in the aggregate. SECTION 5.04. FINANCIAL STATEMENTS, REPORTS, ETC. In the case of the Borrower, furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year, a consolidated balance sheet and related statements of operations, cash flows and stockholders' equity showing the financial condition of UCAR, the Borrower and the Subsidiaries as of the close of such fiscal year and the consolidated results of their operations during such year, all audited by KPMG Peat Marwick LLC or other independent public accountants of recognized national standing reasonably acceptable to the Administrative Agent and accompanied by an opinion of such 69 accountants (which shall not be qualified in any material respect) to the effect that such consolidated financial statements fairly present the financial condition and results of operations of UCAR, the Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, a consolidated balance sheet and related statements of operations, cash flows and stockholders' equity showing the financial condition of UCAR, the Borrower and the Subsidiaries as of the close of such fiscal quarter and the consolidated results of their operations during such fiscal quarter and the then-elapsed portion of the fiscal year, all certified by one of its Finan cial Officers on behalf of the Borrower as fairly presenting the financial condition and results of operations of UCAR, the Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP (except for the absence of footnotes), subject to normal year-end audit adjustments; (c) concurrently with any delivery of financial statements under (a) or (b) above, a certificate of the accounting firm or Financial Officer on behalf of the Borrower opining on or certifying such statements (which certificate, when furnished by an accounting firm, may be limited to accounting matters and disclaim responsibility for legal interpretations) (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth computations in detail reasonably satisfactory to the Administrative Agent demonstrating compliance with the covenants contained in Sections 6.10, 6.11 and 6.12 (it being understood that the information required by this clause (ii) may be provided in a certificate of a Financial Officer on behalf of the Borrower instead of from such accounting firm); (d) promptly after the same become publicly available, copies of all periodic and other publicly available reports, proxy statements and, to the extent requested by the Administrative Agent, other materials filed by UCAR, the Borrower or any Subsidiary with the Securities and Exchange Commission, or any governmental authority succeeding to any of or all the functions of said Commission, or with any national securities exchange, or distributed to its shareholders generally, as the case may be; (e) if, as a result of any change in accounting principles and policies from those as in effect on the date of this Agreement, the consolidated financial statements of UCAR, the Borrower and the Subsidiaries delivered pursuant to paragraph (a) or (b) above will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such clauses had no such change in 70 accounting principles and policies been made, then, together with the first delivery of financial statements pursuant to paragraph (a) and (b) above following such change, a schedule prepared by a Financial Officer on behalf of the Borrower reconciling such changes to what the financial statements would have been without such changes; (f) within 90 days after the beginning of each fiscal year, a copy of an operating and capital expenditure budget for such fiscal year; (g) promptly following the creation or acquisition of any Subsidiary, a certificate of the Borrower signed by a Responsible Officer of the Borrower, identifying such new Subsidiary and the ownership interest of the Borrower and the Subsidiaries therein; (h) simultaneously with the delivery of any financial statements pursuant to paragraph (a) or (b) above, a balance sheet and related statements of operations, cash flows and stockholder's equity for each unconsolidated Subsidiary for the applicable period; (i) promptly, a copy of all reports submitted in connection with any material interim or special audit made by independent accountants of the books of UCAR, the Borrower or any Subsidiary; and (j) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of UCAR, the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, or such consolidating financial statements, or such financial statements showing the results of operations of any Unrestricted Subsidiary, as in each case the Administrative Agent or any Lender, acting through the Administrative Agent, may reasonably request. SECTION 5.05. LITIGATION AND OTHER NOTICES. Furnish to the Administrative Agent and each Lender written notice of the following promptly after any Responsible Officer of the Borrower obtains actual knowledge thereof: (a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto; (b) the filing or commencement of, or any written threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority, against UCAR, the Borrower or any Subsidiary thereof in respect of which there is a reasonable possibility of an adverse determination and which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; and 71 (c) any other development specific to UCAR, the Borrower or any Subsidiary that is not a matter of general public knowledge and that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect. SECTION 5.06. EMPLOYEE BENEFITS. (a) Comply in all material respects with the applicable provisions of ERISA and the provisions of the Code relating to ERISA and any applicable similar non-U.S. law and (b) furnish to the Administrative Agent (i) as soon as possible after, and in any event within 30 days after any Responsible Officer of UCAR, the Borrower or any ERISA Affiliate knows or has reason to know that, any Reportable Event has occurred, a statement of a Financial Officer on behalf of the Borrower setting forth details as to such Reportable Event and the action proposed to be taken with respect thereto, together with a copy of the notice, if any, of such Reportable Event given to the PBGC, (ii) promptly after any Responsible Officer learns of receipt thereof, a copy of any notice that the Borrower or any ERISA Affiliate may receive from the PBGC relating to the intention of the PBGC to terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) or to appoint a trustee to administer any such Plan, (iii) within 30 days after the due date for filing with the PBGC pursuant to Section 412(n) of the Code a notice of failure to make a required installment or other payment with respect to a Plan, a statement of a Financial Officer on behalf of the Borrower setting forth details as to such failure and the action proposed to be taken with respect thereto, together with a copy of any such notice given to the PBGC and (iv) promptly after any Responsible Officer learns thereof and in any event within 30 days after receipt thereof by UCAR, the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by UCAR, the Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability or (B) a determination that a Multiemployer Plan is, or is expected to be, terminated or in reorganization, in each case within the meaning of Title IV of ERISA; PROVIDED that in the case of each of clauses (i) through (iv) above, notice to the Administrative Agent shall only be required if such event or condition, together with all other events or conditions referred to in clauses (i) through (iv) above, could reasonably be expected to result in liability of UCAR, the Borrower or any Subsidiary in an aggregate amount exceeding $7,500,000. SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS. Maintain all financial records in accordance with GAAP and permit any persons designated by the Administrative Agent or any Lender to visit and inspect the financial records and the properties of UCAR, the Borrower or any Subsidiary at reasonable times, upon reasonable prior notice to UCAR or the Borrower, and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any persons designated by the Administrative Agent or any Lender upon reasonable prior notice to UCAR or the Borrower to discuss the affairs, finances and condition of the Borrower or any Subsidiary with the officers thereof and 72 independent accountants therefor (subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract). SECTION 5.08. USE OF PROCEEDS. Use the proceeds of the Loans only for the purposes set forth in the preamble to this Agreement. SECTION 5.09. COMPLIANCE WITH ENVIRONMENTAL LAWS. Comply, and cause all lessees and other persons occupying its Properties to comply, with all Environmental Laws and Environmental Permits applicable to its operations and Properties; obtain and renew all Environmental Permits necessary for its operations and Properties; and conduct any Remedial Action in accordance with Environmental Laws, except, in each case with respect to this Section 5.09, to the extent the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. SECTION 5.10. PREPARATION OF ENVIRONMENTAL REPORTS. If a Default caused by reason of a breach of Section 3.17 or 5.09 shall have occurred and be continuing, at the request of the Required Lenders through the Administrative Agent, provide to Lenders within 90 days after such request, at the expense of the Borrower, an environmental site assessment report for the Properties which are the subject of such Default prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent, indicating the presence or absence of Hazardous Materials and the estimated cost of any Remedial Action required under any applicable Environmental Law in connection with such Properties. SECTION 5.11. FURTHER ASSURANCES. Execute any and all further documents, financing statements, agreements and instruments, and take all further action (including filing Uniform Commercial Code and other financing statements) that may be required under applicable law, or which the Collateral Agent may reasonably request, (a) in order to effectuate the transactions contemplated by the Loan Documents (other than the Local Facility Loan Documents), (b) in order to cause the Guarantee Requirement and Collateral Requirement to be satisfied at all times and (c) in order to grant, preserve, protect and perfect the validity and first priority (subject to Liens permitted by Section 6.02 and the Existing Credit Agreement) of the security interests created or intended to be created by the Security Documents. All such security interests and Liens will be created under the Security Documents and other instruments and documents in form and substance reasonably satisfactory to the Collateral Agent, and UCAR, the Borrower and the Subsidiaries shall deliver or cause to be delivered to the Administrative Agent all such instruments and documents (including legal opinions and lien searches) as the Required Lenders shall reasonably request to evidence compliance with this Section 5.11. UCAR and the Borrower agree to provide, and to cause each Subsidiary to provide, such evidence as the 73 Collateral Agent shall reasonably request as to the perfection and priority status of each such security interest and Lien. SECTION 5.12. SIGNIFICANT SUBSIDIARIES. Cause Significant Subsidiaries at all times to (a) account for 85% or more of the consolidated assets of the Borrower and (b) have accounted for 85% or more of EBITDA for each of the two consecutive periods of four fiscal quarters immediately preceding the date of determination, after giving effect to the designation of any Significant Subsidiary on such date. SECTION 5.13. FISCAL YEAR. In the case of each of UCAR, the Borrower and the Subsidiaries, cause its respective fiscal year to end on December 31. SECTION 5.14. DIVIDENDS. In the case of the Borrower, permit its Subsidiaries to pay dividends and cause such dividends to be paid to the extent required to pay the monetary Obligations, subject to restrictions permitted by Section 6.09(d) and under the Existing Credit Agreement and to prohibitions imposed by applicable requirements of law. SECTION 5.15. INTEREST/EXCHANGE RATE PROTECTION AGREEMENTS. Maintain in effect one or more Interest/Exchange Rate Protection Agreements with any of the Lenders or other financial institutions reasonably satisfactory to the Administrative Agent, the effect of which shall be to limit at all times the interest payable in connection with 40% of the aggregate principal amount of Borrowings projected to be outstanding at such time, in each case to a maximum rate and on terms and conditions comparable to those set forth in the Interest/Exchange Rate Protection Agreements in effect on the Effective Date or otherwise reasonably acceptable, taking into account current market conditions, to the Administrative Agent, and deliver evidence of the execution and delivery thereof to the Administrative Agent. SECTION 5.16. CORPORATE SEPARATENESS. Cause the management, business and affairs of each of the Unrestricted Subsidiaries to be conducted in such a manner so that each Unrestricted Subsidiary will be perceived as a legal entity separate and distinct from UCAR, the Borrower and the Subsidiaries. ARTICLE VI NEGATIVE COVENANTS Each of UCAR and the Borrower covenants and agrees with each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full, unless the Required Lenders shall otherwise consent in writing, 74 neither UCAR nor the Borrower will, and neither will cause or permit any of the Subsidiaries to: SECTION 6.01. INDEBTEDNESS. Incur, create, assume or permit to exist any Indebtedness, except: (a) Indebtedness existing on the Effective Date and set forth in Schedule 6.01, but not any extensions, renewals or replacements of such Indebtedness except (i) renewals and extensions expressly provided for in the agreements evidencing any such Indebtedness as the same are in effect on the Effective Date and (ii) refinancings and extensions of any such Indebtedness if the interest rate with respect thereto and other terms thereof are no less favorable to the obligor thereon or to the Lenders than the Indebtedness being refinanced or extended and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced or extended; PROVIDED that such Indebtedness permitted under clause (i) or clause (ii) above shall not be (A) Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (B) in a principal amount which exceeds the Indebtedness being renewed, extended or refinanced or (C) incurred, created or assumed if any Default or Event of Default has occurred and is continuing or would result therefrom; (b) Indebtedness created hereunder, under the Existing Credit Agreement and under the other Loan Documents; PROVIDED that no principal amount of Indebtedness under any Local Facility described in clause (b) of the definition of "Local Facility" may be incurred unless the Tranche A Exposure shall be simultaneously and permanently reduced by an aggregate amount not less than such principal amount; PROVIDED FURTHER that, with respect to Indebtedness under the Existing Credit Agreement, (i) no Guarantor shall Guarantee the Obligations under the Existing Credit Agreement unless it shall also Guarantee on a PARI PASSU basis the Obligations under this Agreement and (ii) if any additional or more restrictive representation, warranty, covenant, condition, event of default or other term shall be contained in the Tranche C Facility Credit Agreement, the Borrower agrees that such additional or more restrictive representation, warranty, covenant, condition, event of default or other term shall be incorporated herein (and, to the extent that any such additional or more restrictive term shall subsequently be amended to be less restrictive, such amendment shall also be incorporated herein); (c) (i) in the case of UCAR, any Senior Subordinated Guarantee, (ii) in the case of the Borrower, Senior Subordinated Notes in an aggregate principal amount (the "SUBORDINATED PRINCIPAL") not to exceed the sum of (A) $200,000,000 and (B) the aggregate principal amount of Senior Subordinated Notes issued after the Second Closing Date 75 in payment of interest thereon pursuant to the terms thereof (less the principal amount of any Senior Subordinated Notes that is repaid after the Second Closing Date) and (iii) in the case of the Borrower, Refinancing Notes in an aggregate principal amount not to exceed the sum at the time immediately prior to issuance and refinancing of (A) the Subordinated Principal, (B) any premium payable and reasonable expenses incurred in connection with such refinancing and (C) if the Refinancing Notes are issued at a time when there is accrued but unpaid interest on the Subordinated Principal, the amount of such accrued but unpaid interest; (d) Indebtedness of the Borrower and the Subsidiaries pursuant to Interest/Exchange Rate Protection Agreements entered into in order to fix the effective rate of interest, or to hedge against currency fluctuations, on the Loans and other Indebtedness or to hedge against currency fluctuations with respect to purchases and sales of goods in the ordinary course, in each case, PROVIDED that such transactions shall be entered into for business purposes and not for the purpose of speculation; (e) Indebtedness owed to (including obligations in respect of letters of credit for the benefit of) any person providing worker's compensation, health, disability or other employee benefits or property, casualty or liability insurance to the Borrower or any Subsidiary, pursuant to reimbursement or indemnification obligations to such person; (f) (i) Indebtedness of the Borrower or any Wholly Owned Subsidiary that is a Guarantor to any Subsidiary or to the Borrower; (ii) Indebtedness of the Borrower or any Wholly Owned Subsidiary that is not a Guarantor to any Subsidiary; (iii) Indebtedness of any Subsidiary to the Borrower or another Subsidiary incurred pursuant to a Permitted Foreign Transfer (subject in the case of Specified Permitted Transactions to the limitations set forth in Section 6.04(k)); and (iv) so long as at the time of incurrence no Default or Event of Default shall have occurred and be continuing, Indebtedness of UCAR to the Borrower incurred for the purpose of making permitted investments in Unrestricted Subsidiaries (and in an amount limited to the amount of investments so permitted), in each case subject to compliance with the provisions of the Pledge Agreements to the extent applicable to such Indebtedness; (g) Indebtedness of the Borrower or a Subsidiary which represents the assumption by the Borrower or such Subsidiary of Indebtedness of a Subsidiary in connection with the permitted merger of such Subsidiary with or into the assuming person or the purchase of all or substantially all the assets of such Subsidiary; (h) Indebtedness of the Borrower or any Subsidiary in respect of performance bonds, bid bonds, appeal bonds, surety 76 bonds and similar obligations and trade-related letters of credit, in each case provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business, and any extension, renewal or refinancing thereof to the extent not provided to secure the repayment of other Indebtedness and to the extent that the amount of refinancing Indebtedness is not greater than the amount of Indebtedness being refinanced; (i) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; PROVIDED that such Indebtedness is extinguished within two Business Days of its incurrence; (j) Indebtedness of a Subsidiary acquired after the date hereof and Indebtedness of a corporation merged or consolidated with or into the Borrower or a Subsidiary after the date hereof, which Indebtedness in each case exists at the time of such acquisition, merger, consolidation or conversion into a Subsidiary and is not created in contemplation of such event and where such acquisition, merger or consolidation is permitted by this Agreement, PROVIDED that the aggregate principal amount of Indebtedness under this paragraph (j) shall not exceed $25,000,000 for the Borrower and all Subsidiaries; (k) Capital Lease Obligations, mortgage financings and purchase money Indebtedness incurred by the Borrower or any Subsidiary prior to or within 270 days after a Capital Expenditure permitted under Section 6.10 in order to finance such Capital Expenditure, and extensions, renewals and refinancings thereof if the interest rate with respect thereto and other terms thereof are no less favorable to the Borrower or such Subsidiary than the Indebtedness being refinanced and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced; PROVIDED that such refinancing Indebtedness shall not be (i) Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (ii) in a principal amount which exceeds the Indebtedness being renewed, extended or refinanced or (iii) incurred, created or assumed if any Default or Event of Default has occurred and is continuing or would result therefrom; (l) Capital Lease Obligations incurred by the Borrower or any Subsidiary in respect of any Sale and Leaseback Transaction that is permitted under Section 6.03; (m) other Indebtedness of the Borrower and the Subsidiaries in an aggregate principal amount at any time outstanding not in excess of $100,000,000, $20,000,000 of which may be incurred on a secured basis; 77 (n) Indebtedness of UCAR consisting of contingent liabilities or Indebtedness of the type referred to in the proviso contained in the definition of "Unrestricted Subsidiary"; and (o) all premium (if any), interest (including post-petition interest), fees, expenses, indemnities, charges and additional or contingent interest on obligations described in clauses (a) through (n) above. Notwithstanding anything to the contrary in this Agreement or any other Loan Document, no Refinancing Notes shall be issued (and no Indebtedness shall be incurred under the Refinancing Note Indenture) unless: (a) concurrently with the issuance of any Refinancing Notes, Senior Subordinated Notes in a principal amount equal to the principal amount of such Refinancing Notes (less any amount issued pursuant to clause (iii)(B) or (iii)(C) of paragraph (c) above) shall have been redeemed or repurchased (or called for redemption, so long as the redemption price has been indefeasibly deposited with the trustee in respect of such Senior Subordinated Notes (the "TRUSTEE")) and cancelled upon delivery to the Trustee, at a price not in excess of 100% of the principal amount thereof (plus interest accrued to the date of redemption or repurchase and not paid in cash and plus any premium in respect of such redemption or repurchase (so long as the premium on repurchase does not exceed 104.5%, or if lower at the time such repurchase is made, the scheduled premium set forth in the Senior Subordinated Indenture)), (b) the terms of the Refinancing Notes and the Refinancing Note Indenture (other than the interest rate, the interest payment dates and any redemption premiums, which shall be determined at the time of issuance of the Refinancing Notes) shall be reasonably satisfactory to the Required Lenders (PROVIDED, HOWEVER, that such terms of the Refinancing Notes and the Refinancing Note Indenture shall be deemed to be satisfactory to the Required Lenders if the Refinancing Notes are issued with substantially the same terms as the Senior Subordinated Notes that are being refinanced (other than any changes thereto that are not adverse in any respect to the interests of the Lenders)), (c) the interest rate of the Refinancing Notes shall be a fixed, non- increasing interest rate per annum not in excess of the rate payable in respect of the Senior Subordinated Notes, payable on a principal amount of the Refinancing Notes not in excess of the gross proceeds of the sale thereof and interest on the Refinancing Notes shall be payable semiannually and (d) the Refinancing Notes shall mature not earlier than the maturity date of the Senior Subordinated Notes. SECTION 6.02. LIENS. Create, incur, assume or permit to exist any Lien on any property or assets (including stock or other securities of any person, including any Subsidiary) now owned 78 or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, or sell or transfer any account receivable or any right in respect thereof, except: (a) Liens on property or assets of the Borrower and its Subsidiaries existing on the Effective Date and set forth in Schedule 6.02; PROVIDED that such Liens shall secure only those obligations which they secure on the Effective Date (and extensions, renewals and refinancings of such obligations permitted by Section 6.01(a)) and shall not subsequently apply to any other property or assets of UCAR, the Borrower or any Subsidiary; (b) any Lien created under the Loan Documents; (c) any Lien existing on any property or asset of the Borrower or any Subsidiary prior to the acquisition thereof by the Borrower or any Subsidiary; PROVIDED that (i) such Lien is not created in contemplation of or in connection with such acquisition and (ii) such Lien does not apply to any other property or asset of the Borrower or any Subsidiary; (d) any Lien on any property or asset of a Subsidiary securing Indebtedness permitted by Section 6.01(j); PROVIDED that such Lien does not apply to any other property or assets of UCAR, the Borrower or any Subsidiary not securing such Indebtedness at the date of acquisition of such property or asset (other than after acquired property subjected to a Lien securing Indebtedness incurred prior to such date and permitted hereunder which contains a requirement for the pledging of after acquired property); (e) Liens for taxes, assessments or other governmental charges or levies not yet delinquent, or which are for less than $1,000,000 in the aggregate, or which are being contested in compliance with Section 5.03 or for property taxes on property that UCAR, the Borrower or one of the Subsidiaries has determined to abandon if the sole recourse for such tax, assessment, charge, levy or claim is to such property; (f) carriers', warehousemen's, mechanic's, materialmen's, repairmen's or other like Liens arising in the ordinary course of business and securing obligations that are not due and payable or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, UCAR, the Borrower or the relevant Subsidiary shall have set aside on its books reserves in accordance with GAAP; (g) pledges and deposits made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workmen's compensation, unemployment insurance and other social security laws or regulations and deposits securing liability to insurance carriers under 79 insurance or self-insurance arrangements in respect of such obligations; (h) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business; (i) zoning restrictions, easements, trackage rights, leases (other than Capital Lease Obligations), licenses, special assessments, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of UCAR, the Borrower or any of the Subsidiaries; (j) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary (including the interests of vendors and lessors under conditional sale and title retention agreements); PROVIDED that (i) such security interests secure Indebtedness or Sale and Lease-Back Transactions permitted by Section 6.01, (ii) such security interests are incurred, and the Indebted ness secured thereby is created, within 270 days after such acquisition (or construction), (iii) the Indebtedness secured thereby does not exceed 100% of the cost of such real property, improvements or equipment at the time of such acquisition (or construction), (iv) such expenditures are permitted by this Agreement and (v) such security interests do not apply to any other property or assets of the Borrower or any Subsidiary (other than to accessions to such real property, improvements or equipment and provided that individual financings of equipment provided by a single lender may be cross-collateralized to other financings of equipment provided solely by such lender); (k) Liens securing reimbursement obligations in respect of trade-related letters of credit permitted under Section 6.01 and covering the goods (or the documents of title in respect of such goods) financed by such letters of credit; (l) Liens arising out of capitalized or operating lease transactions permitted under Section 6.03, so long as such Liens (i) attach only to the property sold in such transaction and any accessions thereto and (ii) do not interfere with the business of UCAR, the Borrower or any Subsidiary in any material respect; 80 (m) Liens consisting of interests of lessors under capital leases permitted by Section 6.01; (n) Liens securing judgments for the payment of money in an aggregate amount not in excess of $7,500,000 (except to the extent covered by insurance as to which the insurer has acknowledged in writing its obligation to cover), unless such judgments shall remain undischarged for a period of more than 30 consecutive days during which execution shall not be effectively stayed; (o) any Lien arising by operation of law pursuant to Section 107(1) of CERCLA or pursuant to analogous state or foreign law, for costs or damages which are not yet due (by virtue of a written demand for payment by a Governmental Authority) or which are being contested in compliance with the standard set forth in Section 5.03(a), or on property that the Borrower or a Subsidiary has determined to abandon if the sole recourse for such costs or damages is to such property, PROVIDED that the liability of the Borrower and the Subsidiaries with respect to the matter giving rise to all such Liens shall not, in the reasonable estimate of the Borrower (in light of all attendant circumstances, including the likelihood of contribution by third parties), exceed $7,500,000; (p) any leases or subleases to other persons of properties or assets owned or leased by the Borrower or a Subsidiary; (q) Liens which are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness or (ii) pertaining to pooled deposit and/or sweep accounts of the Borrower and/or any Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower and its Subsidiaries; (r) other Liens with respect to property or assets not constituting collateral for the Obligations with an aggregate fair market value of not more than $20,000,000 at any time; (s) any Lien arising as a result of a transaction permitted under Section 6.05(h) or (i) or under Section 6.13; (t) the sale of accounts receivable in connection with collection in the ordinary course of business and Liens which might arise as a result of the sale or other disposition of accounts receivable pursuant to Section 6.05(h); and (u) the replacement, extension or renewal of any Lien permitted by clause (c), (d) or (j) above; PROVIDED that such replacement, extension or renewal Lien shall not cover any property other than the property that was subject to such Lien 81 prior to such replacement, extension or renewal; and PROVIDED FURTHER that the Indebtedness and other obligations secured by such replacement, extension or renewal Lien are permitted by this Agreement. SECTION 6.03. SALE AND LEASE-BACK TRANSACTIONS. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a "SALE AND LEASE-BACK TRANSACTION"), other than any Sale and Lease-Back Transaction which involves a sale by the Borrower or a Subsidiary solely for cash consideration on terms not less favorable than would prevail in an arm's-length transaction and which (a) results in a Capital Lease Obligation or an operating lease, in either case entered into to finance a Capital Expenditure permitted by Section 6.10 consisting of the initial acquisition by the Borrower or such Subsidiary of the property sold or transferred in such Sale and Lease-Back Transaction, PROVIDED that such Sale and Lease-Back Transaction occurs within 270 days after such acquisition or (b) results in a Capital Lease Obligation or an operating lease entered into for any other purpose; PROVIDED that the proceeds of any such Sale and Lease-Back Transaction in reliance upon this clause (b) shall be deemed subject to Section 2.12(e). SECTION 6.04. INVESTMENTS, LOANS AND ADVANCES. Purchase, hold or acquire any capital stock, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other person, except: (a) investments (i) existing on the Effective Date in the capital stock of the Subsidiaries; (ii) by UCAR in the capital stock of the Borrower; (iii) by the Borrower or any Subsidiary in any Wholly Owned Subsidiary that is a Guarantor (so long as such Guarantor shall remain a Wholly Owned Subsidiary after giving effect to such investment); (iv) by any Wholly Owned Subsidiary in any Wholly Owned Subsidiary that is a Guarantor; (v) by any Subsidiary that is not a Guarantor in any Wholly Owned Subsidiary that is not a Guarantor (so long as such Subsidiary shall remain a Wholly Owned Subsidiary after giving effect to such investment); or (vi) that constitute Permitted Foreign Transfers (subject in the case of Specified Permitted Transactions to the limitations set forth in paragraph (k) below); (b) Permitted Investments and investments that were Permitted Investments when made; (c) investments arising out of the receipt by the Borrower or any Subsidiary of noncash consideration for the sale of assets permitted under Section 6.05 provided that such consideration (if the stated amount or value thereof is in 82 excess of $1,000,000) is pledged upon receipt pursuant to the Pledge Agreements to the extent required thereby; (d) intercompany loans permitted to be incurred as Indebtedness under Section 6.01; (e) (i) loans and advances to employees of UCAR, the Borrower or the Subsidiaries not to exceed $6,000,000 in the aggregate at any time outstanding (excluding up to $3,000,000 in loans existing on the Effective Date to former employees) and (ii) advances of payroll payments and expenses to employees in the ordinary course of business; (f) (i) accounts receivable arising and trade credit granted in the ordinary course of business and any securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and (ii) prepayments and other credits to suppliers made in the ordinary course of business consistent with the past practices of UCAR, the Borrower and the Subsidiaries; (g) Interest/Exchange Rate Protection Agreements permitted pursuant to Section 6.01(d); (h) investments, other than investments listed in paragraphs (a) through (g) of this Section, existing on the Effective Date and set forth on Schedule 6.04; (i) investments resulting from pledges and deposits referred to in Section 6.02(g) or (h); (j) investments constituting Permitted Business Acquisitions made either as Capital Expenditures pursuant to Section 6.10 or, to the extent not used for other purposes permitted hereunder, made with funds that if not so spent would constitute Net Proceeds under clause (a) of the definition of "Net Proceeds" (subject to the limitation set forth in the second proviso to such clause (a)); (k) investments constituting Permitted Other Acquisitions or Specified Permitted Transactions; PROVIDED that the sum of (i) the aggregate amount of Specified Permitted Transactions and (ii) the aggregate amount of consideration (whether cash or property, as valued at the time each such investment is made) for all Permitted Other Acquisitions acquired after the Effective Date shall not exceed (net of any return representing return of capital of (but not return on) any such investment) at any time (A) the amount set forth on Schedule A for the Leverage Ratio that is in effect at such time (it being agreed that any such investment permitted when made shall not cease to be permitted as a result of the applicable Leverage Ratio subsequently changing) PLUS, (B) to the extent not used for other purposes permitted hereunder, the funds that if not so spent would 83 constitute Net Proceeds under clause (a) of the definition of "Net Proceeds" (subject to the limitation set forth in the second proviso to such clause (a)); (l) investments in Permitted Business Acquisitions and Unrestricted Subsidiaries to the extent made with proceeds of the issuance of Capital Stock of UCAR (to the extent not previously used to prepay Indebtedness (other than Revolving Loans or Swingline Loans), make any investment or capital expenditure or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any fiscal year) issued after the Original Closing Date (after application of the Net Proceeds of such issuance to prepay Obligations in accordance with Section 2.12(d) and the Existing Credit Agreement); and (m) investments by the Borrower or any Subsidiary in any Subsidiary resulting from or in connection with the formation of a European holding company and any related reorganization or restructuring of the Subsidiaries that occurs in connection therewith; PROVIDED that, after giving effect to any such formation, reorganization or restructuring (COLLECTIVELY, THE "EUROPEAN HOLDING COMPANY STRATEGY"), the Collateral Requirement and Guarantee Requirement shall be satisfied in a manner reasonably satisfactory to the Administrative Agent. PROVIDED, HOWEVER, that the aggregate amount of the consideration (whether cash or property, as valued at the time each such investment is made) for all investments made in Unrestricted Subsidiaries (other than investments made therein pursuant to paragraph (l) above) after the Effective Date shall not exceed (net of return of capital of (but not return on) any such investment) $50,000,000 at any time, PROVIDED FURTHER, HOWEVER, that no more than $25,000,000 of such amount at any time may be invested in Unrestricted Subsidiaries not engaged primarily in Related Businesses. SECTION 6.05. MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND ACQUISITIONS. Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial part of its assets (whether now owned or hereafter acquired), other than assets of UCAR constituting an Unrestricted Subsidiary, or any Capital Stock of any Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person, except that this Section shall not prohibit: (a) the purchase and sale of inventory in the ordinary course of business by the Borrower or any Subsidiary or the acquisition of any asset of any person in the ordinary course of business; (b) if at the time thereof and immediately after giving effect thereto no Event of Default or Default shall have 84 occurred and be continuing (i) the merger of any Subsidiary into the Borrower in a transaction in which the Borrower is the surviving corporation and (ii) the merger or consolidation of any Subsidiary into or with any other Wholly Owned Subsidiary in a transaction in which the surviving entity is a Wholly Owned Subsidiary (which shall be a domestic Subsidiary if the non-surviving person shall be a domestic Subsidiary) and, in the case of each of clauses (i) and (ii), no person other than the Borrower or a Wholly Owned Subsidiary receives any consideration; (c) Sale and Lease-Back Transactions permitted by Section 6.03; (d) investments permitted by Section 6.04; (e) subject to Section 6.07, sales, leases or transfers (i) from the Borrower or any Subsidiary to the Borrower or to a domestic Wholly Owned Subsidiary, (ii) from any foreign Subsidiary to any foreign Wholly Owned Subsidiary or to the Borrower or (iii) constituting Permitted Foreign Transfers (subject in the case of Specified Permitted Transactions to the limitations set forth in Section 6.04(k)); (f)(i) the lease of all or any part of the Borrower's facility located in Robinson, Illinois and (ii) sales, leases or other dispositions of equipment or real property of the Borrower or the Subsidiaries determined, in the case of this clause (ii), by the Board of Directors or senior management of the Borrower to be no longer useful or necessary in the operation of the business of the Borrower or the Subsidiaries; PROVIDED that in the case of this clause (ii), (x) the Net Proceeds thereof shall be applied in accordance with Section 2.12(d) and (y) the fair market value of assets sold, leased or otherwise disposed of in any one year shall not exceed $3,000,000 in the aggregate; (g) sales, leases or other dispositions of inventory of the Borrower and the Subsidiaries determined by the Board of Directors or senior management of the Borrower to be no longer useful or necessary in the operation of the business of the Borrower and the Subsidiaries; PROVIDED that the Net Proceeds thereof shall be applied in accordance with Section 2.12(d); (h) sales or other dispositions of accounts receivable of foreign Subsidiaries in connection with factoring arrangements so long as the aggregate face amount at any time outstanding of receivables subject to such arrangements does not exceed $50,000,000; (i) sales or other dispositions by the Borrower or any Subsidiary of assets (other than receivables, except to the extent disposed of incidentally in connection with an asset disposition otherwise permitted hereby), including Capital Stock of Subsidiaries, for consideration in an aggregate 85 amount not exceeding 25% of the book value of the Total Assets set forth in UCAR's and its subsidiaries' June 30, 1998 quarterly consolidated financial statements (which book value equals $1,273,000,000); PROVIDED that (i) each such disposition shall be for a consideration determined in good faith by the Board of Directors or senior management of the Borrower to be at least equal to the fair market value (if any) of the asset sold, (ii) the aggregate amount of all noncash consideration included in the proceeds of any such disposition may not exceed 15% of the fair market value of such proceeds; PROVIDED, HOWEVER, that obligations of the type referred to in clause (a) or (e) of the definition of "Permitted Investments" (without regard to the maturity or the credit rating thereof) shall not be deemed non-cash proceeds if such obligations are promptly sold for cash and the proceeds of such sale are included in the calculation of Net Proceeds from such sale, (iii) the aggregate Net Proceeds of all such dispositions under this paragraph (i) shall be applied in accordance with Section 2.12(d), except as contemplated by the last sentence of this paragraph and (iv) no Default or Event of Default shall have occurred and be continuing immediately prior to or after such disposition; PROVIDED FURTHER that notwithstanding the first proviso to clause (a) of the definition of "Net Proceeds", no Mortgaged Property (other than Mortgaged Properties which are part of UCAR's Graphite and Carbon Specialties Business) may be sold, transferred, leased or otherwise disposed of at any time unless the Net Proceeds thereof shall be applied immediately to the prepayment of Obligations in accordance with Section 2.12(d) or within 10 Business Days to the acquisition of property having a value equivalent to or greater than the value of such Mortgaged Property and such newly acquired property is thereupon either made a Mortgaged Property subject to a Mortgage on terms reasonably satisfactory to the Collateral Agent or constitutes an addition to a Mortgaged Property and is subject to the Mortgage on such Mortgaged Property; and PROVIDED FURTHER that no sale may be made of the Capital Stock of (x) any Credit Party, UCAR Carbon Company Inc., UCAR Holdings Inc. or UCAR Holdings II Inc. or (y) except in connection with the sale of all its outstanding Capital Stock that is held by the Borrower in any Subsidiary, the Capital Stock of any other Subsidiary. Upon receipt by the Borrower or any Subsidiary of the Net Proceeds of any transaction contemplated by this paragraph (i), the Borrower shall promptly deliver a certificate of the Borrower signed by a Responsible Officer of the Borrower to the Administrative Agent setting forth the amount of the Net Proceeds received in respect thereof and whether it shall apply such Net Proceeds to prepay Obligations in accordance with Section 2.12(d) and the Existing Credit Agreement or will use such Net Proceeds to purchase assets useful in the business of the Borrower and the Subsidiaries within 12 months of such receipt (subject to the second proviso to clause (a) of the definition of "Net Proceeds"); 86 (j) sale or other disposition of UCAR's, the Borrower's or the Subsidiaries' facilities owned and existing on the Effective Date in Berlin, Germany and Welland, Canada; and (k) intercompany sales, transfers, dispositions, acquisitions, mergers and consolidations in connection with the implementation of the European Holding Company Strategy; PROVIDED that, (i) any such sale or transfer is made to, or any such merger into or consolidation with is effected with, a Subsidiary at least 90% of the outstanding Capital Stock of which is owned directly by the Borrower or a Wholly Owned Subsidiary and (ii) after giving effect to any such sale, transfer, disposition, acquisition, merger or consolidation, the Collateral Requirement and Guarantee Requirement shall be satisfied in a manner reasonably satisfactory to the Administrative Agent. SECTION 6.06. DIVIDENDS AND DISTRIBUTIONS. Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its Capital Stock (other than dividends and distributions on the common stock of UCAR payable solely by the issuance of additional shares of common stock of UCAR or rights, warrants or options to acquire common stock of UCAR) or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any Subsidiary to purchase or acquire) any shares of any class of its Capital Stock or set aside any amount for any such purpose (collectively, the "RESTRICTED EQUITY PAYMENTS"); PROVIDED, HOWEVER, that: (a) any Subsidiary may declare and pay dividends to, repurchase its Capital Stock from or make other distributions to the Borrower or to any Wholly Owned Subsidiary (or, in the case of non-Wholly Owned Subsidiaries, to the Borrower or any Subsidiary and to each other owner of Capital Stock of such Subsidiary on a pro rata basis (or more favorable basis from the perspective of the Borrower or such Subsidiary) based on their relative ownership interests); (b) the Borrower may declare and pay dividends or make other distributions to UCAR in respect of overhead, tax liabilities, legal, accounting and other professional fees and expenses and any fees and expenses associated with registration statements filed with the Securities and Exchange Commission and subsequent ongoing public reporting requirements, in each case to the extent actually incurred by UCAR in connection with the business of its ownership of the Capital Stock of the Borrower and the Unrestricted Subsidiaries; (c) so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, UCAR, the Borrower and the Subsidiaries may make Restricted Equity Payments so long as, after giving effect thereto, the 87 aggregate amount of Restricted Junior Payments made after the Effective Date shall not exceed the Restricted Junior Payment Amount applicable to the fiscal year in which any such Restricted Equity Payment is made; (d) UCAR or the Borrower may purchase or redeem, or the Borrower may declare and pay dividends or make other distributions to UCAR the proceeds of which are to be used to purchase or redeem, shares of Capital Stock (or rights, options or warrants in respect of such shares) of UCAR (including related stock appreciation rights or similar securities) held by present or former directors, officers or employees of UCAR, the Borrower or any Subsidiary or by any Plan upon such person's death, disability, retirement or termination of employment or under the terms of any such Plan or any other agreement under which such shares of stock or related rights were issued; PROVIDED that the aggregate amount of such purchases or redemptions (or dividends or distributions to UCAR) under this paragraph (d) shall not exceed $5,000,000 per calendar year which, if not used in any year may be carried forward to any subsequent calendar year; PROVIDED, HOWEVER, that the aggregate amount of such purchases or redemptions (or dividends or distributions to UCAR) that may be made pursuant to this paragraph (d) shall not exceed $25,000,000; and (e) the Borrower may declare and pay dividends or make other distributions to UCAR in order to fund Litigation Payments; PROVIDED that the amount of dividends and distributions permitted pursuant to this clause (e), plus the amount of Restricted Debt Payments permitted pursuant to the last sentence of Section 6.09(b), shall not exceed $400,000,000 (calculated in the manner described in Section 3.24). It being understood that $20,000,000 of such payments and distributions to UCAR in respect of Litigation Liabilities have been made as of the Effective Date. SECTION 6.07. TRANSACTIONS WITH AFFILIATES. (a) Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates or any known direct or indirect holder of 10% or more of any class of capital stock of UCAR, unless such transaction is (i) otherwise permitted under this Agreement and (ii) upon terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's-length transaction with a person which was not an Affiliate, PROVIDED that the foregoing restriction shall not apply to the indemnification of directors of UCAR, the Borrower and the Subsidiaries in accordance with customary practice. (b) The foregoing paragraph (a) shall not prohibit, to the extent otherwise permitted under this Agreement, (i) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements or stock option, ownership or purchase 88 plans approved by the Board of Directors of UCAR, (ii) loans or advances to employees of UCAR, the Borrower or any Subsidiary in accordance with Section 6.04(e), (iii) transactions among UCAR, the Borrower and Wholly Owned Subsidiaries and transactions among Wholly Owned Subsidiaries otherwise permitted by this Agreement, (iv) Permitted Foreign Transfers (other than Specified Permitted Transactions), (v) the payment of fees and indemnities to directors, officers and employees of the Borrower and the Subsidiaries in the ordinary course of business, (vi) transactions pursuant to permitted agreements in existence on the Effective Date and set forth on Schedule 6.07, (vii) payments pursuant to the Tax Sharing Agreement, (viii) any employment agreements entered into by the Borrower or any of the Subsidiaries in the ordinary course of business, (ix) dividends and repurchases permitted under Section 6.06, and (x) any purchase by UCAR of Capital Stock of the Borrower or any contribution by UCAR to the equity capital of the Borrower. SECTION 6.08. BUSINESS OF UCAR, THE BORROWER AND THE SUBSIDIARIES. (a) In the case of the Borrower and the Subsidiaries (taken as a whole), cease to engage primarily in the business of manufacturing graphite and carbon electrodes and (b) in the case of UCAR, engage at any time in any business or business activity other than (i) the ownership of all the outstanding capital stock of the Borrower together with activities directly related thereto, (ii) the ownership of Unrestricted Subsidiaries together with activities directly related thereto, (iii) performance of its obligations under the Loan Documents, under intercompany Indebtedness and under Indebtedness incurred in accordance with Section 6.01(n) and (iv) actions required by law to maintain its status as a corporation and as a public company. SECTION 6.09. INDEBTEDNESS AND OTHER MATERIAL AGREEMENTS. (a) Amend or modify, or grant any waiver or release under, any instruments, agreements or documents evidencing or related to the Senior Subordinated Notes or the Refinancing Notes in any manner adverse to the Lenders. (b) (i) Directly or indirectly, make any payment, retirement, repurchase or redemption on account of the principal of the Senior Subordinated Notes, the Refinancing Notes or intercompany Indebtedness owed to UCAR or directly or indirectly prepay or defease any such Indebtedness prior to the stated maturity date of such Indebtedness (collectively, "RESTRICTED DEBT PAYMENTS"), except with the proceeds of Capital Stock of UCAR issued by UCAR after the Original Closing Date (after application of the Net Proceeds of such issuance to prepay Obligations in accordance with Section 2.12(d) and the Existing Credit Agreement), PROVIDED, that, in addition to the foregoing, so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, the Borrower may make Restricted Debt Payments so long as, after giving effect thereto, the aggregate amount of Restricted Junior Payments made after the Effective Date shall not exceed the Restricted Junior Payment Amount applicable to the fiscal year in which any such Restricted Debt Payment is made, 89 (ii) make any payment or prepayment of any such Indebtedness that would violate the terms of this Agreement or of such Indebtedness, any agreement or document evidencing, related to or securing the payment or performance of such Indebtedness or any subordination agreement or provision applicable to such Indebtedness or (iii) pay in cash any amount in respect of such Indebtedness that may at the Borrower's option be paid in kind thereunder; PROVIDED, HOWEVER, that the proceeds of the Refinancing Notes may be applied to repay or prepay Senior Subordinated Notes. Notwithstanding the foregoing, the Borrower may make Restricted Debt Payments in respect of intercompany Indebtedness owed to UCAR in order to fund Litigation Payments; PROVIDED that the amount of Restricted Debt Payments that may be made to UCAR pursuant to this sentence, plus the amount of dividends or other distributions permitted to be made to UCAR pursuant to Section 6.06(e), shall not exceed $400,000,000 (calculated in the manner described in Section 3.24) (it being understood that $20,000,000 of such payments and distributions to UCAR in respect of Litigation Liabilities have been made as of the Effective Date). (c) Amend or modify in any manner adverse to the Lenders, or grant any waiver or release under or terminate in any manner (if such action shall be adverse to the Lenders), the certificate of incorporation or by-laws of the Borrower or any Subsidiary. (d) Permit any Subsidiary to enter into any agreement or instrument which by its terms restricts the payment of dividends or the making of cash advances by such Subsidiary to the Borrower or any Subsidiary that is a direct or indirect parent of such Subsidiary other than those in effect on the Effective Date and set forth on Schedule 6.09 (or replacements of such agreements on terms no less favorable to the Lenders), and those arising under any Loan Document (other than any Loan Document in respect of any Local Facility described in clause (b) of the definition of "Local Facility"). SECTION 6.10. CAPITAL EXPENDITURES. Permit UCAR to make any Capital Expenditures, or permit the aggregate amount of Capital Expenditures made by the Borrower and the Subsidiaries, in any fiscal year to exceed the aggregate amount set forth below: YEAR AMOUNT 1998 $58,000,000 1999 88,000,000 2000 72,000,000 2001 58,000,000 2002 65,000,000 PROVIDED, HOWEVER, that (a) the Borrower may in any fiscal year, upon written notice to the Administrative Agent, increase the amount of Capital Expenditures permitted to be made pursuant to this Section by an amount up to $10,000,000 by reducing the amount of Capital Expenditures permitted to be made pursuant to this Section in the next succeeding fiscal year by the amount of such 90 increase; PROVIDED that not more than $20,000,000 in the aggregate of increases may be made pursuant to this clause (a) in any three- fiscal-year period, and (b) to the extent that Capital Expenditures made in any fiscal year were less than the amount set forth above for such fiscal year less any reduction made for such fiscal year pursuant to clause (a), such unused amount may be carried forward to the next succeeding fiscal year; PROVIDED that not more that $20,000,000 may be carried forwarded from any fiscal year. SECTION 6.11. INTEREST COVERAGE RATIO. Permit the ratio (the "INTEREST COVERAGE RATIO") as of the last day of any fiscal quarter, which last day occurs in any period set forth below for the four quarter period ended as of such day of (a) EBITDA MINUS Capital Expenditures of UCAR, the Borrower and the Subsidiaries to (b) Cash Interest Expense to be less than the ratio set forth below for such period: FROM AND INCLUDING: TO AND INCLUDING: RATIO: July 1, 1998 December 31, 1998 2.00:1.00 January 1, 1999 June 30, 1999 2.00:1.00 July 1, 1999 December 31, 1999 2.00:1.00 January 1, 2000 June 30, 2000 2.00:1.00 July 1, 2000 December 31, 2000 2.50:1.00 January 1, 2001 June 30, 2001 3.00:1.00 July 1, 2001 December 31, 2002 3.00:1.00 SECTION 6.12. LEVERAGE RATIO. Permit the ratio (the "LEVERAGE RATIO") of (a) Total Debt plus Reserves as of the last day of any fiscal quarter, which last day occurs in any period set forth below to (b) EBITDA for the four quarter period ended as of such day to be in excess of the ratio set forth below for such period: FROM AND INCLUDING: TO AND INCLUDING: RATIO: July 1, 1998 December 31, 1998 4.50:1.00 January 1, 1999 September 30, 1999 4.50:1.00 October 1, 1999 December 31, 1999 4.25:1.00 January 1, 2000 June 30, 2000 4.00:1.00 July 1, 2000 December 31, 2000 3.50:1.00 January 1, 2001 June 30, 2001 3.00:1.00 July 1, 2001 December 31, 2002 3.00:1.00 SECTION 6.13. CAPITAL STOCK OF THE SUBSIDIARIES. Sell, transfer, lease or otherwise dispose of, or make subject to any subscription, option, warrant, call, right or other agreement or commitment of any nature, the Capital Stock of any Subsidiary, other than (a) pursuant to the Loan Documents or pursuant to a transaction permitted pursuant to Section 6.05 and subject to Section 2.12(d), (b) sales, transfers and other dispositions of the Capital Stock of Subsidiaries in connection with UCAR's sale of its Graphite and Carbon Specialties Business, (c) in connection with 91 transactions of the type described in Section 6.05(k) or 6.07(b)(i) and (d) directors' qualifying shares. ARTICLE VII EVENTS OF DEFAULT In case of the happening of any of the following events ("EVENTS OF DEFAULT"): (a) any representation or warranty made or deemed made by UCAR, the Borrower or any Loan Party in any Loan Document (other than a Local Facility Loan Document), or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document (other than a Local Facility Loan Document), shall prove to have been false or misleading in any material respect when so made, deemed made or furnished by UCAR, the Borrower or any other Loan Party; (b) default shall be made in the payment of any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; (c) default shall be made in the payment of any premium or interest on any Loan or in the payment of any Fee or any other amount (other than an amount referred to in (b) above) due under any Loan Document (other than a Local Facility Loan Document), when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days; (d) default shall be made in the due observance or performance by UCAR, the Borrower or any Subsidiary of any covenant, condition or agreement contained in Section 5.01(a) (with respect to the Borrower), 5.05(a), 5.08 or 5.12 or in Article VI; (e) default shall be made in the due observance or performance by UCAR, the Borrower, any Credit Party or any Subsidiary of any covenant, condition or agreement contained in any Loan Document (other than a Local Facility Loan Document) (other than those specified in (b), (c) or (d) above) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or the Required Lenders to the Borrower; (f) (i) UCAR, the Borrower or any Significant Subsidiary shall fail to observe or perform any term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any Indebtedness (other than any 92 Indebtedness under any Loan Document) having an aggregate principal or notional amount in excess of $7,500,000, if the effect of any such failure is to cause, or to permit the holder or holders of such Indebtedness or a trustee on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity, or UCAR, the Borrower or any Significant Subsidiary shall fail to pay any principal in respect of any such Indebtedness at the stated maturity thereof or (ii) an "Event of Default" shall occur under the Existing Credit Agreement; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of UCAR, the Borrower or any Subsidiary, or of a substantial part of the property or assets of UCAR, the Borrower or a Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for UCAR, the Borrower or any Subsidiary or for a substantial part of the property or assets of UCAR, the Borrower or a Subsidiary or (iii) the winding-up or liquidation of UCAR, the Borrower or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) UCAR, the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for UCAR, the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing; (i) one or more judgments for the payment of money in an aggregate amount in excess of $7,500,000 (except to the extent covered by insurance as to which the insurer has acknowledged in writing its obligation to cover) shall be rendered against UCAR, the Borrower, any Significant Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall 93 not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of UCAR, the Borrower or any Significant Subsidiary to enforce any such judgment; (j) (i) a Reportable Event or Reportable Events, or a failure to make a required installment or other payment (within the meaning of Section 412(n)(1) of the Code), shall have occurred with respect to any Plan, (ii) a trustee shall be appointed by a United States district court to administer any Plan, (iii) the PBGC shall institute proceedings (including giving notice of intent thereof) to terminate any Plan, (iv) the Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan and the Borrower or such ERISA Affiliate does not have reasonable grounds for contesting such Withdrawal Liability or is not contesting such Withdrawal Liability in a timely and appropriate manner, (v) the Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, (vi) the Borrower or any ERISA Affiliate shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (vii) any other similar event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vii) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; (k) (i) any Loan Document (other than a Local Facility Loan Document) shall for any reason be asserted by UCAR, the Borrower or any Subsidiary not to be a legal, valid and binding obligation of any party thereto, (ii) any security interest purported to be created by any Security Document and to extend to assets which are not immaterial to UCAR, the Borrower and the Subsidiaries on a consolidated basis shall cease to be, or shall be asserted by the Borrower or any other Loan Party not to be, a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the failure of the Collateral Agent to maintain possession of certificates representing securities pledged under the Pledge Agreements or to file Uniform Commercial Code continuation or other similar statements or (iii) the Obligations of UCAR and the Borrower and the guarantee by UCAR thereof pursuant to the Parent Guarantee Agreement shall cease to constitute senior indebtedness under the subordination provisions of any document or instrument evidencing any permitted subordinated Indebtedness or such subordination provisions shall be invalidated or otherwise cease to be legal, valid and binding 94 obligations of the parties thereto, enforceable in accordance with their terms; (l) the Administrative Agent or the Required Lenders shall have given notice to the Borrower of any event of default under any Local Facility Credit Agreement; or (m) there shall have occurred a Change in Control; then, and in every such event (other than an event with respect to any Credit Party described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest and premiums thereon and any unpaid accrued Fees and all other liabilities of the Credit Parties accrued hereunder and under any other Loan Document (other than any Local Facility Loan Document), shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Credit Parties, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event with respect to any Credit Party described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest and premiums thereon and any unpaid accrued Fees and all other liabilities of the Credit Parties accrued hereunder and under any other Loan Document (other than any Local Facility Loan Document), shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Credit Parties, anything contained herein or in any other Loan Document to the contrary notwithstanding. As soon as practicable following any acceleration hereunder the Administrative Agent shall advise the Local Facility Lenders thereof. ARTICLE VIII THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT In order to expedite the transactions contemplated by this Agreement, The Chase Manhattan Bank is hereby appointed to act as Administrative Agent and Collateral Agent on behalf of the Lenders (for purposes of this Article VIII, the Administrative Agent and the Collateral Agent are referred to collectively as the "AGENTS"). Each of the Lenders and each assignee of any such Lender hereby irrevocably authorizes the Agents to take such actions on behalf of such Lender or assignee and to exercise such powers as are specifically delegated to the Agents by the terms and provisions hereof and of the other Loan Documents, together with 95 such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders all payments of principal of and interest on the Loans and all other amounts due to the Lenders hereunder, and promptly to distribute to each Lender its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrower of any Event of Default specified in this Agreement of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute to each Lender copies of all notices, financial statements and other materials delivered by the Borrower pursuant to this Agreement as received by the Administrative Agent. Without limiting the generality of the foregoing, the Agents are hereby expressly authorized to execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Security Documents. In the event that any party other than the Lenders and the Agents shall participate in all or any portion of the Collateral pursuant to the Security Documents, all rights and remedies in respect of such Collateral shall be controlled by the Collateral Agent. Neither the Agents nor any of their respective directors, officers, employees or agents shall be liable as such for any action taken or omitted by any of them except for its or his own gross negligence or wilful misconduct, or be responsible for any statement, warranty or representation herein or the contents of any document delivered in connection herewith, or be required to ascertain or to make any inquiry concerning the performance or observance by the Borrower or any other Loan Party of any of the terms, conditions, covenants or agreements contained in any Loan Document. The Agents shall not be responsible to the Lenders for the due execution, genuineness, validity, enforceability or effectiveness of this Agreement or any other Loan Documents or other instruments or agreements. The Agents shall in all cases be fully protected in acting, or refraining from acting, in accordance with written instructions signed by the Required Lenders and, except as otherwise specifically provided herein, such instructions and any action or inaction pursuant thereto shall be binding on all the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper person or persons. Neither the Agents nor any of their respective directors, officers, employees or agents shall have any responsibility to the Borrower or any other Loan Party on account of the failure of or delay in performance or breach by any Lender of any of its obligations hereunder or to any Lender on account of the failure of or delay in performance or breach by any other Lender or the Borrower or any other Loan Party of any of their respective obligations hereunder or under any other Loan Document or in connection herewith or therewith. Each of the Agents may execute any and all duties here under by or through agents or employees and shall be entitled to 96 rely upon the advice of legal counsel selected by it with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such counsel. The Lenders hereby acknowledge that neither Agent shall be under any duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders. The Lenders further acknowledge and agree that so long as an Agent shall make any determination to be made by it hereunder or under any other Loan Document in good faith, such Agent shall have no liability in respect of such determination to any person. Subject to the appointment and acceptance of a successor Agent as provided below, either Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor with the consent of the Borrower (not to be unreasonably withheld). If no successor shall have been so appointed by the Required Lenders and approved by the Borrower and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders with the consent of the Borrower (not to be unreasonably withheld), appoint a successor Agent which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of any appointment as Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations hereunder. After the Agent's resignation hereunder, the provisions of this Article and Section 9.05 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. With respect to the Loans made by it hereunder, each Agent in its individual capacity and not as Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not an Agent, and the Agents and their Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent. Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of its pro rata share (based on its Commit ments hereunder (or if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of its applicable outstanding Loans)) of any reasonable expenses incurred for the benefit of the Lenders by the Agents, including counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrower and (b) to indemnify and hold harmless each Agent and any of its directors, officers, employees or agents, on demand, in the amount of such pro rata share, from 97 and against any and all liabilities, taxes, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against it in its capacity as Agent or any of them in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by it or any of them under this Agreement or any other Loan Document, to the extent the same shall not have been reimbursed by the Borrower; PROVIDED that no Lender shall be liable to an Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or wilful misconduct of such Agent or any of its directors, officers, employees or agents. Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan Document, any related agreement or any document furnished hereunder or thereunder. No Managing Agent shall have any liability hereunder by virtue of its execution of this Agreement as a Managing Agent. As soon as practicable after it becomes aware of an Event of Default that has occurred and is continuing, the Administrative Agent shall notify each Lender thereof. In its capacity as Administrative Agent hereunder, the Administrative Agent will serve as Representative of the Bank Indebtedness under the Senior Subordinated Indenture and the Senior Subordinated Exchange Indenture and agrees to notify each Lender of any notice received by it as such Representative. ARTICLE IX MISCELLANEOUS SECTION 9.01. NOTICES. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at UCAR Global Enterprises Inc., 39 Old Ridgebury Road, Danbury, CT 06817-0001, Attention of President (Telecopy No. (203) 207-7785), and if to UCAR, to it in care of the Borrower; 98 (b) if to the Swiss Borrower, to it at Avenue de Mont- Blanc 33, Gland, Canton of Vaud, Switzerland, Attention of Chairman (Telecopy No. 41-22-999-9787), with a copy to the Borrower; (c) if to the Administrative Agent, to The Loan and Agency Services Group, 8th floor, One Chase Manhattan Plaza, New York, New York 10081 Attention: Janet Belden (Telecopy No. (212) 552-5658) with a copy to James Ramage, The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017 (Telecopy No. (212) 270-4724); and (d) if to a Lender, to it at its address (or telecopy number) set forth in the Administrative Questionnaire delivered to the Administrative Agent by such Lender in connection with the execution of this Agreement or in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01. SECTION 9.02. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by the Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Loans, the execution and delivery to the Lenders of the Loan Documents, regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid and so long as the Commitments have not been terminated. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein (including pursuant to Sections 2.13, 2.15, 2.19 and 9.05) shall survive the payment in full of the principal and interest on any Loan hereunder and the termination of the Commitments or this Agreement. SECTION 9.03. BINDING EFFECT. This Agreement shall become effective when it shall have been executed by UCAR, the Borrower, and the Administrative Agent and when the Administrative Agent shall have received copies hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of UCAR, 99 the Borrower, the Swiss Borrower, the Administrative Agent and each Lender and their respective permitted successors and assigns. SECTION 9.04. SUCCESSORS AND ASSIGNS. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of UCAR, the Borrower, the Swiss Borrower, the Administrative Agent or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. (b) Each Lender may assign to one or more assignees all or a portion of its interests, rights and obligations as a Lender under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it); PROVIDED, HOWEVER, that (i) except in the case of an assignment to another Lender, an Affiliate of such Lender or a Related Fund of any Lender, in each case, the Borrower and the Administrative Agent must each give its prior written consent to such assignment (which consent shall not in either case be unreasonably withheld or delayed), PROVIDED that the consent of the Borrower shall not be required if an Event of Default shall have occurred and be continuing, (ii) except in the case of an assignment to another Lender, an Affiliate of such Lender or a Related Fund of such Lender, the amount of the Loans or Commitments of the assigning Lender subject to such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall be an amount not less than $5,000,000 and an integral multiple of $1,000,000 or shall be the entire remaining amount of such Loans or Commitments held by such assigning Lender, (iii) unless the assignor ceases to be a Lender, the aggregate amount of the Loans owing to and unused Commitments of such Lender after giving effect to such assignment shall be not less than $5,000,000, (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 (except that no such processing and registration fee shall be payable in the case of an assignee which is already a Lender, an Affiliate of such Lender or a Related Fund of any Lender), and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof unless agreed otherwise by the Administrative Agent, (i) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (ii) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall 100 cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as to any Fees accrued for its account and not yet paid). (c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that the outstanding balance of its Loans and its Commitments, in each case without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or thereto, or the financial condition of the Borrower or any other Loan Party or the performance or observance by the Borrower or any other Loan Party of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received copies of this Agreement and the other Loan Documents, together with copies of the most recent financial statements delivered pursuant to this Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at its address referred to in subsection 9.01 a copy of each Assignment and Acceptance delivered to it and a register (the "REGISTER") for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Swiss Borrower, 101 the Administrative Agent and the Lenders shall treat each person whose name is recorded in the Register as the owner of Commitments and the Loans recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, the Swiss Borrower, any Lender and their representatives (including counsel and accountants), at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above and, if required, the written consent of the Borrower and the Administrative Agent to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Lenders. Notwithstanding anything to the contrary contained herein, no assignment under Section 9.04(b) of any rights or obligations shall be effective unless and until the Administrative Agent shall have recorded such assignment in the Register. The Administrative Agent shall record the name of the transferor, the name of the transferee, and the amount of the transfer in the Register after receipt of all documents required pursuant to this Section 9.04 and such other documents as the Administrative Agent may reasonably request. (f) Each Lender may without the consent of the Borrower, the Swiss Borrower or the Administrative Agent sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other entities shall be entitled to the benefit of the cost protection provisions contained in Section 2.13, 2.15, 2.19 and 9.05 to the same extent as if they were Lenders; PROVIDED that no such participating bank or entity shall be entitled to receive any greater amount pursuant to such Sections than a Lender would have been entitled to receive in respect of the amount of the participation sold by such Lender to such participating bank or entity had no sale occurred, and (iv) the Borrower, the Swiss Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower or any other Loan Party, as the case may be, relating to its Loans and Fees and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document (other than amendments, modifications or waivers decreasing any Fee payable hereunder or the amount of principal of or the rate at which interest is payable on the Loans, extending any final maturity date or increasing any Commitment, in 102 each case in respect of an Obligation in which the relevant participating bank or entity is participating, or releasing all or substantially all of the Collateral or any Guarantor (other than a Subsidiary which is not a Significant Subsidiary) from its Guarantee Agreement unless all or substantially all the Capital Stock of such Guarantor is sold in a transaction permitted by this Agreement or as provided in Section 9.18). Each Lender will disclose the identity of its participants to the Borrower and Administrative Agent if requested by the Borrower or the Administrative Agent. (g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower or any other Loan Party furnished to such Lender by or on behalf of the Borrower or any Loan Party; PROVIDED that, prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree to be bound by Section 9.17. (h) Any Lender may at any time assign all or any portion of its rights under this Agreement to a Federal Reserve Bank, and any Lender that is a fund that invests in bank loans may, without the consent of the Administrative Agent or the Borrower, pledge all or any portion of its Loans and Notes, if any, to any trustee for, or any other representative of, holders of obligations owed, or securities issued, by such fund, as security for such obligations or securities; PROVIDED that any foreclosure or similar action by such trustee shall be subject to the provisions of this Section concerning assignments; PROVIDED FURTHER that no such assignment shall release a Lender from any of its obligations hereunder. In order to facilitate such an assignment to a Federal Reserve Bank or to any trustee or other representative, the Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made to the Borrower by the assigning Lender hereunder. (i) None of UCAR, the Borrower and the other Credit Parties shall assign or delegate any of its rights or duties hereunder and any attempted assignment shall be null and void. SECTION 9.05. EXPENSES; INDEMNITY. (a) The Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the Administrative Agent and the Collateral Agent in connection with the preparation of this Agreement and the other Loan Documents, or by the Administrative Agent or the Collateral Agent in connection with the syndication of the Commitments or the administration of this Agreement (including expenses incurred in connection with ongoing Collateral examination to the extent incurred with the reasonable prior approval of the Borrower) or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions hereby contemplated 103 shall be consummated) or incurred by the Administrative Agent, the Collateral Agent or any Lender in connection with the enforcement or protection of their rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made hereunder, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent and the Collateral Agent, and, in connection with any such enforcement or protection, the reasonable fees, charges and disbursements of any other counsel (including the reasonable allocated costs of internal counsel if a Lender elects to use internal counsel in lieu of outside counsel) for the Administrative Agent or any Lender (but no more than one such counsel for any Lender). (b) The Borrower agrees to indemnify the Administrative Agent, the Collateral Agent each Lender and each of their respective directors, trustees, officers, employees and agents (each such person being called an "INDEMNITEE") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto and thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated hereby and thereby, (ii) the use of the proceeds of the Loans or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; PROVIDED that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee (treating, for this purpose only, the Administrative Agent, or any Lender and its directors, trustees, officers and employees as a single Indemnitee). Subject to and without limiting the generality of the foregoing sentence, the Borrower agrees to indemnify each Indemnitee against, and hold each Indemnitee harmless from, any Environmental Claim, and any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel or consultant fees, charges and disbursements, incurred by or asserted against any Indemnitee (and arising out of, or in any way connected with or as a result of, any of the events described in clause (i), (ii) or (iii) of the preceding sentence) arising out of, in any way connected with, or as a result of (A) any Environmental Claim related in any way to UCAR, the Borrower or any Subsidiary, (B) any violation of any Environmental Law, (C) any act, omission, event or circumstance (including the actual, proposed or threatened, Release, removal, presence, disposition, discharge or transportation, storage, holding, existence, generation, processing, abatement, handling or presence on, into, from or under any present, past or future property of UCAR, the Borrower or any Subsidiary of any Hazardous 104 Material); PROVIDED that such indemnity shall not, as to any Indemnitee, be available to the extent that such Environmental Claim is, or such losses, claims, damages, liabilities or related expenses are, determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee or any of its directors, trustees, officers or employees. The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent or any Lender. All amounts due under this Section 9.05 shall be payable on written demand therefor. (c) Unless an Event of Default shall have occurred and be continuing, the Borrower shall be entitled to assume the defense of any action for which indemnification is sought hereunder with counsel of its choice at its expense (in which case the Borrower shall not thereafter be responsible for the fees and expenses of any separate counsel retained by an Indemnitee except as set forth below); PROVIDED, HOWEVER, that such counsel shall be reasonably satisfactory to each such Indemnitee. Notwithstanding the Borrower's election to assume the defense of such action, each Indemnitee shall have the right to employ separate counsel and to participate in the defense of such action, and the Borrower shall bear the reasonable fees, costs and expenses of such separate counsel, if (i) the use of counsel chosen by the Borrower to represent such Indemnitee would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the Borrower and such Indemnitee and such Indemnitee shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Borrower (in which case the Borrower shall not have the right to assume the defense or such action on behalf of such Indemnitee); (iii) the Borrower shall not have employed counsel reasonably satisfactory to such Indemnitee to represent it within a reasonable time after notice of the institution of such action; or (iv) the Borrower shall authorize such Indemnitee to employ separate counsel at the Borrower's expense. The Borrower will not be liable under this Agreement for any amount paid by an Indemnitee to settle any claims or actions if the settlement is entered into without the Borrower's consent, which consent may not be withheld or delayed unless such settlement is unreasonable in light of such claims or actions against, and defenses available to, such Indemnitee. (d) Notwithstanding anything to the contrary in this Section 9.05, this Section 9.05 shall not apply to taxes, it being understood that the Borrower's only obligations with respect to taxes shall arise under Sections 2.13 and 2.19. SECTION 9.06. RIGHT OF SETOFF. If an Event of Default shall have occurred and be continuing, each Lender is hereby 105 authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower or the Swiss Borrower against any of and all the obligations of the Borrower or the Swiss Borrower now or hereafter existing under this Agreement or any other Loan Document held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 9.06 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT UNDER THE EXISTING CREDIT AGREEMENT AND AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 9.08. WAIVERS; AMENDMENT. (a) No failure or delay of the Administrative Agent, or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by UCAR, the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on UCAR, the Borrower or any other Loan Party in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by UCAR, the Borrower, the Swiss Borrower and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by each party thereto and the Collateral Agent and consented to by the Required Lenders; PROVIDED, HOWEVER, that no such agreement shall (i) decrease the principal amount of, or extend the final maturity of, or decrease the rate of interest on, any Loan without the prior written consent of each Lender directly affected thereby, (ii) extend any Installment Date (other than any final maturity), or extend any date on which payment of interest on any Loan is due, without the 106 prior written consent of Lenders holding Loans representing at least 80% of the aggregate principal amount of each Tranche affected by such action, (iii) advance any Installment Date without the prior written consent of Lenders holding Loans representing at least 80% of the aggregate principal amount of the then outstanding Loans, (iv) increase or extend the Commitment of any Lender or decrease the Commitment Fees or other fees of any Lender without the prior written consent of such Lender, (v) effect any waiver, amendment or modification that by its terms adversely affects the rights in respect of payments or collateral of Lenders participating in any Class differently from those of Lenders participating in the other Class, without the consent of a majority in interest of the Lenders participating in the adversely affected Class, or change the relative rights in respect of payments or collateral of the Lenders participating in different Classes without the consent of a majority in interest of Lenders participating in each affected Class, (vi) release Collateral, in one transaction or a series of transactions, representing in the aggregate (based on the book value of such released Collateral) more than 10% of the book value of Total Assets set forth in UCAR's most recent consolidated financial statements delivered pursuant to Section 5.04 but less than all or substantially all the Collateral, without the prior written consent of the Designated Lenders or (vii) amend or modify the provisions of Section 2.09(f), Section 2.11(b) or Section 2.16, the provisions of this Section or the definition of "Required Lenders", or release all or substantially all the Collateral or release any Guarantor (other than any Subsidiary which is not a Significant Subsidiary) from its Guarantee Agreement unless all or substantially all the Capital Stock of such Guarantor is sold in a transaction permitted by this Agreement or as provided in Section 9.18, without the prior written consent of each Lender adversely affected thereby; PROVIDED FURTHER that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Collateral Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent or the Collateral Agent acting as such at the effective date of such agreement, as the case may be. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08 shall bind any assignee of such Lender. SECTION 9.09. INTEREST RATE LIMITATION. Notwith standing anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges which are treated as interest under applicable law (collectively the "CHARGES"), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender, shall exceed the maximum lawful rate (the "MAXIMUM RATE") which may be contracted for, charged, taken, received or reserved by such Lender in accordance with applicable law, the rate of interest payable hereunder, together with all Charges payable to such Lender, shall be limited to the Maximum Rate; PROVIDED that such excess amount 107 shall be paid to such Lender on subsequent payment dates to the extent not exceeding the legal limitation. SECTION 9.10. ENTIRE AGREEMENT. This Agreement, the other Loan Documents and the agreements regarding certain Fees referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents. SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11. SECTION 9.12. SEVERABILITY. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 9.13. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 9.03. SECTION 9.14. HEADINGS. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 9.15. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each of UCAR, the Borrower and the Swiss Borrower hereby irrevocably and unconditionally submits, for itself and its 108 property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against UCAR, the Borrower, the Swiss Borrower or any other Loan Party or their properties in the courts of any jurisdiction. (b) Each of UCAR, the Borrower and the Swiss Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.16. CONVERSION OF CURRENCIES. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum due hereunder or under any other Loan Document in Dollars into another currency, the parties hereto agree, to the fullest extent that they may legally and effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase Dollars with such other currency in New York, New York, on the Business Day immediately preceding the day on which final judgment is given. (b) The obligations of UCAR, the Borrower and the Swiss Borrower in respect of any sum due to the Administrative Agent or any Lender hereunder or under any other Loan Document in Dollars shall, to the extent permitted by applicable law, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Business Day following receipt of any sum adjudged to be so due in the judgment currency, the Administrative Agent or such Lender may in accordance with normal banking procedures purchase Dollars in the amount originally due to the 109 Administrative Agent or such Lender with the judgment currency. If the amount of Dollars so purchased is less than the sum originally due to the Administrative Agent or such Lender, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or such Lender against the resulting loss. SECTION 9.17. CONFIDENTIALITY. Each of the Lenders and the Administrative Agent agrees that it shall maintain in confidence any information relating to UCAR, the Borrower and the other Loan Parties furnished to it by or on behalf of UCAR, the Borrower or the other Loan Parties (other than information that (a) has become generally available to the public other than as a result of a disclosure by such party, (b) has been independently developed by such Lender or the Administrative Agent without violating this Section 9.17 or (c) was available to such Lender or the Administrative Agent from a third party having, to such person's knowledge, no obligations of confidentiality to UCAR, the Borrower or any other Loan Party) and shall not reveal the same other than (i) to its directors, trustees, officers, employees and advisors with a need to know (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.17) and (ii) as contemplated by Section 9.04(g), except: (A) to the extent necessary to comply with law or any legal process or the requirements of any Governmental Authority or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, (B) as part of normal reporting or review procedures to Governmental Authorities, (C) to its parent companies, Affiliates or auditors (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.17) and (D) in order to enforce its rights under any Loan Document in a legal proceeding. SECTION 9.18. RELEASE OF LIENS AND GUARANTEES. In the event that UCAR, the Borrower or any Subsidiary conveys, sells, leases, assigns, transfers or otherwise disposes of all or any portion of any of the Capital Stock, assets or property of UCAR, the Borrower or any of the Subsidiaries in a transaction not prohibited by Section 6.05, the Administrative Agent and the Collateral Agent shall promptly (and the Lenders hereby authorize the Administrative Agent and the Collateral Agent to) take such action and execute any such documents as may be reasonably requested by the Borrower and at the Borrower's expense to release any Liens created by any Loan Document in respect of such Capital Stock, assets or property, and, in the case of a disposition of all or substantially all the Capital Stock or assets of any Subsidiary Guarantor, terminate such Subsidiary Guarantor's obligations under any Guarantee Agreements to which it is a party. In addition, the Administrative Agent and the Collateral Agent agree to take such actions as are reasonably requested by the Borrower and at the Borrower's expense to terminate the Liens and security interests created by the Loan Documents when all the Obligations are paid in full and Commitments are terminated. Any representation, warranty or covenant contained in any Loan Document relating to any such 110 Capital Stock, assets, property or Subsidiary shall no longer be deemed to be made once such Capital Stock, assets or property is conveyed, sold, leased, assigned, transferred or disposed of. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. UCAR INTERNATIONAL INC., by /S/ CORRADO F. DEGASPERIS ------------------------------- Name: Corrado F. DeGasperis Title: Controller 111 UCAR GLOBAL ENTERPRISES INC., by /S/ CORRADO F. DEGASPERIS ------------------------------- Name: Corrado F. DeGasperis Title: Controller UCAR S.A., by /S/ CORRADO F. DEGASPERIS ------------------------------- Name: Corrado F. DeGasperis Title: Attorney-in-Fact THE CHASE MANHATTAN BANK, individually and as Administrative Agent and Collateral Agent, by /S/ MARIAN N. SCHULMAN ------------------------------- Name: Marian N. Schulman Title: Vice President 112 LENDER ADDENDUM The undersigned Lender (i) agrees to all the provisions of the Credit Agreement dated as of November 10, 1998, among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation (the "BORROWER"), UCAR, S.A., the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent and as Collateral Agent, Credit Suisse First Boston, as Syndication Agent and Morgan Guaranty Trust Company of New York, as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), and (ii) becomes a party thereto, as a Lender, with obligations applicable to such Lender thereunder, including, without limitation, the obligation to make extensions of credit to the Borrower in an aggregate principal amount not to exceed the amount of its U.S. Term Loan Commitment and to UCAR S.A. in an aggregate principal amount not to exceed the amount of its Swiss Term Loan Commitment, as set forth opposite the undersigned Lender's name in Schedule 2.01 to the Credit Agreement, as such amount may be changed from time to time as provided in the Credit Agreement. Capitalized terms defined in the Credit Agreement shall have their respective defined meanings herein. CREDIT SUISSE FIRST BOSTON ------------------------------- (Name of Lender) By: CHRIS T. HORGAN --------------------------- Name: Chris T. Horgan Title: Vice President By: KRISTIN LEPRI --------------------------- Name: Kristin Lepri Title: Associate Dated as of November 10, 1998 113 LENDER ADDENDUM The undersigned Lender (i) agrees to all the provisions of the Credit Agreement dated as of November 10, 1998, among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation (the "BORROWER"), UCAR, S.A., the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent and as Collateral Agent, Credit Suisse First Boston, as Syndication Agent and Morgan Guaranty Trust Company of New York, as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), and (ii) becomes a party thereto, as a Lender, with obligations applicable to such Lender thereunder, including, without limitation, the obligation to make extensions of credit to the Borrower in an aggregate principal amount not to exceed the amount of its U.S. Term Loan Commitment and to UCAR S.A. in an aggregate principal amount not to exceed the amount of its Swiss Term Loan Commitment, as set forth opposite the undersigned Lender's name in Schedule 2.01 to the Credit Agreement, as such amount may be changed from time to time as provided in the Credit Agreement. Capitalized terms defined in the Credit Agreement shall have their respective defined meanings herein. MORGAN GUARANTY TRUST COMPANY OF NEW YORK ------------------------------------ (Name of Lender) By: C. KUNHARDT -------------------------------- Name: C. Kunhardt Title: Vice President Dated as of November 10, 1998 114 LENDER ADDENDUM The undersigned Lender (i) agrees to all the provisions of the Credit Agreement dated as of November 10, 1998, among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation (the "BORROWER"), UCAR, S.A., the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent and as Collateral Agent, Credit Suisse First Boston, as Syndication Agent and Morgan Guaranty Trust Company of New York, as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), and (ii) becomes a party thereto, as a Lender, with obligations applicable to such Lender thereunder, including, without limitation, the obligation to make extensions of credit to the Borrower in an aggregate principal amount not to exceed the amount of its U.S. Term Loan Commitment and to UCAR S.A. in an aggregate principal amount not to exceed the amount of its Swiss Term Loan Commitment, as set forth opposite the undersigned Lender's name in Schedule 2.01 to the Credit Agreement, as such amount may be changed from time to time as provided in the Credit Agreement. Capitalized terms defined in the Credit Agreement shall have their respective defined meanings herein. BANKBOSTON N.A. -------------------------- (Name of Lender) By: HARVEY H. THAYER ---------------------- Name: Harvey H. Thayer Title: Managing Director Dated as of November 10, 1998 115 LENDER ADDENDUM The undersigned Lender (i) agrees to all the provisions of the Credit Agreement dated as of November 10, 1998, among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation (the "BORROWER"), UCAR, S.A., the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent and as Collateral Agent, Credit Suisse First Boston, as Syndication Agent and Morgan Guaranty Trust Company of New York, as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), and (ii) becomes a party thereto, as a Lender, with obligations applicable to such Lender thereunder, including, without limitation, the obligation to make extensions of credit to the Borrower in an aggregate principal amount not to exceed the amount of its U.S. Term Loan Commitment and to UCAR S.A. in an aggregate principal amount not to exceed the amount of its Swiss Term Loan Commitment, as set forth opposite the undersigned Lender's name in Schedule 2.01 to the Credit Agreement, as such amount may be changed from time to time as provided in the Credit Agreement. Capitalized terms defined in the Credit Agreement shall have their respective defined meanings herein. THE BANK OF NOVA SCOTIA --------------------------- (Name of Lender) By: JAMES R. TRIMBLE ----------------------- Name: James R. Trimble Title: Sr. Relationship Manager Dated as of November 10, 1998 116 LENDER ADDENDUM The undersigned Lender (i) agrees to all the provisions of the Credit Agreement dated as of November 10, 1998, among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation (the "BORROWER"), UCAR, S.A., the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent and as Collateral Agent, Credit Suisse First Boston, as Syndication Agent and Morgan Guaranty Trust Company of New York, as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), and (ii) becomes a party thereto, as a Lender, with obligations applicable to such Lender thereunder, including, without limitation, the obligation to make extensions of credit to the Borrower in an aggregate principal amount not to exceed the amount of its U.S. Term Loan Commitment and to UCAR S.A. in an aggregate principal amount not to exceed the amount of its Swiss Term Loan Commitment, as set forth opposite the undersigned Lender's name in Schedule 2.01 to the Credit Agreement, as such amount may be changed from time to time as provided in the Credit Agreement. Capitalized terms defined in the Credit Agreement shall have their respective defined meanings herein. Balanced High-Yield Fund II Ltd., By: BHF-BANK AKTIENGESELLSCHAFT, acting through its New York Branch, as attorney-in-fact --------------------------- (Name of Lender) By: LINDA PACE --------------------------- Name: Linda Pace Title: Vice President By: ANTHONY HEYMAN --------------------------- Name: Anthony Heyman Title: Assistant Vice President Dated as of November 10, 1998 117 LENDER ADDENDUM The undersigned Lender (i) agrees to all the provisions of the Credit Agreement dated as of November 10, 1998, among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation (the "BORROWER"), UCAR, S.A., the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent and as Collateral Agent, Credit Suisse First Boston, as Syndication Agent and Morgan Guaranty Trust Company of New York, as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), and (ii) becomes a party thereto, as a Lender, with obligations applicable to such Lender thereunder, including, without limitation, the obligation to make extensions of credit to the Borrower in an aggregate principal amount not to exceed the amount of its U.S. Term Loan Commitment and to UCAR S.A. in an aggregate principal amount not to exceed the amount of its Swiss Term Loan Commitment, as set forth opposite the undersigned Lender's name in Schedule 2.01 to the Credit Agreement, as such amount may be changed from time to time as provided in the Credit Agreement. Capitalized terms defined in the Credit Agreement shall have their respective defined meanings herein. INTEGRITY LIFE INS --------------------------- (Name of Lender) By: EDWARD L. ZEMER ------------------------ Name: Edward L. Zemer Title: CFO Dated as of November 10, 1998 118 LENDER ADDENDUM The undersigned Lender (i) agrees to all the provisions of the Credit Agreement dated as of November 10, 1998, among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation (the "BORROWER"), UCAR, S.A., the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent and as Collateral Agent, Credit Suisse First Boston, as Syndication Agent and Morgan Guaranty Trust Company of New York, as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), and (ii) becomes a party thereto, as a Lender, with obligations applicable to such Lender thereunder, including, without limitation, the obligation to make extensions of credit to the Borrower in an aggregate principal amount not to exceed the amount of its U.S. Term Loan Commitment and to UCAR S.A. in an aggregate principal amount not to exceed the amount of its Swiss Term Loan Commitment, as set forth opposite the undersigned Lender's name in Schedule 2.01 to the Credit Agreement, as such amount may be changed from time to time as provided in the Credit Agreement. Capitalized terms defined in the Credit Agreement shall have their respective defined meanings herein. CIBC INC. --------------------------- (Name of Lender) By: IHOR ZALUCKYJ ------------------------ Name: Ihor Zaluckyj Title: Executive Director CIBC Oppenheimer Corp., AS AGENT Dated as of November 10, 1998 119 LENDER ADDENDUM The undersigned Lender (i) agrees to all the provisions of the Credit Agreement dated as of November 10, 1998, among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation (the "BORROWER"), UCAR, S.A., the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent and as Collateral Agent, Credit Suisse First Boston, as Syndication Agent and Morgan Guaranty Trust Company of New York, as Syndication Agent (as the same may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), and (ii) becomes a party thereto, as a Lender, with obligations applicable to such Lender thereunder, including, without limitation, the obligation to make extensions of credit to the Borrower in an aggregate principal amount not to exceed the amount of its U.S. Term Loan Commitment and to UCAR S.A. in an aggregate principal amount not to exceed the amount of its Swiss Term Loan Commitment, as set forth opposite the undersigned Lender's name in Schedule 2.01 to the Credit Agreement, as such amount may be changed from time to time as provided in the Credit Agreement. Capitalized terms defined in the Credit Agreement shall have their respective defined meanings herein. PNC BANK, NATIONAL ASSOCIATION --------------------------- (Name of Lender) By: MARK W. RUTHERFORD ----------------------- Name: Mark W. Rutherford Title: Vice President Dated as of November 10, 1998 SCHEDULE A - -------------------------------------------------------------------- PERMITTED OTHER ACQUISITIONS AND SPECIFIED EXCESS CASH FLOW PERMITTED LEVERAGE RATIO SWEEP PERCENTAGE TRANSACTIONS - -------------------------------------------------------------------- - -------------------------------------------------------------------- greater than or equal to 75% $75,000,000 2.75:1.0 - -------------------------------------------------------------------- - -------------------------------------------------------------------- greater than or equal to 2.5:1.0 50% $75,000,000 and less than 2.75:1.0 - -------------------------------------------------------------------- - -------------------------------------------------------------------- greater than or equal to 2.0:1.0 50% $100,000,000 and less than 2.5:1.0 - -------------------------------------------------------------------- - -------------------------------------------------------------------- less than 2.0:1.0 50% $125,000,000 - -------------------------------------------------------------------- The applicable percentage of Excess Cash Flow referred to in Section 2.12(e) and the aggregate amount of Permitted Other Acquisitions and Specified Permitted Transactions for any date shall be determined by reference to the Leverage Ratio as of the last day of the fiscal quarter most recently ended as of such date and for the period (the "MEASURED PERIOD") referred to in Section 6.12 for which such last day is the measuring date (and computed as provided in Section 6.12 with respect to each such Measured Period), and any change shall become effective upon the delivery to the Administrative Agent of a certificate of the Borrower signed by a Responsible Officer of the Borrower (which certificate may be delivered prior to delivery of the relevant financial statements) with respect to the financial statements to be delivered pursuant to Section 5.04 for the most recently ended fiscal quarter (a) setting forth in reasonable detail the calculation of the Leverage Ratio for such Measured Period and at the end of such fiscal quarter and (b) stating that the signer has reviewed the terms of this Agreement and other Loan Documents and has made, or caused to be made under his or her supervision, a review in reasonable detail of the transactions and condition of UCAR, the Borrower and the Subsidiaries during the accounting period, and that the signer does not have knowledge of the existence as at the date of such officer's certificate of any Event of Default or Default and shall apply on and after such delivery date. It is understood that the foregoing certificate of a Responsible Officer shall be permitted to be delivered prior to, but in no event later than, the time of the actual delivery of the financial statements required to be delivered pursuant to Section 5.04. Notwithstanding the foregoing, at any time during which the Borrower has failed to deliver the certificate required under Section 5.04(c) with respect to a fiscal quarter following the date the delivery thereof is due, the Leverage Ratio shall be deemed, solely for the purposes of this Schedule A, to be greater than 2.75, until such time as Borrower shall deliver such compliance certificate. Schedule 2.01
LENDERS AND COMMITMENTS INSTITUTION SWISS TERM LOAN U.S. TERM LOAN TOTAL COMMITMENTS COMMITMENTS COMMITMENTS THE CHASE MANHATTAN BANK $30,694,444.45 $45,138,888.89 $75,833,333.34 CREDIT SUISSE FIRST BOSTON 15,515,873.01 22,817,460.32 38,333,333.33 MORGAN GUARANTY TRUST COMPANY OF NEW YORK 15,515,873.01 22,817,460.32 38,333,333.33 ARM FINANCIAL 4,047,619.05 5,952,380.95 10,000,000.00 BANKBOSTON, N.A. 4,047,619.05 5,952,380.95 10,000,000.00 THE BANK OF NOVA SCOTIA 6,071,428.57 8,928,571.43 15,000,000.00 BALANCED HIGH-YIELD FUND II LTD., BY: BHF-BANK AKTIENGESELLSCHAFT 2,023,809.52 2,976,190.48 5,000,000.00 CIBC INC. 4,047,619.05 5,952,380.95 10,000,000.00 PNC BANK, NATIONAL ASSOCIATION 3,035,714.29 4,464,285.71 7,500,000.00 TOTAL: $85,000,000.00 $125,000,000.00 $210,000,000.00 - ------
SCHEDULE 3.08 of UCAR International Inc. and Outstanding Subscriptions, Options and Warrants - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION INTERNATIONAL INC. - -------------------------------------------------------------------------------- 1. UCAR Global Delaware 100% Enterprises Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR GLOBAL NAME OF SUBSIDIARY INCORPORATION ENTERPRISES INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2. UCAR Carbon Company Inc. Delaware 100% 3. UCAR Holdings II Inc. Delaware 100% 4. UCAR Carbon S.A. Brazil 95.30% 5. UCAR S.A. Switzerland 99.9%(a) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR CARBON NAME OF SUBSIDIARY INCORPORATION COMPANY INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 6. UCAR Holdings Inc. Delaware 100% 7. UCAR Limited United Kingdom 100%(b) 8. EMSA (Pty.) Ltd. South Africa 100%(c) 9. Carbographite Limited South Africa 100%(c) 10. UCAR International Trading Inc. Delaware 100% 11. UCAR Carbon Technology Corporation Delaware 100% 12. UCAR Carbon Foreign Sales Virgin Islands 100% Corporation 13. UCAR Composites California 100% Inc. 14. Union Carbide Grafito, Inc. New York 100% 15. Unicarbon Brazil 100% Comercial Ltda. 16. UCAR Carbon (Malaysia) Sdn. Bhd. Malaysia 100% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS II - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 17. UCAR Holdings III Delaware 100% Inc. 18. UCAR Holdings S.A. France 100%(d) 19. UCAR Electrodos, Spain 100%(e) S.L. 20. UCAR Inc. Canada 100% 21. UCAR Elektroden Germany 70% GmbH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS GMBH - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 22. UCAR Grafit OAO Russia 96.27% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 23. UCAR Mexicana, S.A. de C.V. Mexico 100%(f) 24. UCAR S.p.A. Italy 100%(g) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS S.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 25. UCAR S.N.C. France 100%(h) 26. Carbone Savoie France 70% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION MEXICANA, S.A. DE C.V. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 27. UCAR Carbon Mexicana, S.A. de C.V. Mexico 100%(i) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR CARBON NAME OF SUBSIDIARY INCORPORATION MEXICANA, S.A. DE C.V. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 28. Servicios Administratoes Carmex, Mexico 99.9% S.A. de C.V. 29. Servicios DYC, S.A. de C.V. Mexico 99.9% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF NAME OF SUBSIDIARY INCORPORATION OWNERSHIP BY UCAR S.P.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 30. UCAR Energia S.r.l. Italy 100% 31. UCAR Specialties Italy 100% S.r.l. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR CARBON NAME OF SUBSIDIARY INCORPORATION S.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 32. UCAR Produtos de Carbono S.A. Brazil 99.9% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UNICARBON NAME OF SUBSIDIARY INCORPORATION COMERCIAL LTDA. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 33. UCAR Carbon S.A. Brazil 2.33% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF NAME OF SUBSIDIARY INCORPORATION OWNERSHIP BY UCAR S.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 34. UCAR Holding GmbH Austria 100% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (a) 99.9% owned by UCAR Global Enterprises Inc. Nominees own three shares of UCAR S.A. (b) 99.9% owned by UCAR Carbon Company Inc. A nominee owns one share of UCAR Limited. (c) On April 21, 1997, UCAR Carbon Company Inc. (the "Company") purchased the 50% interest in EMSA (Pty.) Ltd. ("EMSA") and Carbographite Limited ("Carbographite") that it did not already own from Samancor Limited, a South African company. Commencing April 22, 1997, EMSA's and Carbographite's assets, liabilities and results of operations are included in the Consolidated Financial Statements. (d) 99.4% owned by UCAR Holdings II Inc. UCAR International Inc., UCAR Global Enterprises Inc., UCAR Carbon Company Inc. and three nominees each own one share of UCAR Holdings S.A. (e) 99.9% owned by UCAR Holdings II Inc. UCAR Carbon Company Inc. owns 0.1% of UCAR Electrodos S.L. (f) 99.9% owned by UCAR Holdings Inc. UCAR Carbon Company Inc. owns one share of UCAR Mexicana, S.A. de C.V. (g) 99.9% owned by UCAR Holdings Inc. and UCAR Carbon Company Inc. owns 0.1% of UCAR S.p.A. (h) 99.9% owned by UCAR Holdings S.A. UCAR Holdings III Inc. owns one share of UCAR S.N.C. (i) 99.9% owned by UCAR Mexicana, S.A. de C.V. UCAR Carbon Company Inc. owns 0.1% of UCAR Carbon Mexicana, S.A. de C.V. SCHEDULE 3.09 PENDING LITIGATION OR PROCEEDINGS ANTITRUST CASES AND PROCEEDINGS DOFASCO INC. V. UCAR CARBON CANADA INC., ET AL., Court File No. 98-CV-149864, Ontario Court (General Division), Canada. This case has been settled in principle. An agreement is being prepared and the case has not yet been dismissed. ELLWOOD QUALITY STEELS CO. V. SGL CARBON CORPORATION, ET AL., Civil Action No. 98-1063 (United States District Court for the Western District of Pennsylvania). This case has been settled in principle. An agreement is being prepared and the case has not yet been dismissed. NUCOR CORP. V. THE CARBIDE GRAPHITE GROUP, INC., ET AL., Civil Action No. 98- 1789 (United States District Court for the Eastern District of Pennsylvania). This case has been settled. An agreement has been signed but the case has not yet been dismissed. REPUBLIC ENGINEERED STEELS, INC. V. SHOWA DENKO CARBON, INC., ET AL., Civil Action No. 98 CV-0902 (United States District Court for the Northern District of Ohio, Eastern Division (Akron)). This case has been settled in principle. An agreement is being prepared and the case has not yet been dismissed. IN RE GRAPHITE ELECTRODES ANTITRUST LITIGATION, Master File No. 97-CV-4182 (United States District Court for the Eastern District of Pennsylvania). This case has been settled. An agreement has been signed and the class has been conditionally certified. The opt-out period expires on November 27, 1998. The settlement has been preliminarily approved by the Court, with final approval expected in December 1998. The case has not yet been dismissed. IN RE SIMETCO, INC., Case No. 93-61772 (United States Bankruptcy Court for the Northern District of Ohio at Canton). Motion by bankruptcy trustee (representing debtor SiMETCO, Inc.) for a Rule 2004 Examination. SHAREHOLDER DERIVATIVE CASE JAROSLAWICZ V. KRASS, ET AL., CV-98-033117 S (Conn. Super. Ct., J.D. of Stamford-Norwalk); SECURITIES CLASS ACTION IN RE UCAR INTERNATIONAL INC. SECURITIES LITIGATION, 98-CV-0600 (JBA)(United States District Court for the District of Connecticut) ANTITRUST INVESTIGATIONS The Directorate General IV of the European Union, the antitrust enforcement authorities of the European Union (the "EU authorities"), is conducting an investigation into whether graphite electrode producers, including the Borrower's French subsidiary, violated Article 85-1 of the Treaty of Rome, the antitrust law of the European Union. The Canadian Competition Bureau (the "Competition Bureau") has commenced a criminal investigation as to whether there has been any violation of the Canadian Competition Act (the "Canadian Act") by producers of graphite electrodes. Under Section 45 of the Canadian Act, the maximum fine is Cdn$10 million. Under Section 46 of the Canadian Act, the amount of the fine is discretionary and there is no maximum. UCAR and its subsidiaries have been required by the Competition Bureau to produce documents and witnesses in Canada. UCAR believes that Japanese antitrust authorities have commenced an investigation of producers and distributors of graphite electrodes. Neither UCAR nor its subsidiaries have any facilities or employees in Japan or have sold a material quantity of graphite electrodes in Japan. The independent distributor of their products in Japan has been required to produce documents and witnesses in Japan. THREATENED LITIGATION UCAR and its subsidiaries have received oral and written notices or claims from various domestic and foreign customers concerning recovery for alleged violations of antitrust laws. SCHEDULE 3.14 CREDIT AGREEMENT TAXES (a) None. (b) UCAR has waived or extended the statutes of limitation in the following jurisdictions: EXTENSION JURISDICTION YEAR ENTITY DATE Federal 1993 UCAR Carbon Company, Inc. and Subsidiaries 3/31/99 Federal 1994 UCAR International Inc. Consolidated Group 3/31/99 California 1994 UCAR International Inc. Unitary Group 3/15/00 New York 1992/93 UCAR Carbon Company Inc. 6/30/99 New York 1994 UCAR Carbon Company Inc. 12/31/99 (c) UCAR INTERNATIONAL INC. UCAR is currently under federal income tax audit for the years 1993, 1994 and 1995. No adjustment has been proposed by the IRS as of the Effective Date. UCAR S.P.A. UCAR S.p.A. has appeals still outstanding for the years 1972 and 1975. The results of a tax inspection covering the years 1986 and 1987, completed on April 20, 1989, are still pending. In addition, UCAR S.p.A. has appeals outstanding for the year 1989 that are expected to close without any payment. UCAR S.p.A. has accrued ITL 2,400 million (approx. $1,456,000) which it believes will adequately cover the estimated tax liabilities related to all pending tax appeals for UCAR S.p.A. (d) None, other than included in paragraph (c). SCHEDULE 3.17 CREDIT AGREEMENT ENVIRONMENTAL MATTERS Union Carbide Corporation had a license to process radioactive material at UCAR's current Lawrenceburg, Tennessee site ("UCAR Lawrenceburg") and did so in the 1960's and 1970's. The process was shut down and the license was closed in the mid-1970's. The Nuclear Regulatory Commission ("NRC") has been reviewing closed licenses to determine if additional clean-up is warranted. the NRC reviewed its records for the UCAR Lawrenceburg site and mandated that testing be conducted to ascertain whether regulated levels of residual radiological contamination exist there. Samples of the soil, water and surfaces at UCAR Lawrenceburg were collected and analyzed. UCAR hired a radiological remediation contractor, Nuclear Fuel Services ("NFS"), to review the analytical data and determine whether contamination is present. NFS has reported to UCAR that, based upon its review of the data collected, levels of contamination are above current NRC closure criteria. UCAR commissioned NFS to develop a draft decommissioning plan which was submitted to the NRC on August 20, 1998. The NRC is currently reviewing the plan but has not indicated when we may expect their comments. The plan may need to be modified based on the NRC's comments. Based upon cost estimates received from NFS, UCAR has accrued a liability in the amount of $1,300,000 to cover the cost to this clean-up and related fees and expenses. Schedule 3.18 to Credit Agreement CAPITALIZATION 1) UCAR International Inc. (i) Authorized Capital Stock: 10,000,000 shares of Preferred Stock 100,000,000 shares of Common Stock (ii) Par Value: $.01 per share (iii) Authorized Capital Stock Issued and Outstanding (as of 10/30/98) 44,979,425 2) UCAR Global Enterprises Inc. (i) Authorized Capital Stock 1,500 shares of Common Stock (ii) Par Value $.01 per share (iii) Authorized Capital Stock Issued and Outstanding 100 shares of Common Stock SCHEDULE 3.20 CREDIT AGREEMENT LABOR MATTERS None. SCHEDULE 3.23(a) CREDIT AGREEMENT LOCATION OF REAL PROPERTY OWNER LOCATION UCAR S.N.C. Rue des Garennes F-62100 Calais France UCAR Electrodos, S.L. Carretera de Astrain S/N E-31171 Ororbia Navarra, (Espana) (Spain) UCAR Mexicana S.A. de C.V. Carretara Miguel Alemar Km. 20 #600. Ote. Apodaca, Nuera Leon Mexico 66600 Calle Miguel Barragan No. 702 Pte. Co. Industrial Entre La Calle Amado Nerro y Av. Universidad C.P. 64440 Municipio Monterrey Estado Nuevo Leon Pais Mexico UCAR Inc. 65 Canal Bank St. Welland, Ontario L3B 5R8 UCAR S.p.A. Caserta Via dell Industria 1-81100 Casseta Italy UCAR Specialties S.r.l. Strada Statale Passo del Vivione, 1 I-25040 Malonno, Brescia Italy UCAR Carbon Company Inc. Highway 43 South Lawrenceburg, TN 38464 Phillippi Pike Armoore, WV 26323 Highway 7 Santa Fe Pike Columbia, TN 38401 Hwt 79N @ Hampton Station Road Clarksville, TN 37040 3625 Highland Avenue Niagara Falls, NY 14305 Rural Route 3 Robinson, IL 62454 12900 Snow Road Parma, OH 44130 11709 Madison Avenue Lakewood, OH 44107 UNION Carbide Grafito, Inc. Yabucoa, Puerto Rico EMS (Pty.) Ltd. Kookfontein Farm Meyerton, 1960 Gauteng South Africa UCAR Productos de Carbono S.A. Estrada Salvador-Mataripe Km. 39-Candeias Brahia, Brazil 43800-000 UCAR Productos de Carbono S.A. Av. Brigadeiro Faria Lima, 1461 & UCAR S.A. 9(degree) andar-ej. 9I3e94 01451-000 Sao Paulo-SP Brazil UCAR Limited Claywheels Lane Wadsley Bridge Shiffield, S6 INF England Carbone Savoie 30, rue Louis Jouvei BP 16 Venissieux Codex F-69631 France Carbone Savoie/UCAR S.N.C. Usine de Notre-Dame-de-Braincon La Lechere F-73264 Aigueblanche Cedex France SCHEDULE 3.23(b) CREDIT AGREEMENT LOCATION OF LEASED PREMISES OWNER LOCATION UCAR S.N.C. Usine de Notre-Dame-de-Braincon La Lechere F-73264 Aigueblanche Cedex France (Lessor is Carbone Savoie) 4 Place des Estas-Unis SILIC 214 F-94518 RUNGIS, Cedex France UCAR S.A. 33 Ave. do Mont Blanc Case Postale 630 CH-1196 Gland Switzerland UCAR Electrodos, S.L. Avda Lendakari Aguirre, 11-3(degree) 35-D 43014-Bilbao Spain UCAR S.p.A. Via Dunini 28 20122, Milano UCAR Specialties S.r.l. Forno Allione: Portion of building in North section of Plan with access and connections to water and power UCAR Carbon Company Inc. 39 Old Ridgebury Road J-4 Danbury, CT 06817 UCAR Composites Inc. 5 Burroughs Irvine, CA 92718 UCAR Elektroden GmbH Herzbergstrasse 128 D-10365 Berlin Germany EMSA (Pty.) Ltd. Barphil Building 15 Loch Street Meyerton, 1960 South Africa UCAR GRAFIT OAO 35 Usacheva Street Moscow Russia 119048 UCAR International Trading Inc. Jianguo Men Wai Ave., Room 3067 Beijing, China 9 Penang Road #10-02 Park Mall Singapore Unit B on 13th Floor The Prudential Assurance Tower No. 79 Chatham Road South Tsimshatsui, Kowloon Hong Kong Schedule 4.01 Local Jurisdictions (1) Montgomery County, Tennessee (2) Maury County, Tennessee (3) Lawrence County, Tennessee (4) Cuyahoga County, Ohio (5) Crawford County, Illinois (6) Harrison County, W. Virginia (7) Niagra County, New York
SCHEDULE 6.01 - INDEBTEDNESS @ 10/30/98* * BORROWER LENDER TYPE U.S. $ OR EQUIV. UCAR CARBON S.A.(BRAZIL) UNIBANCO IMPORT FINANCE $699,611.10 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) BFB IMPORT FINANCE $589,244.96 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) BFB(1) IMPORT FINANCE $1,955,505.78 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) CCF IMPORT FINANCE $2,245,722.65 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) BOSTON(1)(2) IMPORT FINANCE $1,999,342.72 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) BFB IMPORT FINANCE $690,946.33 @ OCT 30,1998 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) UNIBANCO ACC - IMPORT/EXPORT $620,804.13 @ OCT 30,1998 FINANCING NOTE @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) UNIBANCO DISCOUNTED A/R $813,684.23 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) MERCANTIL DISCOUNTED A/R $838,306.28 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) REAL DISCOUNTED A/R $1,415,912.64 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) BOSTON DISCOUNTED A/R $1,309,364.58 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) REAL DISCOUNTED A/R $2,837,988.53 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) SUMITOMO DISCOUNTED A/R $1,192,129.28 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) TOKIO DISCOUNTED A/R $1,559,313.26 @ OCT 30,1998 SUBTOTAL BRAZIL $18,767,876.47 UCAR ELEKTRODEN(Germany) BHF FAC CREDIT AGREEMENT $10,447,400.24 @ OCT 30,1998 UCAR SPA(Italy) BANCA NATIONALE DEL LAVORO BANK GUARANTY $246,558.58 @ OCT 30,1998 UCAR SPA(Italy) BANCA COMMERCIALE ITALIANO(IMI) BANK GUARANTY $734,781.28 @ OCT 30,1998 UCAR SPA(Italy) INSTITUTO MOBLIERE ITALIANO IND DEV FINANCE $1,210,156.01 @ OCT 30,1998 UCAR SPECIALTIES SRI BANCA POPOLARE DI SONDRIO OVERDRAFT LINE $1,524,625.27 @ OCT 30,1998 UCAR GLOBAL ENTERPRISES UCAR INTERNATIONAL INTERCO LOAN $116,548,792.47 @ OCT 30,1998 UCAR GLOBAL ENTERPRISES UCAR INC.(Canada) INTERCO LOAN $5,000,000.00 @ OCT 30,1998 UCAR GLOBAL ENTERPRISES UCAR MEXICANA S.A.(Mexico) INTERCO LOAN $27,000,000.00 @ OCT 30,1998 UCAR GLOBAL ENTERPRISES UCAR HOLDINGS ll INTERCO LOAN $37,636,768.13 @ OCT 30,1998 UCAR CARBON COMPANY UCAR ELECTRODOS(Spain) INTERCO LOAN $35,171,508.63 @ OCT 30,1998 UCAR CARBON COMPANY UCAR SNC(France) INTERCO LOAN $43,400,000.00 @ OCT 30,1998 UCAR CARBON COMPANY UCAR LTD(U.K.) INTERCO LOAN $23,792,136.36 @ OCT 30,1998 UCAR CARBON COMPANY UCAR SPA(Italy) INTERCO LOAN $10,172,203.24 @ OCT 30,1998 UCAR CARBON COMPANY UCAR EMSA(So.Africa) INTERCO LOAN $29,746,183.12 @ OCT 30,1998 UCAR HOLDINGS UCAR GLOBAL ENTERPRISES INTERCO LOAN $66,470,056.09 @ OCT 30,1998 UCAR INTERNATIONAL UCAR GLOBAL ENTERPRISES INTERCO LOAN $511,565,445.00 @ OCT 30,1998 UCAR CARBON COMPANY UCAR INTERNATIONAL INTERCO LOAN(NOTE) $172,878,070.94 @ OCT 30,1998 UCAR GLOBAL ENTERPRISES UCAR CARBON COMPANY INTERCO LOAN $2,912,141.00 @ OCT 30,1998 UCAR S.A.(Switzerland) UCAR GLOBAL ENTERPRISES INTERCO LOAN $83,403,591.00 @ OCT 30,1998 UCAR CARBON S.A.(BRAZIL) UCAR PRODUCTS de CARBONO S.A. INTERCO LOAN $12,307,388.08 @ OCT 30,1998 UCAR SNC(FRANCE) CARBONE SAVOIE INTERCO LOAN $15,300,000.00 @ OCT 30,1998 UCAR SNC(FRANCE) UCAR HOLDINGS S.A.(FRANCE) INTERCO LOAN $35,365,000.00 @ OCT 30,1998
** BALANCES ARE PRESENTED AS OF10/30/98 AND ARE SUBJECT TO CHANGES IN THE ORDINARY COURSE OF BUSINESS OCCURING BETWEEN 10/30/98 AND THE EFFECTIVE DATE , WHICH ARE NOT MATERIAL. SCHEDULE 6.02 EXISTING LIENS
BRAZIL 10/16/96 TAX LITIGATION HYSTER , FORKLIFT R $ $45,000.00 STATE OF BAHIA TRUCK US $ $37,957.00 10/16/96 TAX LITIGATION HYSTER , FORKLIFT R $ $95,000.00 STATE OF BAHIA TRUCK US $ $80,132.00 8/22/97 LABOR HYSTER , FORKLIFT R $ $79,000.00 LITIGATION TRUCK US $ $66,636.00 8/22/97 LABOR HYSTER , FORKLIFT R $ $71,000.00 LITIGATION TRUCK US $ $59,888.00 TOTAL R $ $290,000.00 TOTAL US $ $244,613.00 UCAR INC. (CANADA) SECURED PARTY DESCRIPTION 1 MUNICIPAL SAVINGS & LOAN EQUIPMENT 7100 WOODBINE AVE. SUITE 400 1 KONICA 4145 COPIER MARKHAM, ONTARIO WI/RADF AND ALL PROCEEDS OF THE FOREGOING 2 AT & T CAPITAL CANADA INC. EQUIPMENT AND OTHER 900 3650 VICTORIA PARK AVE. WILLOWDALE, ONTARIO 3 AT & T CAPITAL CANADA INC. EQUIPMENT AND OTHER 600 - 3760 14TH AVE. MARKHAM, ONTARIO 4 CHASE MANHATTAN BANK OF CANADA INVENTORY, EQUIPMENT, ACCOUNTS & OTHER SUITE 6900, 100 KING STREET WEST (MOTOR VEHICLES INCLUDED) TORONTO, ONTARIO 5 MTC LEASING EQUIPMENT 3310 SOUTH SERVICE ROAD PHOTOCOPIER SYSTEM 10379-42705 BURLINGTON, ONTARIO UCAR CARBON SECURED PARTY DESCRIPTION CANADA INC. 1 MUNICIPAL FINANCIAL LEASING CORP. EQUIPMENT 7100 WOODBINE AVE. SUITE 400 1 RICOH, MODEL FT6750 COPIER & PROCEEDS MARKHAM, ONTARIO OF THE FOREGOING 2 TRIATHLON LEASING INC EQUIPMENT AND OTHER 2300 YONGE ST. SUITE 3000 (MOTOR VEHICLES INCLUDED) TORONTO, ONTARIO AND GENERAL ELECTRIC CAPITAL CANADA EQUIPMENT AND OTHER LEASING 2300 MEADOWVALE BLVD. 2ND FLOOR (MOTOR VEHICLES INCLUDED) MISSISSAUGA, ONTARIO UCAR SpA MORTGAGE AND PRIVILIGE AT ITL 2,080,000,000.00 CASERTA, ITALY PLANT FIXED ASSETS SECURING DEBT US$ 1,200,000.00 TO INSTITUTO MOBILIARE ITALIANO UCAR SNC USUAL REGISTRATIONS OF LEASING AGREEMENTS : PHOTOCOPIER AND SOFTWARE CARBONE SAVOIE USUAL REGISTRATIONS OF LEASING AGREEMENTS : COMPUTER EQUIPMENT, PHOTOCOPIERS, STAMPING EQUIPMENT, COMMERCIAL VEHICLES, TRUCKS MINORITY SHAREHOLDER HAS A RIGHT OF FIRST REFUSAL FOR PURCHASE OF UCAR'S SHARES IN CARBONE SAVOIE UCAR ELEKTRODEN GMBH MINORITY SHAREHOLDER HAS A RIGHT OF FIRST REFUSAL FOR PURCHASE OF UCAR'S SHARES IN UCAR ELEKTRODEN GMBH
SCHEDULE 6.04 CREDIT AGREEMENT INVESTMENTS None. SCHEDULE 6.07 CREDIT AGREEMENT TRANSACTIONS WITH AFFILIATES UCAR Elektroden GmbH (for purposes of the Schedule, "Elektroden") has a tolling agreement with UCAR Grafit OAO (for purposes of this Schedule, "Grafit") whereby Elektroden supplies molded ungraphitized electrodes to Grafit for graphitization and Grafit returns the graphitized electrodes, scrap and rejects to Elektroden. Under this agreement, Elektroden is required to supply up to 13,900 metric tons of ungraphitized electrodes, and, based upon shipment of 13,900 metric tons by Elektroden, Grafit is expected to return approximately 10,000 metric tons of graphitized electrodes. The tolling price paid to Grafit is 1,960 DM per metric ton for finished product. Prices for burnt scrap and rejects and graphitized scrap and rejects are 820 DM per metric ton and 1,268 DM per metric ton, respectively. The agreement expires on December 31, 1998. Carbone Savoie is a party to the following agreements involving UCAR Subsidiaries: (i) A Sub-Contracting Agreement with UCAR SNC whereby UCAR SNC manufactures all of Carbone Savoie's products. The price term of the agreement includes the cost of raw material, direct labor and variable expense. (ii) A Lease Agreement for real property whereby Carbone Savoie leases to UCAR SNC certain real property used in conjunction with UCAR SNC's obligations under the subcontracting agreement referred to in (i) above. See also Schedule 3.23(b) for reference to leased property. (iii) A Technology License Agreement whereby Carbone Savoie licenses certain technical information and patent rights to UCAR. Carbon Company Inc. (for purposes of this Schedule, `UCAR Carbon"). (iv) A Research and Development, License and Services Agreement among Carbone Savoie, UCAR Carbon and Aluminium Pecheney whereby (i) the parties agree to cooperate for their mutual benefits in certain research and development activities, (ii) UCAR Carbon licenses its technical information and patent rights for the manufacture, use and sale of certain products to Carbone Savoie, (iii) Aluminium Pecheney agrees to cooperate in the marketing and sales of certain products by Carbone Savoie and (iv) UCAR Carbon agrees to provide certain training and instruction of personnel of Carbone Savoie. The consideration for the contributions to this agreement made by Aluminium Pechiney and UCAR Carbon is a percentage of the sales of Carbone Savoie during the term of the agreement. SCHEDULE 6.09 CREDIT AGREEMENT RESTRICTIVE AGREEMENTS Pursuant to the Articles of Association of UCAR Elektroden GmbH, a vote of 75% of the votes polled at a duly convened shareholder's meeting is required to distribute profits. For purposes of such a determination, 75% of the total share capital must be represented to constitute a quorum. January 7, 1999 The undersigned institution, a Lender under the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997, and November 10, 1998, among UCAR International Inc. ("Holdco"), UCAR Global Enterprises Inc. (the "Borrower"), the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and as collateral agent (the "Restated Agreement"), and/or the Credit Agreement dated as of November 10, 1998, among Holdco, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and as collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (the "Tranche C Agreement" and collectively with the Restated Agreement, the "Credit Agreements"), hereby consents to the existence of an asserted lien on the assets of Holdco in favor of the United States Department of Justice (the "DOJ") securing the obligation of Holdco under its settlement agreement with the DOJ to pay a fine in a remaining amount of $90,000,000, constituting a portion of the Litigation Liabilities (as defined in the Credit Agreements). Consent Under the Restated Agreement Lender /s/ ---------------------------- by ------------------------- Name: Title: Consent Under the Tranche C Agreement Lender /s/ ---------------------------- by ------------------------- Name: Title: EX-10.2 8 EXHIBIT 10.2 PARENT GUARANTEE AGREEMENT PARENT GUARANTEE AGREEMENT, dated as of October 19, 1995, as amended and restated as of November 10, 1998 (the "PARENT GUARANTEE AGREEMENT"), made by UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), and UCAR GLOBAL ENTERPRISES INC., a Delaware corporation (the "BORROWER" and, together with UCAR, the "GUARANTORS"), in favor of THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent for the Secured Parties. Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR, the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent and (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreements, the Lenders have severally agreed to make Loans and the Fronting Banks have agreed to issue Letters of Credit, upon the terms and subject to the conditions set forth therein; WHEREAS, it is a condition precedent to the obligation of the Lenders to make the Loans and the obligation of the Fronting Banks to issue the Letters of Credit that the Guarantors shall have executed and delivered this Guarantee to the Collateral Agent for the ratable benefit of the Secured Parties; and WHEREAS, UCAR is the direct holder of all of the issued and outstanding capital stock of the Borrower, and it is to the advantage of UCAR and the Borrower that the Lenders make the Loans and the Fronting Banks issue the Letters of Credit. NOW, THEREFORE, in consideration of the premises and to induce the Secured Parties to enter into the Credit Agreements and 2 to induce the Lenders to make their respective Loans and the Fronting Banks to issue their respective Letters of Credit, each of the Guarantors hereby agrees with the Collateral Agent, for the ratable benefit of the Secured Parties, as follows: 1. DEFINED TERMS. (a) Unless otherwise defined herein, terms defined in the Credit Agreements and used herein shall have the meanings given in the Credit Agreements. (b) "GUARANTEE": this Parent Guarantee Agreement, as the same may be amended, supplemented or otherwise modified from time to time. (c) "OBLIGATIONS": (i) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Existing Credit Agreement after the maturity of the Loans thereunder and interest accruing at the then applicable rate provided in the Existing Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Existing Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Tranche C Facility Credit Agreement after the maturity of the Loans thereunder and interest accruing at the applicable rate provided in the Tranche C Facility Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Tranche C Facility Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (iii) each payment required to be made by any Credit Party under the Existing Credit Agreement, when and as due, including payments in respect of reimbursements of L/C Disbursements, interest thereon and obligations to provide cash collateral, (iv) each payment required to be made by any Credit Party under the Tranche C Facility Credit Agreement, when and as due, and (v) all other obligations and liabilities of every nature of the Credit Parties under the Credit Agreements from time to time owed to the Secured Parties or any of them, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), which may arise under, out of, or in connection with, the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document or any other Loan Document and any obligation of the Borrower or any Credit Party under either of the Credit Agreements to a Lender under either of the Credit Agreements pursuant to an Interest/Exchange Rate Protection Agreement or under any other document made, delivered or given in connection 3 with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by the Borrower or any Credit Party pursuant to the terms of the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document, any other Loan Document or any Interest/Exchange Rate Protection Agreement with a Lender (all of the foregoing obligations collectively, the "OBLIGATIONS"). (d) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section and paragraph references are to this Guarantee unless otherwise specified. The words "include", "includes" and "including" shall be deemed to be followed by the phrase, "without limitation". (e) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. GUARANTEE. (a) The Borrower hereby unconditionally and irrevocably guarantees, as a primary obligor and not merely as surety, to the Collateral Agent, for the ratable benefit of the Secured Parties and their respective successors, indorsees, transferees and assigns, the due, punctual and complete payment and performance by the Credit Parties when and as due, whether at the stated maturity, by acceleration, upon one or more dates set for prepayment or otherwise, of the Obligations. UCAR hereby unconditionally and irrevocably guarantees, as a primary obligor and not merely as surety, to the Collateral Agent, for the ratable benefit of the Secured Parties and their respective successors, indorsees, transferees and assigns, the due, punctual and complete payment and performance by the Borrower when and as due, whether at the stated maturity, by acceleration, upon one or more dates set for prepayment or otherwise, of the Obligations of the Borrower (including the obligations of the Borrower as Guarantor under the immediately preceding sentence). (b) Each Guarantor further agrees to pay any and all reasonable expenses (including all reasonable fees and disbursements of counsel) which may be paid or incurred by any Secured Party in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations guaranteed by such Guarantor and/or enforcing any rights with respect to, or collecting against, such Guarantor under this Guarantee. This Guarantee shall remain in full force and effect until the Obligations are paid in full, no Letters of Credit are outstanding and the Commitments are terminated, notwithstanding that from time to time prior thereto while the Commitments are in effect any Credit Party may be free from any Obligations. (c) Each Guarantor agrees that whenever, at any time, or from time to time, it shall make any payment to the Collateral 4 Agent for the benefit of any Secured Party on account of its liability hereunder, it will notify the Collateral Agent in writing that such payment is made under this Guarantee for such purpose, provided that the failure of such Guarantor to provide such notice shall not preclude the application of such payment to the complete or partial satisfaction of such Guarantor's obligations hereunder following such Guarantor's notice to the Collateral Agent of such payment. 3. NO SUBROGATION. Notwithstanding any payment or payments made by a Guarantor hereunder or any setoff or application of funds of a Guarantor by any Secured Party, no Guarantor shall be entitled to be subrogated to any of the rights of any Secured Party against any Credit Party or any collateral security or guarantee or right of offset held by any Secured Party for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from any Credit Party in respect of payments made by such Guarantor hereunder, until all amounts owing to the Secured Parties by any Credit Party on account of the Obligations are paid in full, no Letters of Credit are outstanding and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, Letters of Credit are outstanding and the Commitments shall not have been terminated, such amount shall be held by such Guarantor in trust for the Secured Parties, segregated from other funds of such Guarantor, and shall forthwith upon receipt by such Guarantor be turned over to the Collateral Agent in the exact form received by such Guarantor (duly endorsed by such Guarantor to the Collateral Agent, if required), to be applied against the Obligations, whether matured or unmatured, at such time and in such order as the Collateral Agent may determine. 4. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF RIGHTS. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against such Guarantor, and without notice to or further assent by such Guarantor, any demand for payment of any of the Obligations made by any Secured Party may be rescinded by such Secured Party, and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by any Secured Party, and the Credit Agreements, any other Loan Document, any Interest/Exchange Rate Protection Agreement and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Collateral Agent (or the Required Secured Parties, as the case may be) or the relevant Secured Party (in the case of any such Interest/Exchange Rate Protection Agreement) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by any Secured Party for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. No Secured Party shall have any obligation to protect, secure, 5 perfect or insure any Lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against a Guarantor, any Secured Party may, but shall be under no obligation to, make a similar demand on any Credit Party or any other guarantor, and any failure by any Secured Party to make any such demand or to collect any payments from any Credit Party or any such other guarantor or any release of any Credit Party or such other guarantor shall not relieve any Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of any Secured Party against any Guarantor. 5. GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by any Secured Party upon this Guarantee or acceptance of this Guarantee; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between any Credit Party or any Guarantor, on the one hand, and any of the Secured Parties, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon any Credit Party or any Guarantor with respect to the Obligations. This Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment, and not of collection, and without regard to (a) the validity, regularity or enforceability of the Credit Agreements, any other Loan Document, any Interest/Exchange Rate Protection Agreement, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by any Secured Party, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by any Credit Party against any Secured Party, or (c) any other circumstance whatsoever (with or without notice to or knowledge of any Secured Party, any Credit Party or any Guarantor) which may or might in any manner or to any extent vary the risk of any Guarantor or otherwise constitutes, or might be construed to constitute, an equitable or legal discharge of any Credit Party for the Obligations, or of any Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against any Guarantor, any Secured Party may, but shall be under no obligation to, pursue such rights and remedies as it may have against any Credit Party or any other person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by any Secured Party to pursue such other rights or remedies or to collect any payments from any Credit Party or any such other person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of any Credit Party or any such other person or of any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any liability hereunder, and shall not 6 impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Secured Party against any Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Guarantor and its successors and assigns, and shall inure to the benefit of the Secured Parties, and their respective permitted successors, indorsees, transferees and assigns, until all the Obligations and the obligations of each Guarantor under this Guarantee shall have been satisfied by payment in full, no Letters of Credit shall be outstanding and the Commitments shall have been terminated, notwithstanding that from time to time while the Commitments are in effect during the term of the Credit Agreements any Credit Party may be free from any Obligations. 6. REINSTATEMENT. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by any Secured Party for any reason whatsoever, including, without limitation, upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Credit Party or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, any Credit Party or any substantial part of its property, or otherwise, all as though such payments had not been made. 7. PAYMENTS. The Guarantors hereby agree that the Obligations will be paid to the Collateral Agent without setoff or counterclaim in Dollars at the office of the Collateral Agent located at 270 Park Avenue, New York, New York 10017. 8. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents and warrants to and with the Secured Parties that all representations and warranties in the Loan Documents that relate to the Guarantors are true and correct in all material respects. 9. COVENANTS. Each Guarantor hereby covenants and agrees with the Secured Parties that, from and after the date of this Guarantee until the Obligations are paid in full, no Letters of Credit are outstanding and the Commitments are terminated, unless the Required Secured Parties shall otherwise consent in writing, it will, and will cause each of the Subsidiaries to, comply with each covenant set forth in Articles V and VI of the Credit Agreements to the extent that it relates to such Guarantor. 10. AUTHORITY OF COLLATERAL AGENT. Each Guarantor acknowledges that the rights and responsibilities of the Collateral Agent under this Guarantee with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Guarantee shall, as between the Collateral Agent and the other Secured Parties, be governed by the Credit Agreements and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Guarantors, the Collateral Agent shall be conclusively 7 presumed to be acting as agent for the other Secured Parties with full and valid authority so to act or refrain from acting. 11. NOTICES. All notices, requests and demands to or upon any Secured Party or Guarantor under this Guarantee shall be given in accordance with Section 9.01 of the Credit Agreements. 12. SEVERABILITY. Any provision of this Guarantee or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the prohibited or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the prohibited or unenforceable provisions. 13. RIGHT OF SETOFF. If an Event of Default shall have occurred and be continuing under the Credit Agreements, each Secured Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Secured Party to or for the credit or the account of a Guarantor against any of and all the obligations of such Guarantor now or hereafter existing under this Guarantee irrespective of whether or not such Secured Party shall have made any demand under this Guarantee and although such obligations may be unmatured. The rights of each Secured Party under this Section 13 are in addition to other rights and remedies (including other rights of setoff) that such Secured Party may have. 14. INTEGRATION. This Guarantee represents the agreement of the Guarantors with respect to the subject matter hereof and there are no promises or representations by any Guarantor or any Secured Party relative to the subject matter hereof not reflected herein. 15. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a) None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each Guarantor and the Collateral Agent, PROVIDED that any provision of this Guarantee may be waived by the Required Secured Parties pursuant to a letter or agreement executed by the Collateral Agent or by facsimile transmission from the Collateral Agent. (b) No Secured Party shall by any act (except by a written instrument pursuant to Section 15(a) hereof) or delay be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of any Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or 8 privilege hereunder or any course of dealing between the Collateral Agent and any Guarantor shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such Secured Party would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 16. SECTION HEADINGS. The section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 17. SUCCESSORS AND ASSIGNS. This Guarantee shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of each Guarantor and each Secured Party and their permitted successors and assigns except that no Guarantor shall have the right to assign its rights hereunder or any interest herein (and any such attempted assignment shall be void) except as expressly contemplated by this Guarantee or by the other Loan Documents. 18. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 19. COUNTERPARTS. This Guarantee may be executed in counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument. IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year first above written. UCAR INTERNATIONAL INC. by: /s/ Corrado F. DeGasperis --------------------------------------- Name: Corrado F. DeGasperis Title: Controller UCAR GLOBAL ENTERPRISES INC. by: /s/ Corrado F. DeGasperis --------------------------------------- Name: Corrado F. DeGasperis Title: Controller EX-10.3 9 EXHIBIT 10.3 SUBSIDIARY GUARANTEE AGREEMENT SUBSIDIARY GUARANTEE AGREEMENT, dated as of October 19, 1995, as amended and restated as of November 10, 1998 made by each U.S. Subsidiary (collectively referred to as the "GUARANTORS"), in favor of THE CHASE MANHATTAN BANK, a New York banking corporation as collateral agent for the Secured Parties (such term and each other capitalized term used but not defined herein having the meaning given it in Article I of the Credit Agreements). Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR, the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent and (ii) the Credit Agreement dated as of November 10, 1998 among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreements, the Lenders have severally agreed to make Loans and the Fronting Banks have agreed to issue Letters of Credit, upon the terms and subject to the conditions set forth therein; WHEREAS, the Borrower owns directly or indirectly all of the issued and outstanding stock of each Guarantor; WHEREAS, the proceeds of the Loans and the availability of the Letters of Credit will be used in part to enable the Borrower to make valuable transfers to some of the Guarantors in connection with the operation of their respective businesses; WHEREAS, the Borrower and the Guarantors are engaged in related businesses, and each Guarantor will derive substantial direct and indirect benefit from the making of the Loans and the availability of the Letters of Credit; and WHEREAS, it is a condition precedent to the obligations of the Lenders to make the Loans and the Fronting Banks to issue the Letters of Credit that the Guarantors shall have executed and 2 delivered this Guarantee to the Collateral Agent for the ratable benefit of the Secured Parties. NOW, THEREFORE, in consideration of the premises and to induce the Secured Parties to enter into the Credit Agreements and to induce the Lenders to make their respective Loans and the Fronting Banks and to issue their respective Letters of Credit, each of the Guarantors hereby agrees with the Collateral Agent, for the ratable benefit of the Secured Parties, as follows: 1. DEFINED TERMS. (a) Unless otherwise defined herein, terms defined in the Credit Agreements and used herein shall have the meanings given in the Credit Agreements. (b) "GUARANTEE": this Subsidiary Guarantee Agreement, as the same may be amended, supplemented or otherwise modified from time to time. (c) "OBLIGATIONS": (i) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Existing Credit Agreement after the maturity of the Loans thereunder and interest accruing at the then applicable rate provided in the Existing Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Existing Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Tranche C Facility Credit Agreement after the maturity of the Loans thereunder and interest accruing at the applicable rate provided in the Tranche C Facility Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Tranche C Facility Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (iii) each payment required to be made by any Credit Party under the Existing Credit Agreement, when and as due, including payments in respect of reimbursements of L/C Disbursements, interest thereon and obligations to provide cash collateral, (iv) each payment required to be made by any Credit Party under the Tranche C Facility Credit Agreement, when and as due, and (v) all other obligations and liabilities of every nature of the Credit Parties under the Credit Agreements from time to time owed to the Secured Parties or any of them, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), which may arise under, out of, or in connection with, the Existing Credit Agreement, the 3 Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document or any other Loan Document and any obligation of the Borrower or any Credit Party under either of the Credit Agreements to a Lender under either of the Credit Agreements pursuant to an Interest/Exchange Rate Protection Agreement or under any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by the Borrower or any Credit Party pursuant to the terms of the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document, any other Loan Document or any Interest/Exchange Rate Protection Agreement with a Lender (all of the foregoing obligations collectively, the "OBLIGATIONS"). (d) "U.S. SUBSIDIARY": any Subsidiary incorporated or otherwise organized in the United States of America. (e) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section references are to this Guarantee unless otherwise specified. The words "include", "includes" and "including" shall be deemed to be followed by the phrase, "without limitation". (f) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. GUARANTEE. (a) Subject to the provisions of Section 2(b), each Guarantor hereby, jointly and severally, unconditionally and irrevocably, as a primary obligor and not merely as a surety, guarantees to the Collateral Agent, for the ratable benefit of the Secured Parties and their respective successors, endorsees, transferees and assigns, the due, punctual and complete payment and performance by the Credit Parties when and as due, whether at the stated maturity, by acceleration, upon one or more dates set for prepayment, or otherwise of the Obligations. (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable Federal and state laws relating to the insolvency of debtors (giving effect to the right of contribution set forth in Section 3 and in the Indemnity, Subrogation and Contribution Agreement). (c) Each Guarantor further agrees to pay any and all reasonable expenses (including all reasonable fees and disbursements of counsel) which may be paid or incurred by any Secured Party in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or 4 collecting against, such Guarantor under this Guarantee. This Guarantee shall remain in full force and effect until the Obligations are paid in full, no Letters of Credit are outstanding and the Commitments are terminated, notwithstanding that from time to time prior thereto while the Commitments are in effect any Credit Party may be free from any Obligations. (d) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the maximum amount of the liability of such Guarantor hereunder without impairing this Guarantee or affecting the rights and remedies of the Collateral Agent or any Secured Party hereunder. (e) Each Guarantor agrees that whenever, at any time, or from time to time, it shall make any payment to the Collateral Agent for the benefit of any Secured Party on account of its liability hereunder, it will notify the Collateral Agent in writing that such payment is made under this Guarantee for such purpose, provided that the failure of such Guarantor to provide such notice shall not preclude the application of such payment to the complete or partial satisfaction of such Guarantor's obligations hereunder following such Guarantor's notice to the Collateral Agent of such payment. 3. RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that to the extent that any Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall have the rights with respect to such amounts set forth in the Indemnity, Subrogation and Contribution Agreement. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 4 hereof. The provisions of this Section shall in no respect limit the obligations and liabilities of any Guarantor to the Secured Parties, and each Guarantor shall (subject to Section 2(b)) remain liable to the Secured Parties for the full amount guaranteed by such Guarantor hereunder. 4. NO SUBROGATION. Notwithstanding any payment or payments made by any of the Guarantors hereunder or any setoff or application of funds of any of the Guarantors by any Secured Party, no Guarantor shall be entitled to be subrogated to any of the rights of any Secured Party against any Credit Party or any other Guarantor or any collateral security or guarantee or right of offset held by any Secured Party for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from any Credit Party or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Secured Parties by any Credit Party on account of the Obligations are paid in full, no Letters of Credit are outstanding and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, Letters of Credit are outstanding and the Commitments shall not have been terminated, such amount shall be held by such Guarantor in trust for the Secured Parties, segregated from other funds of such Guarantor, and shall forthwith upon receipt by such Guarantor be turned over to the Collateral Agent in the exact form received by such Guarantor (duly endorsed by such Guarantor to the Collateral 5 Agent, if required), to be applied against the Obligations, whether matured or unmatured, at such time and in such order as the Collateral Agent may determine. 5. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF RIGHTS. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by any Secured Party may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by any Secured Party, and the Credit Agreements, any other Loan Document, any Interest/Exchange Rate Protection Agreement and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Collateral Agent (or the Required Secured Parties, as the case may be) or the relevant Secured Party (in the case of any such Interest/Exchange Rate Protection Agreement) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by any Secured Party for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. No Secured Party shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against any of the Guarantors, any Secured Party may, but shall be under no obligation to, make a similar demand on any Credit Party or any other Guarantor or guarantor, and any failure by any Secured Party to make any such demand or to collect any payments from any Credit Party or any such other Guarantor or guarantor or any release of any Credit Party or such other Guarantor or guarantor shall not relieve any of the Guarantors in respect of which a demand or collection is not made or any of the Guarantors not so released of their several obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of any Secured Party against any of the Guarantors. 6. SECURITY. Each of the Guarantors authorizes each of the other Secured Parties, in accordance with the terms and subject to the conditions set forth in the Security Documents to which such Guarantor is a party, to (a) take and hold security for the payment of this guarantee or the Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as they in their sole discretion determine and (c) release or substitute any one or more endorsees, other guarantors or other obligors. 7. GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by any Secured Party upon this Guarantee or acceptance of this Guarantee; the Obligations, and any of them, 6 shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between any Credit Party and any of the Guarantors, on the one hand, and any of the Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Guarantee. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon any Credit Party or any of the Guarantors with respect to the Obligations. Each Guarantor understands and agrees that this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment, and not of collection, and without regard to (a) the validity, regularity or enforceability of the Credit Agreements, any other Loan Document, any Interest/Exchange Rate Protection Agreement, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by any Secured Party, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by any Credit Party against any Secured Party, or (c) any other circumstance whatsoever (with or without notice to or knowledge of any Secured Party, any Credit Party or such Guarantor) which may or might in any manner or to any extent vary the risk of the Guarantor or otherwise constitutes, or might be construed to constitute, an equitable or legal discharge of any Credit Party for the Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against any Guarantor, any Secured Party may, but shall be under no obligation to, pursue such rights and remedies as it may have against any Credit Party or any other person (including any other Guarantor) or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by any Secured Party to pursue such other rights or remedies or to collect any payments from any Credit Party or any such other person (including any other Guarantor) or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of any Credit Party or any such other person (including any other Guarantor) or any such collateral security, guarantee or right of offset, shall not relieve such Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Secured Party against such Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Guarantor and the successors and assigns thereof, and shall inure to the benefit of each Secured Party, and its successors, indorsees, transferees and assigns, until all the Obligations and the obligations of the Guarantor under this Guarantee shall have been satisfied by payment in full, no Letters of Credit shall be outstanding and the Commitments shall have been terminated, notwithstanding that from time to time while the Commitments are in effect during the term of the Credit Agreements any Credit Party may be free from any Obligations. 8. REINSTATEMENT. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is 7 rescinded or must otherwise be restored or returned by any Secured Party for any reason whatsoever, including, without limitation, upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Credit Party or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, any Credit Party or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. 9. PAYMENTS. Each Guarantor hereby guarantees that payments hereunder will be paid to the Collateral Agent without setoff or counterclaim in Dollars at the office of the Collateral Agent located at 270 Park Avenue, New York, New York 10017. 10. INFORMATION. Each of the Guarantors assumes all responsibility for being and keeping itself informed of the Credit Parties' financial condition and assets and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Secured Parties will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks. 11. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents and warrants to and with each Secured Party that all representations and warranties in the Loan Documents that relate to such Guarantor are true and correct in all material respects. 12. AUTHORITY OF COLLATERAL AGENT. Each Guarantor acknowledges that the rights and responsibilities of the Collateral Agent under this Guarantee with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Guarantee shall, as between the Collateral Agent and the other Secured Parties, be governed by the Credit Agreements and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and each Guarantor, the Collateral Agent shall be conclusively presumed to be acting as agent for the other Secured Parties with full and valid authority so to act or refrain from acting. 13. NOTICES. All notices, requests and demands to or upon any Secured Party or any Guarantor under this Guarantee shall be given or made in accordance with Section 9.01 of the Credit Agreements and addressed as follows: (a) if to any Secured Party, UCAR or any Credit Party, at its address or transmission number for notices provided in Section 9.01 of the Credit Agreements; and (b) if to any Guarantor that is not a Credit Party, at its address or transmission number for notices set forth under its signature below. 8 The Collateral Agent, each Secured Party and each Guarantor may change its address and transmission numbers for notices by notice in the manner provided in this Section. 14. RELEASE. Each Guarantor shall be released from its guarantee hereunder in the event that all of the capital stock of such Guarantor shall be sold, transferred or otherwise disposed of, in accordance with the terms of the Credit Agreements, by the Borrower or UCAR or any other person that shall own such stock, to a person that is not UCAR, the Borrower or a Subsidiary. 15. COUNTERPARTS. This Guarantee may be executed by one or more of the Guarantors in any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the counterparts of this Guarantee signed by all the Guarantors shall be lodged with the Collateral Agent. 16. SEVERABILITY. Any provision of this Guarantee or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the prohibited or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the prohibited or unenforceable provisions. 17. RIGHT OF SETOFF. If an Event of Default shall have occurred and be continuing under the Credit Agreements, each Secured Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Secured Party to or for the credit or the account of any Guarantor against any of and all the obligations of such Guarantor now or hereafter existing under this Guarantee irrespective of whether or not such Secured Party shall have made any demand under this Guarantee and although such obligations may be unmatured. The rights of each Secured Party under this Section 17 are in addition to other rights and remedies (including other rights of setoff) and such Secured Party may have. 18. INTEGRATION. This Guarantee represents the agreement of each Guarantor with respect to the subject matter hereof and there are no promises or representations by any Guarantor or any Secured Party relative to the subject matter hereof not reflected herein. 19. AMENDMENTS IN WRITING; NO WAIVER, CUMULATIVE REMEDIES. (a) None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each Guarantor and the Collateral Agent, PROVIDED that any provision of this Guarantee may be waived by the Required Secured Parties pursuant to a letter 9 or agreement executed by the Collateral Agent or by telecopy transmission from the Collateral Agent. (b) No Secured Party shall by any act (except by a written instrument pursuant to Section 19(a) hereof) or delay be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of any Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such Secured Party would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 20. SECTION HEADINGS. The section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 21. SUCCESSORS AND ASSIGNS. This Guarantee shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of each Guarantor and each Secured Party and their successors and assigns; PROVIDED that this Guarantee may not be assigned by any Guarantor without the prior written consent of the Collateral Agent. 22. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 23. SUBMISSION TO JURISDICTION; WAIVERS. Each Guarantor hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Guarantee and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgement in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; 10 (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Guarantor at its address set forth in Section 13 or at such other address of which the Collateral Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 24. ADDITIONAL GUARANTORS. Pursuant to Section 5.11 of the Credit Agreements, each U.S. Subsidiary that was not in existence or not a U.S. Subsidiary on the date thereof is required to enter into this Agreement as a Guarantor upon becoming a U.S. Subsidiary. Upon execution and delivery, after the date hereof, by the Collateral Agent and such U.S. Subsidiary of an instrument in the form of Annex 1, such U.S. Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor hereunder. The execution and delivery of any such instrument shall not require the consent of any Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Guarantee. 25. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 25. 11 IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year first above written. EACH OF THE GUARANTORS LISTED ON SCHEDULE I HERETO by: /s/ Corrado F. DeGasperis --------------------------------------- Name: Corrado F. DeGasperis Title: Attorney-in-Fact SCHEDULE I TO SUBSIDIARY GUARANTEE AGREEMENT GUARANTORS UCAR Carbon Company Inc. UCAR Carbon Technology Corporation UCAR Holdings Inc. UCAR Holdings II Inc. UCAR Holdings III Inc. UCAR International Trading Inc. Union Carbide Grafito, Inc. UCAR Composites Inc. 1 EXHIBIT A-1 TO SUBSIDIARY GUARANTEE AGREEMENT SUPPLEMENT NO. dated as of [ ], to the Subsidiary Guarantee Agreement dated as of October 19, 1995, as amended and restated as of November 10, 1998 (the "SUBSIDIARY GUARANTEE AGREEMENT"), each of the Guarantors (such term and each other capitalized term used but not defined having the meaning given it in the Subsidiary Guarantee Agreement, and if not defined therein, having the meaning given it in Article I of the Credit Agreements) party thereto (together with the Borrower, the "GUARANTORS") and THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent (the "COLLATERAL AGENT") for the Secured Parties. A. Reference is made to the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto, and The Chase Manhattan Bank, as administrative agent and as collateral agent and (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). B. The U.S. Subsidiaries have entered into the Subsidiary Guarantee Agreement in order to induce the Lenders to make Loans and induce the Fronting Banks to issue Letters of Credit pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreements. Pursuant to Section 5.11 of the Credit Agreements, each U.S. Subsidiary that was not in existence or not a U.S. Subsidiary on the date thereof is required to enter into the Subsidiary Guarantee Agreement as a Guarantor upon becoming a U.S. Subsidiary. Section 24 of the Subsidiary Guarantee Agreement provides that additional U.S. Subsidiaries may become Guarantors under the Subsidiary Guarantee Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned (the "NEW GUARANTOR") is a U.S. Subsidiary and is executing this Supplement in accordance with the requirements of the Credit Agreements to become a Guarantor under the Subsidiary Guarantee Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. 2 Accordingly, the Collateral Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 24 of the Subsidiary Guarantee Agreement, the New Guarantor by its signature below becomes a Guarantor under the Subsidiary Guarantee Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby agrees to all the terms and provisions of the Subsidiary Guarantee Agreement applicable to it as a Guarantor thereunder. Each reference to a "GUARANTOR" in the Subsidiary Guarantee Agreement shall be deemed to include the New Guarantor. The Subsidiary Guarantee Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency or similar laws effecting creditors' rights generally and equitable principles of general applicability. SECTION 3. This Supplement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Collateral Agent. SECTION 4. Except as expressly supplemented hereby, the Subsidiary Guarantee Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Subsidiary Guarantee Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the eco nomic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in the Credit Agreements. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature, with a copy to the Borrower. 3 IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly executed this Supplement to the Subsidiary Guarantee Agreement as of the day and year first above written. [NAME OF NEW GUARANTOR], by ------------------------------------ Name: Title: THE CHASE MANHATTAN BANK, as Collateral Agent, by ------------------------------------ Name: Title: EX-10.4 10 EXHIBIT 10.4 INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated as of October 19, 1995, as amended and restated as of November 10, 1998, among UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation, as borrower (the "BORROWER"), each of the U.S. Subsidiaries party hereto (collectively, the "SUBSIDIARY GUARANTORS"), and THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent for the Secured Parties (such term and each other capitalized term used but not defined herein having the meaning given it in Article I of the Credit Agreements). Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR, the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent and (ii) the Credit Agreement dated as of November 10, 1998 among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). The Lenders and the Fronting Banks, respectively, have agreed to make Loans and to issue Letters of Credit pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreements. Each of the Subsidiary Guarantors has agreed to guarantee, among other things, all the obligations of the Borrower and the other Credit Parties under the Credit Agreements. The obligations of the Lenders to make the Loans and of the Fronting Banks to issue the Letters of Credit under the Credit Agreements are conditioned upon, among other things, the execution and delivery by the Subsidiary Guarantors of an indemnity, subrogation and contribution agreement in the form hereof (the "AGREEMENT") to support the due and punctual payment of, with respect to each Subsidiary Guarantor, its obligations as obligor or guarantor in respect of (a) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Existing Credit Agreement after the maturity of the Loans thereunder and interest accruing at the then applicable rate provided in the Existing Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Existing Credit Agreement, 2 when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (b) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Tranche C Facility Credit Agreement after the maturity of the Loans thereunder and interest accruing at the applicable rate provided in the Tranche C Facility Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Tranche C Facility Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (c) each payment required to be made by any Credit Party under the Existing Credit Agreement, when and as due, including payments in respect of reimbursements of L/C Disbursements, interest thereon and obligations to provide cash collateral, (d) each payment required to be made by any Credit Party under the Tranche C Facility Credit Agreement, when and as due, and (e) all other obligations and liabilities of every nature of the Credit Parties under the Credit Agreements from time to time owed to the Secured Parties or any of them, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), which may arise under, out of, or in connection with, the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document or any other Loan Document and any obligation of the Borrower or any Credit Party under either of the Credit Agreements to a Lender under either Credit Agreements pursuant to an Interest/Exchange Rate Protection Agreement or under any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by the Borrower or any Credit Party pursuant to the terms of the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document, any other Loan Document or any Interest/Exchange Rate Protection Agreement with a Lender (all of the foregoing obligations collectively, the "OBLIGATIONS"). Accordingly, UCAR and the Borrower, each Subsidiary Guarantor and the Collateral Agent agree as follows: SECTION 1. INDEMNITY AND SUBROGATION. In addition to all such rights of indemnity and subrogation as the Subsidiary Guarantors may have under applicable law (but subject to Sec tion 3), UCAR and the Borrower agree that (a) in the event a pay ment shall be made by any Subsidiary Guarantor under the Subsidiary Guarantee Agreement, UCAR and the Borrower shall indemnify such Subsidiary Guarantor for the full amount of such payment and such Subsidiary Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to 3 the extent of such payment and (b) in the event any assets of any Subsidiary Guarantor shall be sold pursuant to any applicable security agreement or similar instrument or agreement to satisfy a claim of any Secured Party, UCAR and the Borrower shall indemnify such Subsidiary Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold. SECTION 2. CONTRIBUTION AND SUBROGATION. Each Subsidiary Guarantor agrees (subject to Section 3) that in the event a payment shall be made by any Subsidiary Guarantor under the Subsidiary Guarantee Agreement or assets of any Subsidiary Guarantor shall be sold pursuant to any applicable security agreement or similar instrument or agreement to satisfy a claim of any Secured Party, and such Subsidiary Guarantor (the "CLAIMING SUBSIDIARY GUARANTOR") shall not have been indemnified by UCAR or the Borrower as provided in Section 1, each other Subsidiary Guarantor (a "CONTRIBUTING SUBSIDIARY GUARANTOR") shall indemnify the Claiming Subsidiary Guarantor in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as the case may be, multiplied by a fraction of which the numerator shall be the net worth of the Contributing Subsidiary Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Subsidiary Guarantors on the date hereof (or, in the case of any Subsidiary Guarantor becoming a party hereto pursuant to Section 16, the date of the Supplement hereto executed and delivered by such Subsidiary Guarantor). Any Contributing Subsidiary Guarantor making any payment to a Claiming Subsidiary Guarantor pursuant to this Section 2 shall be subrogated to the rights of such Claiming Subsidiary Guarantor under Section 1 to the extent of such payment. SECTION 3. SUBORDINATION. Notwithstanding any provision of this Agreement to the contrary, all rights of the Subsidiary Guarantors under Sections 1 and 2 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full of the Obligations. No failure on the part of UCAR, the Borrower or any Subsidiary Guarantor to make the payments required by Sections 1 and 2 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any other Subsidiary Guarantor with respect to any Guarantee, and each Subsidiary Guarantor shall remain liable for the full amount of the Obligations that such Subsidiary Guarantor has otherwise guaranteed. SECTION 4. TERMINATION. This Agreement shall terminate when all the Obligations have been indefeasibly paid in full, no Letters of Credit are outstanding and the Secured Parties have no further Commitments under the Credit Agreements. SECTION 5. CONTINUED EFFECTIVENESS. UCAR, the Borrower and each Subsidiary Guarantor further agree that this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be restored by any Secured Party or any Subsidiary Guarantor upon the 4 bankruptcy or reorganization of UCAR, the Borrower, any Subsidiary Guarantor or otherwise. SECTION 6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7. WAIVERS; AMENDMENT. (a) No failure or delay of the Collateral Agent, any Secured Party, or any Guarantor in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power or any abandonment or discontinuance of steps to enforce such a right or power preclude any other or further exercise thereof or the exercise of any other right or power. The rights and the remedies of the Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or consent to any departure by any Subsidiary Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Subsidiary Guarantor in any case shall entitle such Subsidiary Guarantor to any other or further notice or demand in similar or other circumstances. (b) Except for the operation of Section 16 of this Agreement, neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Subsidiary Guarantors and the Collateral Agent, with the prior written consent of the Required Secured Parties. SECTION 8. NOTICES. All communications and notices hereunder shall be in writing and given as provided in the Credit Agreements, except those to any Subsidiary Guarantor that is not a Credit Party, which shall be directed to the address set forth under its signature below. SECTION 9. BINDING AGREEMENT; ASSIGNMENTS. This Agreement shall become effective as to each of UCAR, the Borrower or any Subsidiary Guarantor when a counterpart hereof executed on behalf of UCAR, the Borrower or such Subsidiary Guarantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon each of UCAR, the Borrower or such Subsidiary Guarantor and the Collateral Agent and their respective successors and permitted assigns, and shall inure to the benefit of such Subsidiary Guarantor and the Secured Parties, and their respective successors and permitted assigns, except that no Subsidiary Guarantor shall have the right to assign its rights hereunder or any interest herein (and any such attempted assignment shall be void), except as expressly contemplated by this Agreement or the other Loan Documents. SECTION 10. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the parties hereto is referred to, such reference 5 shall be deemed to include the successors and permitted assigns of such party, and all covenants, promises and agreements by or on behalf of each of UCAR, the Borrower or any Subsidiary Guarantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and permitted assigns. SECTION 11. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants, agreements, representations and warranties made by each of UCAR, the Borrower and each Subsidiary Guarantor herein and in any certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Secured Parties and each Subsidiary Guarantor and shall survive the making by the Lenders of the Loans, the execution and delivery to the Lenders of the Loan Documents and the issuance by any Fronting Bank of the Letters of Credit, regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or L/C Disbursement or any Fee or any other amount payable under, or in respect of, this Agreement or under any of the other Loan Documents (other than any Local Facility Loan Document that is not supported in any way by any Loan Document (other than another Local Facility Loan Document)) is outstanding and unpaid and so long as any Letter of Credit is outstanding and so long as the Commitments have not been terminated. (b) In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 12. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument. SECTION 13. RULES OF INTERPRETATION. The rules of interpretation specified in Section 1.02 of the Credit Agreements shall be applicable to this Agreement. SECTION 14. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each of UCAR, the Borrower and each Subsidiary Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any 6 thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment related to any such action or proceeding, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Loan Party or any Secured Party may otherwise have to bring any action or proceeding relating to this Agreement against UCAR, the Borrower or any Subsidiary Guarantor or any Secured Party or their properties in the courts of any jurisdiction. (b) Each of UCAR, the Borrower, each Subsidiary Guarantor and each Secured Party hereby irrevocably and uncondi tionally waives, to the fullest extent it may legally and effectively do so, any objection it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 15. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15. SECTION 16. ADDITIONAL SUBSIDIARY GUARANTORS. Pursuant to Section 5.11 of the Credit Agreements, each Subsidiary incorporated or otherwise organized in the United States of America (a "U.S. SUBSIDIARY") that was not in existence or not a Subsidiary on the date thereof is required to enter into this Agreement as a Subsidiary Guarantor upon becoming a Subsidiary. Upon execution and delivery, after the date hereof, by the Collateral Agent and a U.S. Subsidiary of an instrument in the form of Annex 1, such U.S. Subsidiary shall become a Subsidiary Guarantor hereunder with the same force and effect as if originally named as a Subsidiary Guarantor hereunder. The execution and delivery of any such instrument shall not require 7 the consent of any Subsidiary Guarantor hereunder. The rights and obligations of each Subsidiary Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Subsidiary Guarantor as a party to this Agreement. SECTION 17. HEADINGS. Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpretive, this Agreement. 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first appearing above. UCAR INTERNATIONAL INC. by /s/ Corrado F. DeGasperis --------------------------- Name: Corrado F. DeGasperis Title: Controller UCAR GLOBAL ENTERPRISES INC. by /s/ Corrado F. DeGasperis --------------------------- Name: Corrado F. DeGasperis Title: Controller EACH OF THE SUBSIDIARY GUARANTORS LISTED ON SCHEDULE I HERETO by /s/ Corrado F. DeGasperis --------------------------- Name: Corrado F. DeGasperis Title: Controller THE CHASE MANHATTAN BANK, as Collateral Agent by /s/ Marian Schulman --------------------------- Name: Marian Schulman Title: Vice President 9 SCHEDULE I TO INDEMNITY SUBROGATION AND CONTRIBUTION AGREEMENT SUBSIDIARY GUARANTORS UCAR Carbon Company Inc. UCAR Carbon Technology Corporation UCAR Holdings Inc. UCAR Holdings II Inc. UCAR Holdings III Inc. UCAR International Trading Inc. Union Carbide Grafito, Inc. UCAR Composites Inc. 1 ANNEX I TO INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT SUPPLEMENT NO. dated as of [ ], to the Indemnity, Subrogation and Contribution Agreement dated as of as of October 19, 1995, as amended and restated as of November 10, 1998 (the "INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT"), among UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation (the "BORROWER"), each of Subsidiary Guarantors (each capitalized term used but not defined having the meaning given it in the Indemnity, Subrogation and Contribution Agreement or the Credit Agreements) party thereto and THE CHASE MANHATTAN BANK, a New York banking corporation, as Collateral Agent for the Secured Parties. A. Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT") among UCAR, the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent and (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). B. Certain Subsidiary Guarantors have entered into the Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreements. Pursuant to Section 5.11 of the Credit Agreements, promptly after its creation or acquisition, each additional U.S. Subsidiary is required to become a party to the Indemnity, Subrogation and Contribution Agreement as a Subsidiary Guarantor. Section 16 of the Indemnity, Subrogation and Contribution Agreement provides that additional U.S. Subsidiaries may become Subsidiary Guarantors under the Indemnity, Subrogation and Contribution Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned (the "NEW SUBSIDIARY GUARANTOR") is a U.S. Subsidiary and is executing this Supplement in accordance with the require ments of the Credit Agreements to become a Subsidiary Guarantor under the Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. 2 Accordingly, the Collateral Agent and the New Subsidiary Guarantor agree as follows: SECTION 1. In accordance with Section 16 of the Indemnity, Subrogation and Contribution Agreement, the New Subsidiary Guarantor by its signature below becomes a Subsidiary Guarantor under the Indemnity, Subrogation and Contribution Agreement with the same force and effect as if originally named therein as a Subsidiary Guarantor and the New Subsidiary Guarantor hereby agrees to all the terms and provisions of the Indemnity, Subrogation and Contribution Agreement applicable to it as a Subsidiary Guarantor thereunder. Each reference to a "Subsidiary Guarantor" in the Indemnity, Subrogation and Contribution Agreement shall be deemed to include the New Subsidiary Guarantor. The Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein by reference. SECTION 2. The New Subsidiary Guarantor represents and warrants to the Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and equitable principles of general applicability. SECTION 3. This Supplement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Subsidiary Guarantor and the Collateral Agent. SECTION 4. Except as expressly supplemented hereby, the Indemnity, Subrogation and Contribution Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. If any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Indemnity, Subrogation and Contribution Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in the Credit Agreement. All communications and notices hereunder to the New Subsidiary 3 Guarantor shall be given to it at the address set forth under its signature, with a copy to the Borrower. IN WITNESS WHEREOF, the New Subsidiary Guarantor and the Collateral Agent have duly executed this Supplement to the Indemnity, Subrogation and Contribution Agreement as of the day and year first above written. [NAME OF NEW SUBSIDIARY GUARANTOR], by_____________________________ Name: ____________________ Title: ____________________ Address: ____________________ THE CHASE MANHATTAN BANK, as Collateral Agent, by_____________________________ Name: ____________________ Title: ____________________ EX-10.5 11 EXHIBIT 10.5 DOMESTIC PLEDGE AGREEMENT PLEDGE AGREEMENT dated as of October 19, 1995, as amended and restated as of November 10, 1998 (the "PLEDGE AGREEMENT"), by UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation (the "BORROWER"), and certain U.S. Subsidiaries that are signatories hereto ("PLEDGOR SUBSIDIARIES" and, together with UCAR and the Borrower, the "PLEDGORS"), in favor of THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent for the Secured Parties (such term and each other capitalized term used but not defined herein having the meaning given it in Article I of the Credit Agreements). Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR, the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent and (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). W I T N E S S E T H : WHEREAS, pursuant to the Credit Agreements, the Lenders have severally agreed to make Loans and the Fronting Banks have agreed to issue Letters of Credit, upon the terms and subject to the conditions set forth therein; WHEREAS, the Pledgors are the legal and beneficial owners of the shares of Pledged Stock issued by the Issuers; WHEREAS, it is a condition precedent to the obligations of the Lenders to make the Loans and the Fronting Banks to issue the Letters of Credit that the U.S. Subsidiaries guarantee payment and performance of the Credit Parties' obligations under the Credit Agreements and the other Loan Documents, that the Borrower guarantee payment and performance of the other Credit Parties' obligations under the Credit Agreements and the other Loan Documents and that UCAR guarantee payment and performance of the Borrower's obligations, including its obligations as a guarantor, under the Credit Agreements and the other Loan Documents; 2 WHEREAS, in satisfaction of such condition, the Pledgors have entered into certain Guarantee Agreements for the benefit of the Secured Parties; and WHEREAS, it is a further condition precedent to the obligations of the Lenders to make the Loans and the Fronting Banks to issue the Letters of Credit that the Pledgors shall have executed and delivered this Pledge Agreement to the Collateral Agent for the ratable benefit of the Secured Parties, to secure payment and performance of the Pledgors' respective obligations under the Credit Agreements, the Guarantee Agreements and the other Loan Documents to which they are party. NOW, THEREFORE, in consideration of the premises and to induce the Secured Parties to enter into the Credit Agreements and to induce the Lenders to make their respective Loans and the Fronting Banks to issue their respective Letters of Credit, each of the Pledgors hereby agrees with the Collateral Agent, for the ratable benefit of the Secured Parties, as follows: 1. DEFINED TERMS. (a) Unless otherwise defined herein, terms defined in the Credit Agreements and used herein shall have the meanings given in the Credit Agreements. (b) The following terms shall have the following meanings: "ADDITIONAL COLLATERAL": (i) all notes held by any Pledgor evidencing intercompany debt in an amount greater than $10,000,000 owed by UCAR, the Borrower or any Subsidiary to any Pledgor, and (ii) any noncash consideration as described in Section 6.04(c) of the Credit Agreements, including notes, in each case having a stated amount or value in excess of $1,000,000, received by any Pledgor for a sale of assets permitted under Section 6.05 of the Credit Agreements. Notwithstanding anything to the contrary in this Agreement, in no event shall any Pledgor be required to pledge hereunder any of the items described in this definition if such pledge would have material adverse tax or legal consequences. "AGREEMENT": this Pledge Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "CODE": the Uniform Commercial Code from time to time in effect in the State of New York. "COLLATERAL": the Pledged Stock, Additional Collateral and all Proceeds thereof. "COLLATERAL ACCOUNT": any account established to hold money Proceeds, maintained under the sole dominion and control of and on terms and conditions reasonably satisfactory to the Collateral Agent, subject to withdrawal by the Collateral Agent for the account of the Secured 3 Parties and the Pledgors, as provided in Section 8(a) and Section 15. "FOREIGN SUBSIDIARY": any Subsidiary incorporated or otherwise organized outside the United States of America. "INDEMNITEE": the Secured Parties and their respective officers, directors, trustees, affiliates and controlling persons. "ISSUERS": the collective reference to the companies identified on SCHEDULE I attached hereto as the issuers of the Pledged Stock and each issuer of any securities included in the Additional Collateral; each, individually, an "ISSUER." "OBLIGATIONS": with respect to each Pledgor, the collective reference to its obligations as obligor or guarantor in respect of (i) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Existing Credit Agreement after the maturity of the Loans thereunder and interest accruing at the then applicable rate provided in the Existing Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Existing Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Tranche C Facility Credit Agreement after the maturity of the Loans thereunder and interest accruing at the applicable rate provided in the Tranche C Facility Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Tranche C Facility Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (iii) each payment required to be made by any Credit Party under the Existing Credit Agreement, when and as due, including payments in respect of reimbursements of L/C Disbursements, interest thereon and obligations to provide cash collateral, (iv) each payment required to be made by any Credit Party under the Tranche C Facility Credit Agreement, when and as due, and (v) all other obligations and liabilities of every nature of the Credit Parties under the Credit Agreements from time to time owed to the Secured Parties or any of them, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of 4 whether allowed or allowable in such proceeding), which may arise under, out of, or in connection with, the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document or any other Loan Document and any obligation of the Borrower or any Credit Party under either of the Credit Agreements to a Lender under either Credit Agreement pursuant to an Interest/Exchange Rate Protection Agreement or under any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by the Borrower or any Credit Party pursuant to the terms of the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document, any other Loan Document or any Interest/Exchange Rate Protection Agreement with a Lender; "PLEDGED STOCK": the shares of Capital Stock listed on SCHEDULE I hereto, together with all the stock certificates, options or rights of any nature whatsoever that may be issued or granted by any Issuer to any Pledgor while this Agreement is in effect that are required to be pledged under Section 5 below. "PROCEEDS": all "proceeds" (as such term is defined in Section 9-306(1) of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Pledged Stock and any Additional Collateral and, in any event, shall include all dividends or other income from the Pledged Stock, collections thereon or distributions with respect thereto. "SECURITIES ACT": the Securities Act of 1933, as amended. "U.S. SUBSIDIARY": any Subsidiary that is incorporated or otherwise organized in the United States of America. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section references are to this Agreement unless otherwise specified. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. PLEDGE; GRANT OF SECURITY INTEREST. Each Pledgor hereby pledges and delivers to the Collateral Agent, for the ratable benefit of the Secured Parties, all the Pledged Stock and 5 Additional Collateral owned by such Pledgor and hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a first priority security interest in all the Collateral owned by such Pledgor from time to time, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration, upon one or more dates of prepayment or otherwise) of (i) in the case of UCAR, its Obligations and those of the Borrower, including as a guarantor or Pledgor, and (ii) in the case of each other Pledgor, the Obligations. Each Pledgor will cause any shares of capital stock of the Borrower, any Significant Subsidiary or any other Subsidiary that is or becomes party to the Subsidiary Guarantee Agreement that it owns or possesses to be evidenced by duly executed certificates that are pledged and delivered to the Collateral Agent pursuant to the terms thereof. 3. STOCK POWERS. Concurrently with the delivery to the Collateral Agent of each certificate representing one or more shares of Pledged Stock to the Collateral Agent, the applicable Pledgor shall deliver an undated stock power covering such certificate, duly executed in blank by such Pledgor with, if the Collateral Agent so requests, signature guaranteed. 4. REPRESENTATIONS AND WARRANTIES. Each Pledgor represents and warrants, as to itself and the Pledged Stock and Collateral pledged by it hereunder, that: (a) The shares of Pledged Stock constitute the portion of the issued and outstanding shares of all classes of the Capital Stock of the applicable Issuer set forth on Schedule I. (b) All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable. (c) Subject to Section 21(b), each Pledgor is the legal, record and beneficial owner of the Pledged Stock and of the Additional Collateral, free of any and all Liens or options in favor of, or claims of, any other person, except the security interest created by this Agreement. (d) all capital stock or other ownership interests in the Subsidiaries will at all times constitute certificated securities for purposes of Articles 8 and 9 of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions (the "UCC"). (e) This Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral and, when the Pledged Stock or Additional Collateral is delivered to the Collateral Agent (or, as applicable in the case of Capital Stock of foreign Subsidiaries, the requisite filings or registrations are made), this Agreement will constitute a duly perfected first priority Lien on, and security interest in, all right, title and interest of the Pledgors thereunder in such Pledged Stock 6 or Additional Collateral, in each case prior and superior in rights to any other person, subject to the agreements listed in Schedule 3.08. 5. COVENANTS. Each Pledgor, as to itself and the Collateral pledged by it hereunder, covenants and agrees with the Secured Parties that, from and after the date of this Agreement until this Agreement is terminated and the security interest created hereby is released, subject to Section 21(b): (a) If such Pledgor shall, as a result of its ownership of Pledged Stock or Additional Collateral, become entitled to receive or shall receive any stock certificate (including any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any shares of the Pledged Stock or Additional Collateral, or otherwise in respect thereof, such Pledgor shall accept the same as the agent of the Secured Parties, hold the same in trust for the Secured Parties and deliver the same forthwith to the Collateral Agent in the exact form received, duly indorsed by such Pledgor to the Collateral Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Pledgor and with, if the Collateral Agent, so requests, signature guaranteed, to be held by the Collateral Agent, subject to the terms hereof, as additional collateral security for the Obligations; PROVIDED that if compliance with this paragraph (a) would result in more than 65% of the voting power of any class of Capital Stock of any Foreign Subsidiary being included in the Pledged Stock or Additional Collateral, the applicable Pledgor shall pledge only such portion of such Capital Stock as shall result in 65% of the voting power of such class of Capital Stock being included in the Pledged Stock (or such lesser portion as is owned by the relevant Pledgor). Without prejudice to the terms and conditions of the Credit Agreements, any sums paid upon or in respect of the Pledged Stock or Additional Collateral upon the liquidation or dissolution (other than any liquidation or dissolution permitted by Section 5.01(a) of the Credit Agreements) of any Issuer shall be subject to Section 2.12(d) of the Credit Agreements, or upon and during the continuance of an Event of Default shall upon the written request of the Collateral Agent be paid over to the Collateral Agent to be held and applied by it hereunder as provided in Section 8(a) and Section 15, and in case any distribution of capital shall be made on or in respect of the Pledged Stock or Additional Collateral or any property shall be distributed upon or with respect to the Pledged Stock or Additional Collateral pursuant to the recapitalization or reclassification of capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall be subject to Section 2.12(d) of the Credit Agreements or, upon and during continuance of an Event of Default upon the written request of the Collateral Agent, be delivered to the Collateral Agent 7 to be held and applied by it hereunder as provided in Section 8(a) and Section 15. If any sums of money or property so paid or distributed in respect of the Pledged Stock or Additional Collateral shall be received by such Pledgor, such Pledgor shall apply such amount in accordance with Section 2.12(d) of the Credit Agreements, or upon and during the continuance of an Event of Default, shall, upon the written request of the Collateral Agent, until such money or property is paid or delivered to the Collateral Agent, hold such money or property in trust for the Secured Parties, segregated from other funds of such Pledgor, for application in accordance with Section 8(a) and Section 15. (b) Without the prior written consent of the Collateral Agent, such Pledgor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer, except to the extent the same are permitted to be issued under the Credit Agreements, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Collateral owned by it, except as not prohibited under the terms of the Credit Agreements, (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any person with respect to, any of such Collateral, or any interest therein, except as not prohibited under the terms of the Credit Agreements and for the security interest created by this Agreement or (iv) enter into any agreement or undertaking restricting the right or ability of such Pledgor or the Collateral Agent to sell, assign or transfer any of such Collateral, except as not prohibited under the terms of the Credit Agreements. (c) Such Pledgor shall maintain the security interest created by it under this Agreement as a first priority, perfected security interest and shall defend such security interest against claims and demands of all persons whomsoever. At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Pledgor, such Pledgor shall promptly and duly execute and deliver such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted. If any amount payable under or in connection with any of the Collateral owned by such Pledgor shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall, if so requested by the Collateral Agent, be immediately delivered to the Collateral Agent duly endorsed in a manner reasonably satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Agreement, provided that the use of the Proceeds of such Collateral shall nonetheless be governed by Sections 6 and 7. 8 (d) If such Pledgor shall at any time own or acquire any shares of Capital Stock of a Subsidiary that was not in existence or not a Subsidiary on the date hereof (a "NEW SUBSIDIARY"), such Pledgor shall (i) immediately deliver such shares of Capital Stock (or, if such New Subsidiary is a Foreign Subsidiary, shares of Capital Stock representing 65% (or such lesser percentage as is owned by such Pledgor) of the voting power of each class of Capital Stock of such New Subsidiary), and all stock certificates evidencing the same, to the Collateral Agent to be held as collateral hereunder, (ii) promptly deliver a supplement to this Pledge Agreement, substantially in the form of Exhibit A-1 to this Agreement (each, a "PLEDGE AGREEMENT SUPPLEMENT") adding such shares of Capital Stock to Schedule I hereto and (iii) promptly cause such New Subsidiary to execute and deliver an Acknowledgment and Consent substantially in the form appended to Annex I to the Pledge Agreement Supplement. The execution and delivery of any such instrument shall not require the consent of any Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Pledgor as a party to this Agreement. (e) If the Borrower or any Subsidiary has incurred or shall incur indebtedness to UCAR, the Borrower or any U.S. Subsidiary in an amount greater than $10,000,000, UCAR, the Borrower or such U.S. Subsidiary, as applicable, shall obtain a promissory note from such obligor in respect of such Indebtedness and shall pledge such note as Additional Collateral hereunder. In the event such intercompany indebtedness is owed to a U.S. Subsidiary that is not a Pledgor hereunder, the Borrower shall cause such U.S. Subsidiary to execute and deliver a Pledge Agreement Supplement substantially in the form of Exhibit A-2 to this Agreement, whereby such U.S. Subsidiary shall become a Pledgor hereunder. The rights and obligations of each Pledgor shall remain in full force and effect notwithstanding the addition of any new Pledgor as a party to this Agreement. (f) If any Pledgor receives any noncash consideration pursuant to Section 6.04(c) of the Credit Agreements in an aggregate principal amount in excess of $1,000,000, such noncash consideration shall be pledged as Additional Collateral hereunder. If such noncash consideration is received by any U.S. Subsidiary that is not a Pledgor hereunder, the Borrower shall cause such U.S. Subsidiary to execute and deliver a Pledge Agreement Supplement in substantially the form of Exhibit A-2 to this Agreement, whereby such U.S. Subsidiary shall become a Pledgor hereunder. The rights and obligations of each Pledgor shall remain in full force and effect notwithstanding the addition of any new Pledgor as a party to this Agreement. 6. CASH DIVIDENDS; VOTING RIGHTS; PROCEEDS. (a) Unless an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given notice to the Pledgors of the Collateral Agent's intent to exercise its 9 corresponding rights pursuant to Section 7 below, the Pledgors shall be permitted to receive, retain and use all cash dividends paid in accordance with the terms and conditions of the Credit Agreements in respect of the Pledged Stock and, if applicable, Additional Collateral and to exercise all voting and corporate rights with respect to the Pledged Stock and, if applicable, Additional Collateral, PROVIDED, HOWEVER, that no vote shall be cast or corporate right exercised or other action taken (regardless of whether an Event of Default has occurred and is continuing) which would materially and adversely affect the rights of the Collateral Agent or the Secured Parties or their ability to exercise same or result in any violation of any provision of the Credit Agreements, this Agreement or any other Loan Document. (b) Unless an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given notice to the Pledgors of the Collateral Agent's intent to exercise its corresponding rights pursuant to Section 7 below, the Pledgors shall be permitted to receive, retain and use all other Proceeds (in addition to cash dividends as provided under Section 6(a) above) from the Collateral. 7. RIGHTS OF THE SECURED PARTIES AND THE COLLATERAL AGENT. If an Event of Default shall occur and be continuing and the Collateral Agent shall give notice of its intent to exercise such rights to the Pledgors, (i) the Collateral Agent shall have the right to receive any and all Proceeds paid in respect of the Pledged Stock or Additional Collateral and any and all Proceeds of Proceeds and make application thereof to the Obligations in the manner provided in Section 8(a) and Section 15 and (ii) all shares of the Pledged Stock and, if applicable, Additional Collateral shall be registered in the name of the Collateral Agent or its nominee, and the Collateral Agent or its nominee may thereafter exercise (1) all voting, corporate and other rights pertaining to such shares of the Pledged Stock and to such Additional Collateral at any meeting of shareholders of any Issuer or otherwise and (2) any and all rights of, conversion, exchange, subscription and any other rights, privileges or options pertaining to such shares of the Pledged Stock and to such Additional Collateral as if it were the absolute owner thereof (including the right to exchange at its discretion any and all the Pledged Stock and, if applicable, Additional Collateral upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by a Pledgor or the Collateral Agent of any right, privilege or option pertaining to such shares of the Pledged Stock and to such Additional Collateral, and in connection therewith, the right to deposit and deliver any and all the Pledged Stock and, if applicable, Additional Collateral with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may reasonably determine), all without liability except to account for property actually received by it, but the Collateral Agent shall have no duty to any Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. All Proceeds that are received by any Pledgor contrary to the provisions of this Section 7 shall be received in 10 trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Pledgor and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this Section 7 shall be retained by the Collateral Agent in a Collateral Account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 8(a) and Section 15. After all Events of Default under the Credit Agreements have been cured or waived, the Collateral Agent shall, within five Business Days after all such Events of Default have been cured or waived, repay to each Pledgor all cash dividends, interest or principal that such Pledgor would otherwise be permitted to retain pursuant to the terms of Section 6 above, but only to the extent such Proceeds remain in such Collateral Account. 8. REMEDIES. (a) If an Event of Default shall have occurred and be continuing the Collateral Agent shall apply all or any part of the Proceeds held in any Collateral Account in accordance with Section 15. (b) If an Event of Default shall have occurred and be continuing, the Collateral Agent, on behalf of the Secured Parties, may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice, required by law referred to below) to or upon the Pledgors or any other person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or office of the Collateral Agent or any Secured Party or elsewhere upon such terms and conditions as it may reasonably deem advisable and at such prices as it may reasonably deem best, for cash or on credit or for future delivery without assumption of any risk. The Collateral Agent or any Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of (to the extent permitted by law) any right or equity of redemption in a Pledgor which right or equity is, to the extent permitted by law, hereby waived or released. The Collateral Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses incurred in respect thereof or incidental to the care or safekeeping of any of the Collateral or 11 reasonably relating to the Collateral or the any or the rights of the Collateral Agent and the Secured Parties hereunder, including reasonable attorney's fees and disbursements of counsel to the Collateral Agent, to the payment in whole or in part of the Obligations, in the order set forth in Section 15. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be in writing and deemed reasonable and proper if given at least 10 days before such sale or other disposition. UCAR and the other Pledgors shall remain liable for any deficiency if the proceeds of any sale or other disposition of Collateral are insufficient to pay (i) in the case of each Pledgor other than UCAR, its Obligations and the reasonable fees and disbursements of any attorneys employed by the Collateral Agent or any Secured Party to collect such deficiency in its Obligations and (ii) in the case of UCAR, its and the Borrower's Obligations and pro rata shares of such fees and disbursements. 9. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the Collateral Agent shall determine to exercise its right to sell any or all of the Pledged Stock pursuant to Section 8 hereof, and if in the opinion of the Collateral Agent it is necessary or advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act, the Pledgor who owns such Pledged Stock will cause the Issuer thereof to (i) execute and deliver, and cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the reasonable opinion of the Collateral Agent, necessary or advisable to register the Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period expiring on the earlier of (A) one year from the date of the first public offering of the Pledged Stock and (B) such time that all of the Pledged Stock, or that portion thereof to be sold, is sold and (iii) to make all amendments thereto and/or to the related prospectus which, in the reasonable opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor who owns such Pledged Stock agrees to cause such Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Collateral Agent shall reasonably designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act. Each Pledgor jointly and severally agrees to (x) indemnify, defend and hold harmless Collateral Agent and the other Indemnitees from and against all losses, liabilities, expenses, costs (including the reasonable fees and expenses of legal counsel to the Collateral Agent) and claims (including the costs of investigation) that they may incur insofar as any such loss, liability, expense, cost or claim arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus, offering circular or similar document (or any amendment or supplement thereto), or arises out 12 of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any writing thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to any Pledgor or the Issuer of such Pledged Stock by the Collateral Agent or any other Secured Party expressly for use therein, and (y) enter into an indemnification agreement with any underwriter of or placement agent for any Pledged Stock, on its standard form, to substantially the same effect. The Pledgors will jointly and severally bear all costs and expenses of carrying out their obligations under this Section 9. (b) The Pledgors recognize that the Collateral Agent may be unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Collateral Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree do so. (c) Each Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be reasonably necessary to make such sale or sales of all or any portion of the Pledged Stock or Additional Collateral owned by it pursuant to this Section valid and binding and in compliance with any and all other applicable requirements of the laws of any jurisdiction. Each Pledgor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Collateral Agent and the Secured Parties, that the Collateral Agent and the Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in the Section shall be specifically enforceable against such Pledgor. 10. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER. Each Pledgor hereby authorizes and instructs each Issuer that has issued Pledged Stock pledged by such Pledgor pursuant to Section 2 hereof to comply with any instruction received by it from the Collateral Agent in writing that (a) states that an Event of Default has occurred and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Pledgor, and agrees that each such Issuer shall be fully protected in so complying. 13 11. COLLATERAL AGENT'S APPOINTMENT AS ATTORNEY-IN- FACT. (a) Each Pledgor hereby irrevocably constitutes, and appoints the Collateral Agent and any officer or agent of the Collateral Agent, with full irrevocable power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Pledgor and in the name of such Pledgor or in the Collateral Agent's own name, from time to time in the Collateral Agent's discretion upon and during the continuance of an Event of Default, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, including without limitation, any financing statements, endorsements, assignments or other instruments of transfer. (b) Each Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in Section 11(a). All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released. 12. DUTY OF COLLATERAL AGENT. The Collateral Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9- 207 of the Code or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar securities and property for its own account, PROVIDED that investments shall be made at the option and sole discretion of the Collateral Agent, and PROVIDED FURTHER that the Collateral Agent shall use reasonable efforts to make such investments. Neither the Collateral Agent, any Secured Party nor any of their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgors or any other person or to take any other action whatsoever with regard to the Collateral or any part thereof. 13. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of the Code, each Pledgor authorizes the Collateral Agent to file financing statements with respect to the Collateral owned by it without the signature of such Pledgor in such form and in such filing offices as the Collateral Agent reasonably determines appropriate to perfect the security interests of the Collateral Agent under this Agreement. A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement for filing in any jurisdiction. 14. AUTHORITY OF COLLATERAL AGENT. Each Pledgor acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting 14 or arising out this Agreement shall, as between the Collateral Agent and the Secured Parties, be governed by the Credit Agreements and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and such Pledgor, the Collateral Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting. 15. APPLICATION OF PROCEEDS. The proceeds of any sale of Collateral pursuant to Section 8(b), as well as any Collateral consisting of cash under Section 8(a), shall be applied by the Collateral Agent as follows: FIRST, to the payment of the reasonable costs and expenses of the Collateral Agent as set forth in Section 8(b); SECOND, to the payment of all amounts of the Obligations owed to the Secured Parties in respect of Loans made by them and outstanding and amounts owing in respect of any L/C Disbursement or Letter of Credit or under any Interest/Exchange Rate Protection Agreements with a Lender, pro rata as among the Secured Parties in accordance with the amount of such Obligations owed them; THIRD, to the payment and discharge in full of the Obligations (other than those referred to above), pro rata as among the Secured Parties in accordance with the amount of such Obligations owed to them; and FOURTH, after payment in full of all Obligations, to the applicable Pledgor, or the successors or assigns thereof, or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, any Collateral then remaining. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. 16. SECURITY INTEREST ABSOLUTE. All rights of the Collateral Agent hereunder, the security interests granted hereunder and all obligations of the Pledgors hereunder shall be absolute and unconditional. 17. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by any Pledgor herein and in the certificates or other instruments prepared or delivered in 15 connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Secured Parties and shall survive the making by the Lenders of the Loans, the execution and delivery to the Lenders of the Loan Documents and the issuance by the Fronting Banks of the Letters of Credit, regardless of any investigation made by the Secured Parties, or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or L/C Disbursement, or any Fee or any other amount payable under or in respect of this Agreement or any other Loan Document is outstanding and unpaid and so long as the Commitments have not been terminated. 18. COLLATERAL AGENT'S LIABILITIES AND EXPENSES; INDEMNIFICATION. (a) Notwithstanding anything to the contrary provided herein, the Collateral Agent assumes no liabilities with respect to any claims regarding each Pledgor's ownership (or purported ownership) of, or rights or obligations (or purported rights or obligations) arising from, the Collateral or any use (or actual or alleged misuse) whether arising out of any past, current or future event, circumstance, act or omission or otherwise, or any claim, suit, loss, damage, expense or liability of any kind or nature arising out of or in connection with the Collateral. All of such liabilities shall, as between the Collateral Agent and the Pledgors, be borne exclusively by the Pledgors. (b) Each Pledgor hereby agrees to pay all reasonable expenses of the Collateral Agent and to indemnify the Collateral Agent with respect to any and all losses, claims, damages, liabilities and related expenses in respect of this Agreement or the Collateral in each case to the extent the Borrower is required to do so pursuant to Section 9.05 of the Credit Agreements. (c) Any amounts payable by a Pledgor as provided hereunder shall be additional Obligations of it secured hereby and by its other Security Documents. Without prejudice to the survival of any other agreements contained herein, all indemnification and reimbursement obligations contained herein shall survive the payment in full of the principal and interest under the Credit Agreements, the expiration of the Letters of Credit and the termination of the Commitments or this Agreement. 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19. 20. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each Pledgor hereby irrevocably and unconditionally submits, for 16 itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Loan Party or any Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Pledgor or any Secured Party or its properties in the courts of any jurisdiction. (b) Each Pledgor and each Secured Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 22 hereof. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. 21. TERMINATION AND RELEASE. (a) This Agreement and the security interest created hereunder shall terminate when all the Obligations have been fully and indefeasibly paid and when the Secured Parties have no further Commitments and no Letters of Credit are outstanding, at which time the Collateral Agent shall reassign and deliver to each Pledgor, or to such person or persons as each Pledgor shall reasonably designate, against receipt, such of the Collateral owned by such Pledgor as shall have not been sold or otherwise applied by the Collateral Agent pursuant to the terms hereof and shall still be held by it hereunder, together with appropriate instructions of reassignment and release. Any such reassignment shall be without recourse to or any warranty by the Collateral Agent and at the expense of such Pledgor. (b) All Collateral sold, transferred or otherwise disposed of, in accordance with the terms of the Credit Agreements (including pursuant to a waiver or amendment of the terms thereof), shall be sold, transferred or otherwise disposed of free and clear of the Lien and the security interest created hereunder. In connection with the foregoing, (i) the Collateral Agent shall execute and deliver to each Pledgor with respect to the Collateral owned by such Pledgor, or to such person or persons as such 17 Pledgor shall reasonably designate, against receipt, such Collateral sold, transferred or otherwise disposed together with appropriate instructions of reassignment and release, (ii) any representation, warranty or covenant contained herein relating to the Collateral shall no longer be deemed to be made with respect to such sold, transferred or otherwise disposed Collateral and (iii) all schedules hereto shall be amended to delete the name of the Issuer. Any such reassignment shall be without recourse or to any warranty by the Collateral Agent and at the expense of such Pledgor. 22. NOTICES. All notices, requests and demands to or upon the Secured Parties or the Pledgors under this Agreement shall be given or made in accordance with Section 9.01 of the Credit Agreements and addressed as follows: (a) if to any Secured Party, UCAR, or any Credit Party, at its address for notices provided in Section 9.01 of the Credit Agreements; (b) if to any Subsidiary that is not a Credit Party, at its address set forth under its signature below. 23. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition of enforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 24. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a) None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgors and the Collateral Agent, PROVIDED that any provision of this Agreement may be waived by the Required Secured Parties pursuant to a letter or agreement executed by the Collateral Agent or by telecopy transmission from the Collateral Agent. (b) Neither the Collateral Agent nor any Secured Party shall by any act (except by a written instrument pursuant in Section 24(a) hereof) or delay be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of any Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise of any other right, power or privilege. A waiver by any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to 18 any right or remedy which such Secured Party would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 25. SECTION HEADINGS. The section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the successors and assigns of the Pledgors and shall inure to the benefit of the Pledgors, the Collateral Agent and the Secured Parties and their successors and assigns, PROVIDED that this Agreement may not be assigned by the Pledgors without the prior written consent of the Collateral Agent and the Secured Parties. 27. COUNTERPARTS. This Agreement may be executed in two or more original counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. 28. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 19 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. UCAR INTERNATIONAL INC. by /s/ Corrado F. DeGasperis ------------------------------------ Name: Corrado F. DeGasperis Title: Controller UCAR GLOBAL ENTERPRISES INC. by /s/ Corrado F. DeGasperis ------------------------------------ Name: Corrado F. DeGasperis Title: Controller EACH OF THE PLEDGOR SUBSIDIARIES LISTED ON SCHEDULE II HERETO by /s/ Corrado F. DeGasperis ------------------------------------ Name: Corrado F. DeGasperis Title: Controller Address:
SCHEDULE I PLEDGED STOCK PERCENTAGE PLEDGOR ISSUER PLEDGED STOCK PLEDGED UCAR International Inc. UCAR Global Enterprises Inc. 100 Shares 100% (Certificate No. U0001) UCAR Global Enterprise Inc. UCAR Carbon S.A. No Certificates 65% UCAR Carbon Company Inc. 500 Shares 100% (Certificate No. 2) UCAR Holdings II Inc. 100 Shares 100% (Certificate No. 2) UCAR S.A. 1,750,000 Shares 65% (Certificate No. 5) UCAR Carbon Company Inc. Unicarbon Comercial Ltda. No Certificates 65% UCAR Limited 9,750,000 Shares 65% (Certificate No. 8) UCAR Holdings Inc. 100 Shares 100% (Certificate No. 1) Union Carbide Grafito, Inc. 25,000 preferred Shares 100% (Certificate No. 26) 200 common Shares (Certificate No. 2) UCAR Carbon Technology 100 Shares 100% Corporation (Certificate No. 1) UCAR Carbon Foreign Sales .65 Share 65% Corporation (Certificate No. 2) UCAR Composites Inc. 800 Shares 100% (Certificate No. A3) UCAR International Trading 100 Shares 100% Inc. (Certificate No. 1) EMSA (Pty.) Ltd. 4,062,500 Shares 65% (Certificate No. 36) Carbographite Limited 2,600 Shares 65% (Certificate No. 42) UCAR Holdings Inc. UCAR Mexicana S.A. de C.V. 269,827,025 Shares 65% (Certificate No. __) UCAR S.p.A. No Certificates 65% UCAR Holdings II Inc. UCAR Inc. 650 Shares (Certificate No. 3) 65% UCAR Electrodos S.L. No Certificates 65% UCAR Holdings S.A. No Certificates 65% UCAR Holdings III Inc. 100 Shares 100% (Certificate No. 2) UCAR Holdings III Inc. UCAR SNC (1) (1) No Certificates ====================================================================================================
(1) UCAR HOLDINGS III Inc. owns one quota of UCAR SNC, which comprises less than 1% of the outstanding ownership of UCAR SNC. SCHEDULE II PLEDGOR SUBSIDIARIES UCAR Carbon Company Inc. UCAR Holdings Inc. UCAR Holdings II Inc. UCAR Holdings III Inc. EXHIBIT A-1 TO PLEDGE AGREEMENT [FORM OF] PLEDGE AGREEMENT SUPPLEMENT PLEDGE AGREEMENT SUPPLEMENT, dated as of [ ] (this "SUPPLEMENT"), made by , a [ ] corporation (the "PLEDGOR"), in favor of THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent for the Secured Parties (such term and each other capitalized term used but not defined having the meaning given in the Pledge Agreement, and if not defined therein, having the meaning given in Article I of the Credit Agreements). Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation (the "BORROWER"), the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent, and (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). 1. Reference is hereby made to that certain Pledge Agreement, dated as of October 19, 1995, as amended and restated as of November 10, 1998(as amended, supplemented or otherwise modified as of the date hereof, the "PLEDGE AGREEMENT"), made by UCAR, the Borrower and certain U.S. Subsidiaries in favor of the Collateral Agent. 2. The Pledgor hereby confirms and reaffirms the security interest in the Collateral granted to the Collateral Agent for the benefit of the Secured Parties under the Pledge Agreement, and, as additional collateral security for the prompt and complete payment when due (whether at stated maturity, by acceleration or otherwise) of the Obligations and in order to induce the Secured Parties to make Loans and extend Letters of Credit under the Credit Agreements and the other Loan Documents, the Pledgor hereby delivers to the Collateral Agent, for the benefit of the Secured Parties, all of the issued and outstanding 2 shares of Capital Stock of [INSERT NAME OF NEW SUBSIDIARY] (the "NEW ISSUER") listed in SCHEDULE 1 hereto, together with all stock certificates, options, or rights of any nature whatsoever which may be issued or granted by the New Issuer in respect of such stock while the Pledge Agreement, as supplemented hereby, is in force (the "ADDITIONAL PLEDGED STOCK"; as used in the Pledge Agreement as supplemented by this Supplement, "PLEDGED STOCK" shall be deemed to include the Additional Pledged Stock) and hereby grants to the Collateral Agent, for the benefit of the Secured Parties, a first security interest in the Additional Pledged Stock and all Proceeds thereof. 3. The Pledgor hereby represents and warrants that the representations and warranties contained in Section 4 of the Pledge Agreement are true and correct on the date of this Supplement with references therein to the "PLEDGED STOCK" to include the Additional Pledged Stock, with references therein to the "ISSUERS" to include the New Issuer, and with references to the "PLEDGE AGREEMENT" to mean the Pledge Agreement as supplemented by this Supplement. 4. This Supplement is supplemental to the Pledge Agreement, forms a part thereof and is subject to the terms thereof and the Pledge Agreement is hereby supplemented as provided herein. Without limiting the foregoing, SCHEDULE I to the Pledge Agreement shall hereby be deemed to include each item listed on SCHEDULE I to this Supplement and all references in the Pledge Agreement (other than in Section 4 therein) to (a) "PLEDGED STOCK" shall be deemed to, and shall, include the Additional Pledged Stock and (b) "ISSUERS" shall be deemed to, and shall, include the New Issuer. IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have caused this Supplement to be duly executed and delivered on the date first set forth above. [PLEDGOR] by ------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Collateral Agent by ------------------------------ Name: Title: SCHEDULE I TO PLEDGE AGREEMENT SUPPLEMENT PLEDGED STOCK OWNERSHIP PLEDGOR ISSUER PLEDGED STOCK INTEREST Annex I TO PLEDGE AGREEMENT SUPPLEMENT ACKNOWLEDGMENT AND CONSENT The undersigned hereby acknowledges receipt of a copy of the foregoing Supplement and the Pledge Agreement referred to therein (the "PLEDGE AGREEMENT"). The undersigned agrees for the benefit of the Secured Parties as follows: 1. The undersigned will be bound by the terms of the Pledge Agreement and will comply with such terms insofar as such terms are applicable to the undersigned. 2. The undersigned will notify the Agent promptly in writing of the occurrence of any of the events described in Section 5(a) of the Pledge Agreement. 3. The terms of Section 9(c) of the Pledge Agreement shall apply to it, MUTATIS MUTANDIS, with respect to all actions that may be required of it under or pursuant to or arising out of Section 9 of the Pledge Agreement. [NAME OF ISSUER] By -------------------------------------- Name: Title: Address for Notices: ---------------------------------------- ---------------------------------------- Telecopy: ------------------------------- EXHIBIT A-2 TO THE PLEDGE AGREEMENT SUPPLEMENT NO. dated as of [ ], to the Pledge Agreement dated as of October 19, 1995, as amended and restated as of November 10, 1998 (the "PLEDGE AGREEMENT"), among UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation, as borrower (the "BORROWER"), each of the other Pledgors (such term and each other capitalized term used but not defined having the meaning given it in the Pledge Agreement, and if not defined therein, having the meaning given it in Article I of the Credit Agreements), party thereto (together with the Borrower, the "PLEDGORS") and THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent (the "COLLATERAL AGENT") for the Secured Parties. A. Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR, the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent and (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). B. The Pledgors have entered into the Pledge Agreement in order to induce the Lenders to make Loans and induce the Fronting Banks to issue Letters of Credit pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreements. Pursuant to Sections 5(e) and 5(f) of the Pledge Agreement, each U.S. Subsidiary that was not a Pledgor on the date thereof is required to enter into the Pledge Agreement as a Pledgor upon acquiring Additional Collateral. Sections 5(e) and 5(f) of the Pledge Agreement provide that additional U.S. Subsidiaries may become Pledgors under the Pledge Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned (the "NEW PLEDGOR") is a U.S. Subsidiary and is executing this Supplement in accordance with the requirements of the Pledge Agreement to become a Pledgor under the Pledge Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Pledgor agree as follows: 2 SECTION 1. The New Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with the same force and effect as if originally named therein as a Pledgor and the New Pledgor hereby agrees to all the terms and provisions of the Pledge Agreement applicable to it as a Pledgor thereunder. Each reference to a "Pledgor" in the Pledge Agreement shall be deemed to include the New Pledgor. The Pledge Agreement is hereby incorporated herein by reference. SECTION 2. The New Pledgor represents and warrants to the Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency or similar laws effecting creditors' rights generally and equitable principles of general applicability. SECTION 3. This Supplement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Pledgor and the Collateral Agent. SECTION 4. Except as expressly supplemented hereby, the Pledge Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Pledge Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in the Credit Agreements. All communications and notices hereunder to the New Pledgor shall be given to it at the address set forth under its signature, with a copy to the Borrower. 3 IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly executed this Supplement to the Pledge Agreement as of the day and year first above written. [NAME OF NEW PLEDGOR], by ------------------------------------ Name: Title: THE CHASE MANHATTAN BANK, as Collateral Agent, by ------------------------------------ Name: Title: EXHIBIT B TO PLEDGE AGREEMENT ACKNOWLEDGMENT AND CONSENT Each of the undersigned hereby acknowledges receipt of a copy of the Pledge Agreement dated as of October 19, 1995, as amended and restated as of November 10, 1998 (the "PLEDGE AGREEMENT"), by UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation (the "BORROWER"), and certain U.S. Subsidiaries that are signatories hereto ("PLEDGOR SUBSIDIARIES" and, together with UCAR and the Borrower, the "PLEDGORS"), in favor of THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent for the Secured Parties (such term and each other capitalized term used but not defined herein having the meaning given it in Article I of the Credit Agreements). Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR, the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent and (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). 1. Each of the undersigned will be bound by the terms of the Pledge Agreement and will comply with such terms insofar as such terms are applicable to the undersigned. 2. Each of the undersigned will notify the Collateral Agent promptly in writing of the occurrence of any of the events described in subsection 5(a) of the Pledge Agreement. 3. The terms of subsection 9(c) of the Pledge Agreement shall apply to it, MUTATIS MUTANDIS, with respect to all actions that may be required of it under or pursuant to or arising out of Section 9 of the Pledge Agreement. UCAR GLOBAL ENTERPRISES INC. By --------------------------------------- Name: Title: [NAME OF ISSUER] By --------------------------------------- Name: Title: EX-10.6 12 EXHIBIT 10.6 INTELLECTUAL PROPERTY SECURITY AGREEMENT INTELLECTUAL PROPERTY SECURITY AGREEMENT dated as of April 22, 1998, as amended and restated as of November 10, 1998, made by UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation (the "BORROWER"), and the U.S. Subsidiaries (the "Subsidiary Grantors", and together with UCAR and the Borrower, the "GRANTORS") in favor of THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent for the Secured Parties. Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR, the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent and (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). The Lenders and the Fronting Banks, respectively, have agreed to make Loans to the Credit Parties and to issue Letters of Credit for the account of the Credit Parties, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreements. The obligations of the Lenders to make Loans and of the Fronting Banks to issue Letters of Credit under the Credit Agreements are conditioned upon, among other things, the execution and delivery by the Grantors of an intellectual property security agreement in the form hereof to secure the due and punctual payment of, with respect to each Grantor, its obligations as obligor or guarantor in respect of (i) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Existing Credit Agreement after the maturity of the Loans thereunder and interest accruing at the then applicable rate provided in the Existing Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Existing Credit Agreement, 2 when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Tranche C Facility Credit Agreement after the maturity of the Loans thereunder and interest accruing at the applicable rate provided in the Tranche C Facility Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Tranche C Facility Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (iii) each payment required to be made by any Credit Party under the Existing Credit Agreement, when and as due, including payments in respect of reimbursements of L/C Disbursements, interest thereon and obligations to provide cash collateral, (iv) each payment required to be made by any Credit Party under the Tranche C Facility Credit Agreement, when and as due, and (v) all other obligations and liabilities of every nature of the Credit Parties under the Credit Agreements from time to time owed to the Secured Parties or any of them, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), which may arise under, out of, or in connection with, the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document or any other Loan Document and any obligation of the Borrower or any Credit Party under either of the Credit Agreements to a Lender under either Credit Agreement pursuant to an Interest/Exchange Rate Protection Agreement or under any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by the Borrower or any Credit Party pursuant to the terms of the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document, any other Loan Document or any Interest/Exchange Rate Protection Agreement with a Lender (all the foregoing obligations collectively, the "OBLIGATIONS"). Accordingly, the Grantors and the Collateral Agent, on behalf of itself and each other Secured Party (and each of their successors and assigns), hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINITION OF TERMS USED HEREIN. All capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreements. 3 SECTION 1.02. DEFINITION OF CERTAIN TERMS USED HEREIN. As used herein, the following terms shall have the following meanings: "AGREEMENT" shall mean this Intellectual Property Security Agreement. "COLLATERAL" shall mean, with respect to each Grantor, all of the following, whether now owned or hereafter acquired by such Grantor: (a) Patents, including all granted Patents, recordings and pending applications, including those listed on Schedule I attached hereto, (b) Trademarks, including all registered Trademarks, registrations, recordings, and pending applications, including those listed on Schedule II attached hereto, (c) Copyrights, including all registered Copyrights, registrations, recordings, supplemental registrations and pending applications, including those listed on Schedule III attached hereto, (d) Licenses, including those listed on Schedule IV hereto, (e) General Intangibles, and (f) all products and Proceeds (including insurance proceeds) of, and additions, improvements and accessions to, and books and records describing or used in connection with, any and all of the property described above. "COPYRIGHTS" shall mean, with respect to each Grantor, all of the following now or hereafter owned by such Grantor: (i) all copyright rights in any work subject to the copyright laws of the United States or any other country, whether as author, assignee, transferee or otherwise, and (ii) all registrations and applications for registration of any such copyright in the United States or any other country, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office. "COPYRIGHT LICENSE" shall mean, with respect to each Grantor, any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now or hereafter owned by such Grantor or which such Grantor otherwise has the right to license, or granting any right to such Grantor under any Copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement. "GENERAL INTANGIBLES" shall mean, with respect to each Grantor, all intangible, intellectual or other similar property of such Grantor of any kind or nature now owned or hereafter acquired by such Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations, franchises, and all other intellectual or other similar property rights not otherwise described above. "INDEMNITEE" shall mean the Collateral Agent, the Secured Parties and their respective officers, directors, trustees, affiliates and controlling persons. 4 "LICENSE" shall mean, with respect to each Grantor, any Patent License, Trademark License, Copyright License or other license or sublicense as to which such Grantor is a party (other than those license agreements which by their terms prohibit assignment or a grant of a security interest by such Grantor as licensee thereunder). "PATENT LICENSE" shall mean, with respect to each Grantor, any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now or hereafter owned by such Grantor or which such Grantor otherwise has the right to license, is in existence, or granting to such Grantor any right to make, use or sell any invention on which a Patent, now or hereafter owned by any third party, is in existence, and all rights of such Grantor under any such agreement. "PATENTS" shall mean, with respect to each Grantor, all the following now or hereafter owned by such Grantor: (a) all letters patent of the United States or any other country, including patents, design patents or utility models, all registrations and recordings thereof, and all applications for letters patent of the United States or any other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or any similar offices in any other country, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein. "PROCEEDS" shall mean, with respect to each Grantor, any consideration received from the sale, exchange, license, lease or other disposition of any asset or property that constitutes Collateral owned by such Grantor, any value received as a consequence of the possession of any such Collateral and any payment received from any insurer or other person or entity as a result of the destruction, loss, theft or other involuntary conversion of whatever nature of any asset or property that constitutes such Collateral, any claim of such Grantor against third parties for (and the right to sue and recover for and the rights to damages or profits due or accrued arising out of or in connection with) (a) past, present or future infringement of any Patent now or hereafter owned by such Grantor or licensed under a Patent License, (b) past, present or future infringement or dilu tion of any Trademark now or hereafter owned by such Grantor or licensed under a Trademark License or injury to the goodwill associated with or symbolized by any Trademark now or hereafter owned by such Grantor, (c) past, present or future breach of any License, (d) past, present or future infringement of any Copyright now or hereafter owned by such Grantor or licensed under a Copyright License, and (e) any and all other amounts from time to time paid or payable under or in connection with any of such Collateral. 5 "TRADEMARK LICENSE" shall mean, with respect to each Grantor, any written agreement, now or hereafter in effect, granting to any third party any right to use any Trademark now or hereafter owned by such Grantor or that such Grantor otherwise has the right to license, or granting to such Grantor any right to use any Trademark now or hereafter owned by any third party, and all rights of such Grantor under any such agreement. "TRADEMARKS" shall mean, with respect to each Grantor, all of the following now or hereafter owned by such Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, and all designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office, any State of the United States or any similar offices in any other country or any political subdivision thereof, and all extensions or renewals thereof, and (b) all goodwill associated therewith or symbolized thereby, and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill. "U.S. SUBSIDIARIES" shall mean the Subsidiaries (as defined in the Credit Agreements) incorporated or otherwise organized in the United States of America. SECTION 1.03. RULES OF INTERPRETATION. The rules of interpretation specified in Section 1.02 of the Credit Agreements shall be applicable to this Agreement. ARTICLE II SECURITY INTEREST SECTION 2.01. SECURITY INTEREST. As security for the payment or performance, as the case may be, of the Obligations, each Grantor hereby creates, mortgages, pledges, hypothecates and transfers to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a continuing first priority security interest in all such Grantors' right, title and interest in, to and under the Collateral subject to liens permitted under Section 6.02 of the Credit Agreements (the "SECURITY INTEREST"). Without limiting the foregoing, the Collateral Agent is hereby authorized to file one or more financing statements, continuation statements, filings with the United States Patent and Trademark Office or United States Copyright Office (or similar office in any other country), or any other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by such Grantor, without the signature 6 of such Grantor, naming such Grantor as debtor and the Collateral Agent as secured party. Notwithstanding any other provision of this Agreement to the contrary, the Collateral shall not include any License which by its terms or the terms governing it prohibits assignment thereof or the grant of a security interest therein; PROVIDED that such term or terms are typical or customary in connection with the document or instrument to which they relate. Each Grantor agrees at all times to keep accurate and complete, in all material respects, accounting records with respect to the Collateral and, on and after the occurrence and during the continuance of a Default, a record of all payments and Proceeds received in respect thereof. SECTION 2.02. FURTHER ASSURANCES. Each Grantor agrees, at its own cost and expense, to promptly execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request for the better assuring, preserving and perfecting of the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest created hereby, the filing of any financing statements or other documents (including filings with the United States Patent and Trademark Office and the United States Copyright Office or similar offices in any other country) in connection herewith, and the execution and delivery of any document required to supplement this Agreement with respect to any Patents, Trademarks and/or Copyrights applied for, acquired, registered (or for which registration applications are filed) or issued after the date hereof. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, upon the request of the Collateral Agent, such note or instrument shall (to the extent not previously pledged and delivered pursuant to the Pledge Agreements) be immediately pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent. Each Grantor agrees promptly to notify the Collateral Agent if any material portion of the Collateral is canceled or overturned, opposed, misappropriated, injured, infringed, lost (other than due to expiration of any issued Patent) or, if applicable, diluted. SECTION 2.03. INSPECTION AND VERIFICATION. Without limiting the scope of Section 5.07 of the Credit Agreements, the Collateral Agent and such representatives as the Collateral Agent may reasonably designate shall have the right to inspect, at any reasonable times or times, any of the Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Collateral is located, to discuss any Grantor's affairs with the officers of such Grantor and its independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, conditions, and status of or any other matter relating to such Collateral, including, in the case of Collateral in the 7 possession of any third party (with, except after an Event of Default shall have occurred and during the continuance thereof, the consent of such Grantor, which consent shall not be unreasonably withheld), by contacting such person possessing such Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any or all of the Secured Parties. SECTION 2.04. TAXES; ENCUMBRANCES. At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, liens, security interests or other encumbrances at any time levied or placed on any of the Collateral and not permitted under this Agreement or other Loan Documents, and may pay for the maintenance and preservation of any of the Collateral to the extent any Grantor fails to do so to the extent required by this Agreement or the other Loan Documents, and such Grantor agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; PROVIDED, HOWEVER, that nothing in this Section 2.04 shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any other Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents. SECTION 2.05. NO ASSUMPTION OF LIABILITY. The Security Interest is granted as security only and shall not subject any Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of any of the Collateral. ARTICLE III REPRESENTATIONS AND WARRANTIES REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants, as to itself and the Collateral in which the Security Interest is created by it hereunder, that: SECTION 3.01. VALIDITY OF PATENTS, TRADEMARKS AND COPYRIGHTS. Each of the Patents, Trademarks and Copyrights is subsisting and has not been adjudged invalid or unenforceable, in whole or in part, except as could not reasonably be expected to have a Material Adverse Effect. SECTION 3.02. TITLE AND AUTHORITY. Each Grantor has rights in and good title to the Collateral shown on the schedules hereto as being owned by it and has full corporate power and authority to grant to the Collateral Agent (for the benefit of the Secured Parties) the Security Interest in the Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than any consent or approval that has been obtained, 8 except, in each case, as could not reasonably be expected to have a Material Adverse Effect. SECTION 3.03. FILINGS. (a) Fully executed financing statements containing a description of the Collateral shall promptly following the Closing Date be filed of record in every governmental, municipal or other office in every jurisdiction located within the United States and its respective territories and possessions or such other analogous documents in other countries as are necessary to publish notice of and protect the validity of and to establish a valid and perfected security interest in favor of the Collateral Agent (for the benefit of the Secured Parties) in respect of the Collateral in which a security interest may be perfected by filing a financing statement or analogous document in the United States and its political subdivisions, territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions or pursuant to applicable law in other countries, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements or other documents of similar effect, except as contemplated by paragraph (b) below and filings with respect to after-acquired Collateral, with respect to which all necessary actions will be promptly taken subsequent to the acquisition of such after-acquired Collateral. (b) Each Grantor shall ensure and warrants that fully executed security agreements in the form hereof and containing a description of the Collateral shall have been received and recorded within three months after the execution of this Agreement with respect to United States Patents and United States registered Trademarks (and Trademarks for which United States registration applications are pending) and within one month after the execution of this Agreement with respect to United States registered Copyrights by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. ss. 261, 15 U.S.C. ss. 1060 or 17 U.S.C. ss. 205 and the regulations thereunder, as applicable, and otherwise as may be required pursuant to the laws of any other country or any political subdivision thereof, to protect the validity and first priority of and to perfect a valid first priority security interest (subject only to Liens permitted by Section 6.02 of the Credit Agreements) in favor of the Collateral Agent (for the benefit of the Secured Parties) in respect of the Collateral in which a security interest may be perfected by filing in the United States and its political subdivisions, territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements (other than such actions as are necessary to perfect the Collateral Agent's first priority security interest with respect to any Collateral (or registration or application for registration thereof) acquired or developed after the date hereof). 9 SECTION 3.04. VALIDITY OF SECURITY INTERESTS. This Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral, and, when financing statements in appropriate form are filed in the offices specified on Schedule VI hereto and this Agreement is filed in the United States Patent and Trademark Office and the United States Copyright Office, this Agreement will constitute a duly perfected Lien on, and security interest in, all right, title and interest of the Grantors in such Collateral and, to the extent contemplated therein and subject to ss. 9-306 of the UCC, the proceeds thereof, in each case prior and superior in right to any other person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a lien on registered trademarks, trademark applications and copyrights acquired by the Grantors after the date hereof), other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 6.02 of the Credit Agreements. SECTION 3.05. INFORMATION REGARDING NAMES AND LOCATIONS. Each Grantor has disclosed in writing to the Collateral Agent on Schedule IV any material trade names used to identify it in its business or in the ownership of its properties during the past five years. SECTION 3.06. ABSENCE OF OTHER LIENS. The Collateral is owned by the Grantors free and clear of any Lien of any nature whatsoever (except for Liens expressly permitted by Section 6.02 of the Credit Agreements or hereby and any liens of licenses listed on Schedule V). Other than as contemplated hereby and by the other Loan Documents, and except as permitted therein, the Grantors have not filed (a) any financing statement or analogous document under the Uniform Commercial Code, (b) any assignment in which any Grantor assigns the Collateral, any security agreement or any similar instrument covering any Collateral with the United States Patent and Trademark Office, the United States Copyright Office or any similar office in any other country of political subdivision thereof and (c) any assignment in which any Grantor assigns the Collateral or any security agreement or similar instrument covering any Collateral with any foreign governmental, municipal or other office. ARTICLE IV COVENANTS SECTION 4.01. COVENANTS REGARDING PATENT, TRADEMARK AND COPYRIGHT COLLATERAL. (a) Each Grantor (either itself or through licensees) will, for each Patent, not do any act, or omit to do any act, whereby any Patent that is material to the conduct of the Grantors' businesses, taken as a whole, may become invalidated or dedicated to the public, and shall continue to mark, to the extent consistent with past practices and good business judgment, any products covered by a material Patent with the relevant patent number as necessary and sufficient to establish and preserve such Grantor's matrial rights under applicable laws. 10 (b) Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of the Grantors' businesses, taken as a whole, to the extent consistent with past practices and good business judgment, (i) maintain such Trademark in full force free from any material claim of abandonment or invalidity for nonuse, (ii) maintain the quality of products and services offered under such Trademark to the extent that the failure to do so would result in a Material Adverse Effect, (iii) display such Trademark with notice of federal or foreign registration to the extent necessary and sufficient to establish and preserve such Grantor's material rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any material third-party rights. (c) Each Grantor (either itself or through licensees) will, for each work covered by a material Copyright, to the extent consistent with past practices and good business judgment, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve such Grantor's material rights under applicable copyright laws. (d) Each Grantor shall notify the Collateral Agent immediately if it knows or has reason to know that any Patent, Trademark or Copyright material to the conduct of the Grantors' businesses, taken as a whole, may become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, United States Copyright Office or any court or similar office of any country) regarding such Grantor's ownership of any such Patent, Trademark or Copyright, its right to register the same, or to keep and maintain the same. (e) In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, unless it promptly informs the Collateral Agent, and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence (and, in the case of applications for Trademarks with the United States Patent and Trademark Office, perfect) the Collateral Agent's security interest in such Patent, Trademark or Copyright of such Grantor and the good will and general intangibles of such Grantor relating thereto or represented thereby, and such Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable until the Obligations are paid in full. 11 (f) Each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States or in any other country or any political subdivision thereof, to maintain and pursue each material application (and to obtain the relevant grant or registration) relating to the Pat ents, Trademarks and/or Copyrights which are material to the Grantors' businesses, taken as a whole, to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of the Grantors' businesses, taken as a whole, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancelation proceedings against third parties. (g) In the event that any Collateral consisting of a Patent, Trademark or Copyright material to the conduct of the Grantors' businesses, taken as a whole, is believed by the Grantor that has created the Security Interest in such Collateral pursuant hereto to have been infringed, misappropriated or diluted by a third party in any material respect, such Grantor shall notify the Collateral Agent promptly after it learns thereof and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation, or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Collateral. SECTION 4.02. PROTECTION OF SECURITY. Each Grantor shall, at its own cost and expense, take any and all reasonable actions necessary to defend title to the Collateral against all persons, to properly maintain, protect and preserve the Collateral and to defend the Security Interest of the Collateral Agent in the Collateral and the priority thereof against any Lien not permitted under the Credit Agreements in each case, except as otherwise permitted by the Credit Agreements or this Agreement. SECTION 4.03. CONTINUING OBLIGATIONS OF THE GRANTORS. Each Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each License, contract, agreement, interest or obligation relating to the Collateral, all in accordance with the terms and conditions thereof, to the extent consistent with good business practice. Without limiting the foregoing, the Collateral Agent shall have no obligation or liability under any License by reason of or arising out of this Agreement or the granting or the assignment to the Collateral Agent of the Security Interest or the receipt by the Collateral Agent of any payment related to any License pursuant hereto, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of any Grantor under or pursuant to any License, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any License, or to present or file any claim, or to take any action to collect or enforce any performance of the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times. 12 SECTION 4.04. USE AND DISPOSITION OF COLLATERAL. A Grantor shall not (i) make or permit to be made an assignment, pledge or hypothecation of the Collateral, and shall grant no other security interest in the Collateral (other than pursuant hereto or except for any Permitted Liens) or (ii) make or permit to be made any transfer of the Collateral, and shall remain at all times in possession thereof other than transfers to the Collateral Agent pursuant to the provisions hereof; notwithstanding the foregoing, a Grantor may use and dispose of the Collateral in any lawful manner permitted by the provisions of this Agreement, the Credit Agreements or any other Loan Document, unless the Collateral Agent shall, after an Event of Default shall have occurred and during the continuance thereof, notify the Borrower not to sell, convey, lease, assign, transfer or otherwise dispose of any Collateral except with respect to any transfer between the Borrower or a Wholly Owned Subsidiary that is a Grantor and the Borrower or a Wholly Owned Subsidiary that is a Grantor. SECTION 4.05. LOCATIONS OF COLLATERAL; PLACE OF BUSINESS. (a) Each Grantor agrees, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form reasonably satisfactory to the Collateral Agent, showing the identity, amount and location (to the extent practicable) of any and all Collateral. (b) Each Grantor agrees not to change, or permit to be changed, the location of its chief executive office or chief place of business or the name or names used to identify it in its business or in the ownership of its properties unless all filings under the Uniform Commercial Code or under other applicable laws that are required to be made with respect to the Collateral have been made and the Collateral Agent has a valid, legal and perfected first priority security interest in the Collateral, subject to no liens, other than Liens permitted by Section 6.02 of the Credit Agreements and any liens or licenses listed on Schedule V, and prior notice thereof has been given to the Collateral Agent along with copies of all such filings to be made. SECTION 4.06. FUTURE RIGHTS. (a) If, before the time that all Obligations shall have been paid in full, no Letters of Credit are outstanding and the Secured Parties no longer have Commitments under the Credit Agreements, any Grantor shall obtain rights to any material asset or item that may be considered Collateral, the provisions of Section 2.01 shall automatically apply thereto and each Grantor shall give to the Collateral Agent prompt notice thereof in writing. (b) With respect to any such material asset or item that may be considered Collateral as set forth in paragraph (a) above, each Grantor shall follow the procedures set forth in Section 3.03, as applicable, to ensure that the Collateral Agent's valid first priority security interest therein is perfected (subject only to Liens permitted by Section 6.02 the Credit Agreements). 13 SECTION 4.07 ASSIGNMENT OF LICENSES. Upon and during the continuance of an Event of Default and at the reasonable request of the Collateral Agent, each Grantor shall use its reasonable efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all of the Grantors' rights, title and interest thereunder to the Collateral Agent or its designee. SECTION 4.08. COLLATERAL AGENT'S LIABILITIES AND EXPENSES; INDEMNIFICATION. (a) Notwithstanding anything to the contrary provided herein, the Collateral Agent assumes no liabilities with respect to any claims regarding each Grantor's ownership (or purported ownership) of, or rights or obligations (or purported rights or obligations) arising from, the Collateral or any use (or actual or alleged misuse), license or sublicense thereof by any Grantor or any licensee of such Grantor, whether arising out of any past, current or future event, circumstance, act or omission or otherwise, or any claim, suit, loss, damage, expense or liability of any kind or nature arising out of or in connection with the Collateral or the production, marketing, delivery, sale or provision of goods or services under or in connection with any of the Collateral. As between the Secured Parties and the Grantors, all of such liabilities shall be borne exclusively by the Grantors. (b) Each Grantor hereby agrees to pay all expenses of the Collateral Agent and to indemnify the Collateral Agent with respect to any and all losses, claims, damages, liabilities and related expenses in respect of this Agreement or the Collateral in each case to the extent the Borrower is required to do so pursuant to Section 9.05 of the Credit Agreements. (c) Any amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. Without prejudice to the survival of any other agreements contained herein, all indemnification and reimbursement obligations contained herein shall survive the payment in full of the principal and interest under the Credit Agreements, the expiration of the Letters of Credit and the termination of the Commitments or this Agreement. ARTICLE V REMEDIES SECTION 5.01. POWER OF ATTORNEY. Upon the occurrence and during the continuance of any Event of Default, subject to prior written notice to the Borrower, the Collateral Agent shall have the right, as the true and lawful attorney-in-fact of the 14 Grantors, with power of substitution for the Grantors and in the Grantors' names, the Collateral Agent's name or otherwise, for the use and benefit of the Secured Parties (a) upon prior notice from the Collateral Agent, to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice relating to any of the Collateral; (d) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (e) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to or pertaining to all or any of the Collateral; (f) to license or, to the extent permitted by any applicable law, sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any of the Collateral throughout the world for such term or terms, on such conditions, and in such manner, as the Collateral Agent shall determine (other than in violation of any then existing licensing arrangements to the extent that waivers or other adequate provision cannot be secured therefor); and (g) generally to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; PROVIDED, HOWEVER, that except as provided for by law or the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions, nothing herein contained shall be construed as requiring or obligating the Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby, and no action taken by the Collateral Agent or omitted to be taken with respect to the Collateral or any part thereof shall give rise to any defense, counterclaim or offset in favor of any Grantor or to any claim or action against the Collateral Agent. It is understood and agreed that the appointment of the Collateral Agent as the attorney-in-fact of the Grantors for the purposes set forth above in this Section 5.01 is coupled with an interest and is irrevocable. The provisions of this Section 5.01 shall in no event relieve the Grantors of any of their obligations hereunder or under the Credit Agreements or any other Loan Document with respect to the Collateral or any part thereof or impose any obligation on the Collateral Agent or the Secured Parties to proceed in any particular manner with respect to the Collateral or any part thereof, or in any way limit the exercise by the Collateral Agent or any Secured Party of any other or further right that it may have on the date of this Agreement or hereafter, whether hereunder or by law or by the Security Agreement, or otherwise. 15 SECTION 5.02. OTHER REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance of an Event of Default, each Grantor expressly agrees that, subject to prior written notice to the Borrower, the Collateral Agent on demand shall have the right to take any or all of the following actions at the same or different times: with or without legal process and with or without previous notice or demand for performance, to take possession of all tangible manifestations or embodiments of the Collateral and documentation relating thereto and all business records, documents, files, prints and labels with respect to the Collateral, and without liability for trespass to enter any premises where such tangible manifestations or embodiments, business records, documents, files, prints and labels with respect to the Collateral may be located for the purpose of taking possession of or removing such tangible manifestations or embodiments, business records, documents, files, prints and labels with respect to the Collateral, and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other law applicable to any part of the Collateral. Subject to and without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral, at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof where the failure to obtain such a representation and agreement could result in a violation of any applicable securities laws, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay and appraisal that such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Collateral Agent shall give the Grantors at least 10 days' written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions) of the Collateral Agent's intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker's board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or 16 portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice to the Grantors. At any public sale made pursuant to this Section 5.02, the Collateral Agent or any Secured Party may bid for or purchase, free from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to the Collateral Agent or any Secured Party from any Grantor as a credit against the purchase price, and the Collateral Agent or any Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to such Grantor therefor. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. SECTION 5.03. APPLICATION OF PROCEEDS OF SALE. The proceeds of any sale of Collateral, as well as any Collateral consisting of cash, shall be applied by the Collateral Agent as follows: FIRST, to the payment of the reasonable costs and expenses of the Collateral Agent as set forth in Sections 5.01 and 5.02 and in the Credit Agreements; SECOND, to the payment of all amounts of the Obligations owed to the Secured Parties in respect of Loans made by them and outstanding and amounts owing in respect of any L/C Disbursement or Letter of Credit or under any Interest/Exchange Rate Protection Agreement, pro rata as among the Secured Parties in accordance with the amount of such Obligations owed them; THIRD, to the payment and discharge in full of the Obligations (other than those referred to above), pro rata as among the Secured 17 Parties in accordance with the amount of such Obligations owed to them; and FOURTH, after payment in full of all Obligations, to the applicable Grantor, or its successor or assign thereof, or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, any Collateral then remaining. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. SECTION 5.04. GRANT OF LICENSE TO USE PATENT, TRADEMARK AND COPYRIGHT COLLATERAL. For the purpose of enabling the Collateral Agent to exercise rights and remedies under Article V hereof at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to such Grantor) to use, license or sublicense any of the Collateral now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored. The use of such license by the Collateral Agent shall be exercised, at the option of the Collateral Agent for any purpose appropriate in connection with the exercise of remedies hereunder, only upon the occurrence and during the continuance of an Event of Default; PROVIDED that any license, sublicense or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon such Grantor notwithstanding any subsequent cure of an Event of Default. The Collateral Agent agrees to apply the net proceeds received from any license as provided in Section 5.03 hereof. ARTICLE VI MISCELLANEOUS SECTION 6.01. THE COLLATERAL AGENT APPOINTED ATTORNEY- IN-FACT. Except as otherwise provided herein, each Grantor hereby appoints the Collateral Agent the attorney-in-fact of such Grantor, effective upon the occurrence and during the continuance of an Event of Default, for the purposes of carrying out the provisions of this Agreement, taking any action and executing any instrument that the Collateral Agent may reasonably deem necessary or advisable to accomplish the purposes hereof, and doing all other acts that such Grantor is obligated to do hereunder. Such appointment is in each case 18 irrevocable and coupled with an interest. Each Grantor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof in accordance with this Agreement. SECTION 6.02. NOTICES. Notices and other communications provided for herein shall be in writing and given (i) in the case of communications and notices to any Credit Party or any Secured Party, as provided in the Credit Agreements and (ii) in the case of communications and notices to any Grantor that is not a Credit Party, as provided in the Subsidiary Guarantee Agreement. SECTION 6.03. SUCCESSORS AND ASSIGNS. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party, and the terms "Lender", "Fronting Bank" and "Secured Party" shall include each permitted successor and assignee of any Lender, Fronting Bank or Secured Party permitted under Section 9.04 of the Credit Agreements and all covenants, promises and agreements by or on behalf of the Grantors or the Collateral Agent or that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and permitted assigns referred to above. (b) No Grantor shall assign or delegate any of its rights and duties hereunder. (c) The covenants, promises and agreements by the Grantors shall inure to the benefit of each Secured Party and each assignee of any Secured Party permitted under Section 9.04 of the Credit Agreements. SECTION 6.04. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT FEDERAL LAW OR LAWS OF ANOTHER STATE OR FOREIGN JURISDICTION MAY APPLY TO PATENTS, TRADEMARKS, COPYRIGHTS, OTHER COLLATERAL OR REMEDIES. SECTION 6.05. WAIVERS; AMENDMENT. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other right or power. The rights and remedies of the Collateral Agent hereunder and of other Secured Parties under the Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or any other Loan Document or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Grantor in any case shall entitle such Grantor to any other or further notice or demand in similar or other circumstances. 19 (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into between any Grantor and the Collateral Agent, with the prior written consent of the Required Secured Parties; PROVIDED, HOWEVER, that except as provided herein or in the other Loan Documents, no such agreement shall amend, modify, waive or otherwise affect the rights or duties of the Collateral Agent hereunder without the prior written consent of the Collateral Agent. SECTION 6.06. SECURITY INTEREST ABSOLUTE. All rights of the Collateral Agent hereunder, the security interests granted hereunder and all obligations of the Grantors hereunder shall be absolute and unconditional. SECTION 6.07. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by any Grantor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Secured Parties and shall survive the making by the Lenders of the Loans, the execution and delivery to the Lenders of the Loan Documents and the issuance by the Fronting Banks of the Letters of Credit regardless of any investigation made by the Secured Parties or on their behalf and shall continue in full force and effect so long as the principal of or any accrued interest on any Loan or L/C Disbursement or any Fee or any other amount payable under or in respect of this Agreement or any other Loan Document is outstanding and unpaid and so long as the Commitments have not been terminated. SECTION 6.08. BINDING EFFECT; ASSIGNMENTS. This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent, and thereafter shall be binding upon such Grantor and its respective successors and assigns, and shall inure to the benefit of such Grantor and the Secured Parties and their respective successors and assigns, except that no Grantor shall have the right to assign its rights hereunder or any interest herein (and any such attempted assignment shall be void) except as expressly contemplated by this Agreement or the other Loan Documents. SECTION 6.09. TERMINATION; RELEASE. (a) This Agreement and the security interests granted hereby shall terminate when all the Obligations have been indefeasibly paid in full, the Commitments have been terminated and no Letters of Credit are outstanding. (b) Upon any sale by any Grantor of any Collateral that is permitted under the Credit Agreements or upon the effectiveness of any written consent to the release of the Security Interest in any Collateral pursuant to Section 9.08 of the Credit Agreements, the Security Interest in such Collateral shall be automatically released. 20 (c) In connection with any termination or release pursuant to paragraphs (a) and (b), the Collateral Agent shall execute and deliver to each Grantor, at such Grantor's expense, all Uniform Commercial Code termination statements, documents in order to terminate any United States Patent and Trademark Office filings and similar documents that such Grantor shall reasonably request to evidence such termination or release. Any execution and delivery of termination statements or documents pursuant to this Section 6.09 shall be without recourse to or warranty by the Collateral Agent. SECTION 6.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.10. SECTION 6.11. SEVERABILITY. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 6.12. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each Grantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Loan Party or Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Grantor or any Secured Party or its properties in the courts of any jurisdiction. 21 (b) Each Grantor and each Secured Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.02. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 6.13. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together shall constitute but one instrument, and shall become effective as provided in Section 6.08. SECTION 6.14. HEADINGS. Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 6.15. ADDITIONAL GRANTORS. Pursuant to Section 5.11 of the Credit Agreements, each U.S. Subsidiary that was not in existence or not a U.S. Subsidiary on the date thereof is required to enter into this Agreement as a Grantor upon becoming a U.S. Subsidiary. Upon execution and delivery, after the date hereof, by the Collateral Agent and such U.S. Subsidiary of an instrument in the form of Annex 1, such U.S. Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor hereunder. The execution and delivery of any such instrument shall not require the consent of any Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement. 22 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. UCAR INTERNATIONAL INC. by /s/ Michelle F. Rider --------------------------------------- Name: Michelle F. Rider Title: Attorney-in-Fact UCAR GLOBAL ENTERPRISES INC. by /s/ Michelle F. Rider --------------------------------------- Name: Michelle F. Rider Title: Attorney-in-Fact EACH OF THE SUBSIDIARY GRANTORS LIATED ON SCHEDULE VII HERETO by /s/ Michelle F. Rider --------------------------------------- Name: Michelle F. Rider Title: Attorney-in-Fact THE CHASE MANHATTAN BANK, as Collateral Agent by /s/ Marian Schulman --------------------------------------- Name: Marian Schulman Title: Vice President SCHEDULE I TO INTELLECTUAL PROPERTY SECURITY AGREEMENT PATENTS AND PATENT APPLICATIONS SERIAL NO. OR ISSUE OR PATENT NO. INVENTOR COUNTRY FILE DATE TITLE See Attached SCHEDULE II TO INTELLECTUAL PROPERTY SECURITY AGREEMENT TRADEMARKS, TRADEMARK REGISTRATIONS AND TRADEMARK REGISTRATION APPLICATIONS SERIAL NO. OR ISSUE OR REGISTRATION NO. COUNTRY FILE DATE MARK See attached SCHEDULE III TO INTELLECTUAL PROPERTY SECURITY AGREEMENT COPYRIGHT REGISTRATIONS AND COPYRIGHT REGISTRATION APPLICATIONS REGISTRATION NO. COUNTRY ISSUE OR FILE DATE TITLE None SCHEDULE IV TO INTELLECTUAL PROPERTY SECURITY AGREEMENT TRADE NAMES None SCHEDULE V TO INTELLECTUAL PROPERTY SECURITY AGREEMENT LIENS ON None SCHEDULE VI TO INTELLECTUAL PROPERTY SECURITY AGREEMENT Offices where financing statements need to be filed [See Security Agreement] SCHEDULE VII TO INTELLECTUAL PROPERTY SECURITY AGREEEMENT SUBSIDIARY GRANTORS UCAR International Inc. UCAR Global Enterprises Inc. UCAR Carbon Company Inc. UCAR Carbon Technology Corporation UCAR Holdings Inc. UCAR Holdings II Inc. UCAR Holdings III Inc. UCAR International Trading Inc. Union Carbide Grafito, Inc. UCAR Composites Inc. EXHIBIT A-1 TO INTELLECTUAL PROPERTY SECURITY AGREEMENT SUPPLEMENT NO. dated as of [ Security Agreement dated as of April 22,1998, as amended and restated as of November 10, 1998 (the "INTELLECTUAL PROPERTY SECURITY AGREEMENT"), among UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation (the "BORROWER"), each of the U.S. Subsidiaries (such term and each other capitalized term used but not defined having the meaning given it in the Intellectual Property Security Agreement, and if not defined therein, having the meaning given it in Article I of the Credit Agreements), party thereto (together with the Borrower, the "GRANTORS") and THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent (the "COLLATERAL AGENT") for the Secured Parties. A. Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR, the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent and (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). B. The Borrower and the U.S. Subsidiaries have entered into the Intellectual Property Security Agreement in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreements. Pursuant to Section 5.11 of the Credit Agreements, each U.S. Subsidiary that was not in existence or not a U.S. Subsidiary on the date thereof is required to enter into the Intellectual Property Security Agreement as a Grantor upon becoming a U.S. Subsidiary. Section 6.15 of the Intellectual Property Security Agreement provides that additional U.S. Subsidiaries may become Grantors under the Intellectual Property Security Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned (the "NEW GRANTOR") is a U.S. Subsidiary and is executing this Supplement in accordance with the requirements of the Credit Agreements to become a Grantor under the Intellectual Property Security Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional 2 Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Grantor agree as follows: SECTION 1. In accordance with Section 6.15 of the Intellectual Property Security Agreement, the New Grantor by its signature below becomes a Grantor under the Intellectual Property Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Grantor hereby agrees to all the terms and provisions of the Intellectual Property Security Agreement applicable to it as a Grantor thereunder. Each reference to a "GRANTOR" in the Intellectual Property Security Agreement shall be deemed to include the New Grantor. The Intellectual Property Security Agreement is hereby incorporated herein by reference. SECTION 2. The New Grantor represents and warrants to the Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency or similar laws effecting creditors' rights generally and equitable principles of general applicability. SECTION 3. This Supplement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Grantor and the Collateral Agent. SECTION 4. Except as expressly supplemented hereby, the Intellectual Property Security Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Intellectual Property Security Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provi sions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in the Credit Agreements. All communications and notices hereunder to the New Grantor shall be given to it at the address set forth under its signature, with a copy to the Borrower. IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly executed this Supplement to the Intellectual Property Security Agreement as of the day and year first above written. [NAME OF NEW GRANTOR], by ----------------------------------- Name: Title: Address: THE CHASE MANHATTAN BANK, as Collateral Agent, by ----------------------------------- Name: Title: Address: EX-10.7 13 EXHIBIT 10.7 DOMESTIC SECURITY AGREEMENT SECURITY AGREEMENT, dated as of April 22, 1998, as amended and restated as of November 10, 1998, made by UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation (the "BORROWER"), and the U.S. Subsidiaries (together with UCAR and the Borrower, the "GRANTORS") in favor of THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent for the Secured Parties (such term and each other capitalized term used but not defined herein having the meaning given it in Article I of the Credit Agreements). Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR, the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent and (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreements, the Lenders have severally agreed to make Loans and the Fronting Banks have agreed to issue Letters of Credit, upon the terms and subject to the conditions set forth therein; and WHEREAS, it is a condition precedent to the obligations of the Lenders to make the Loans and the Fronting Banks to issue the Letters of Credit that the Grantors, other than UCAR and the Borrower, guarantee payment and performance of the Credit Parties' obligations under the Credit Agreements and the other Loan Documents, that UCAR guarantee payment and performance of the Borrower's obligations, including its obligations as a guarantor, under the Credit Agreements and the other Loan Documents and that the Borrower guarantee payment and performance of the other Credit Parties' obligations under the Credit Agreements and the other Loan Documents; 2 WHEREAS, in satisfaction of such condition, the Grantors have entered into certain Guarantee Agreements for the benefit of the Secured Parties; WHEREAS, it is a further condition precedent to the obligations of the Lenders to make the Loans and the Fronting Banks to issue the Letters of Credit that the Grantors shall have executed and delivered this Security Agreement; and NOW, THEREFORE, in consideration of the premises and to induce the Secured Parties to enter into the Credit Agreements and to induce the Lenders to make their respective Loans and the Fronting Banks to issue their respective Letters of Credit, each of the Grantors hereby agree with the Collateral Agent, for the ratable benefit of the Secured Parties, as follows: 1. DEFINED TERMS. 1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms defined in the Credit Agreements and used herein shall have the meanings given in the Credit Agreements, and the following terms which are defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are used herein as so defined: Chattel Paper, Farm Products, Instruments and Vehicles. (b) The following terms shall have the following meanings: "ACCOUNTS": with respect to each Grantor, any and all right, title and interest of such Grantor to payment for goods and services sold or leased, including any such right evidenced by chattel paper, whether due or to become due, whether or not it has been earned or performed, and whether now or hereafter acquired or arising in the future, including, without limitation, accounts receivable from Affiliates of such person, except to the extent that the grant of a security interest in Accounts owed by Affiliates not incorporated or otherwise organized in the United States of America would result in material adverse tax or legal consequences to such Grantor. "ACCOUNTS RECEIVABLE": with respect to each Grantor, all right, title and interest of such Grantor to Accounts and all of its right, title and interest in any returned goods, together with all rights, titles, securities and guaranties with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary in each case whether due or become due, whether now or hereafter arising in the future. "AGREEMENT": this Security Agreement, as the same may be amended, modified or otherwise supplemented from time to time. 3 "CODE": the Uniform Commercial Code as from time to time in effect in the State of New York. "COLLATERAL": as defined in Section 2 of this Agreement. "COLLATERAL ACCOUNT": any collateral account established by the Collateral Agent as provided in Section 5.3 or Section 7.2. "CONTRACTS": with respect to each Grantor, all rights of such Grantor under contracts and agreements to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same may from time to time be amended, supplemented or otherwise modified, including, without limitation, (a) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (b) all rights of such Grantor to damages arising out of, or for, breach or default in respect thereof and (c) all rights of such Grantor to exercise all remedies thereunder, in each case to the extent the grant by such Grantor of a security interest pursuant to this Agreement in its rights under such contract or agreement is not prohibited without the consent of any other person, or is permitted with consent if all necessary consents to such grant of a security interest have been obtained from all such other persons (it being understood that the foregoing shall not be deemed to obligate such Grantor to obtain such consents); PROVIDED, that the foregoing limitation shall not affect, limit, restrict or impair the grant by such Grantor of a security interest pursuant to this Agreement in any Account or any money or other amounts due or to become due under any such contract or agreement to the extent provided in Section 9-318 of the Code as in effect on the date hereof. "DOCUMENTS": with respect to each Grantor, all Instruments, files, records, ledger sheets, and documents covering or relating to any of the Accounts, Equipment, General Intangibles, Inventory and Proceeds. "EQUIPMENT": with respect to each Grantor, all equipment, furniture and furnishings, tools, accessories, parts and supplies of every kind and description, wherever located, now or hereafter existing, and all improvements, accessions or appurtenances thereto, including Fixtures, and all other tangible personal property whether or not similar to any of the foregoing items which are now or hereafter acquired by such Grantor (it being understood that "Equipment" does not include Vehicles). "FIXTURES": with respect to each Grantor, all items that would otherwise constitute items of Collateral, whether now owned or hereafter acquired, that become so related to particular real estate that an interest in them arises under any real estate law applicable thereto. 4 "GENERAL INTANGIBLES": with respect to each Grantor, as defined in the Uniform Commercial Code in effect in the State of New York on the date hereof to the extent, in the case of any General Intangibles arising under any contract or agreement, that the grant by such Grantor of a security interest pursuant to this Agreement in its rights under such contract or agreement is not prohibited without the consent of any other person, or is permitted with consent if all necessary consents to such grant of a security interest have been obtained from all such other persons (it being understood that the foregoing shall not be deemed to obligate such Grantor to obtain such consents), PROVIDED, that the foregoing limitation shall not affect, limit, restrict or impair the grant by such Grantor of a security interest pursuant to this Agreement in any Account or General Intangible or any money or other amounts due or to become due under any such contract or agreement to the extent provided in Section 9-318 of the Code as in effect on the date hereof, and PROVIDED, FURTHER, that "General Intangibles" shall not include any of the items within Section 2(h) herein, except to the extent that the grant of a security interest in General Intangibles owed by Affiliates not incorporated or otherwise organized in the United States of America would result in material adverse tax or legal consequences to such Grantor. "INDEMNITEE": the Secured Parties and their respective officers, directors, trustees, affiliates and controlling persons. "INVENTORY": with respect to each Grantor, all right, title and interest of such Grantor in and to goods intended for sale or lease by such person, or consumed in such person's business (including, without limitation, all operating parts and supplies), together with all raw materials and finished goods, whether now owned or hereafter acquired or arising. "OBLIGATIONS": with respect to each Grantor, the collective reference to its obligations as obligor or guarantor in respect of (i) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Existing Credit Agreement after the maturity of the Loans thereunder and interest accruing at the then applicable rate provided in the Existing Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Existing Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Tranche C Facility Credit Agreement after the maturity of the Loans thereunder and interest accruing at the applicable rate provided in the Tranche C Facility Credit Agreement after the 5 filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans made under the Tranche C Facility Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (iii) each payment required to be made by any Credit Party under the Existing Credit Agreement, when and as due, including payments in respect of reimbursements of L/C Disbursements, interest thereon and obligations to provide cash collateral, (iv) each payment required to be made by any Credit Party under the Tranche C Facility Credit Agreement, when and as due, and (v) all other obligations and liabilities of every nature of the Credit Parties under the Credit Agreements from time to time owed to the Secured Parties or any of them, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), which may arise under, out of, or in connection with, the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document or any other Loan Document and any obligation of the Borrower or any Credit Party under either of the Credit Agreements to a Lender under either Credit Agreement pursuant to an Interest/Exchange Rate Protection Agreement or under any other document made, delivered or given in connection with any of the foregoing, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by the Borrower or any Credit Party pursuant to the terms of the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document, any other Loan Document or any Interest/Exchange Rate Protection Agreement with a Lender. "PROCEEDS": with respect to each Grantor, any consideration received from the sale, exchange or other disposition of any asset or property which constitutes Collateral owned by it, any value received as a consequence of the possession of any such Collateral and any payment received from any insurer or other person or entity as a result of the destruction, loss, theft, damage or other involuntary conversion of whatever nature of any asset or property which constitutes such Collateral, and shall include, without limitation, (a) all cash and negotiable instruments received or held on behalf of the Collateral Agent pursuant to Section 5.3 and (b) any claim of such Grantor against a third party for (and the right to sue and recover for and the rights to damages or profits due or accrued arising out of or in connection with) any and all amounts from time to time paid or payable under or in connection with any of the Collateral. 6 "U.S. SUBSIDIARY": a Subsidiary incorporated o rotherwise organized in the United States of America. 1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section references are to this Agreement unless otherwise specified. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". (b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. GRANT OF SECURITY INTEREST. As collateral security for the prompt and complete payment and performance when due, whether at the stated maturity, by acceleration, upon one or more dates set for prepayment or otherwise of the Obligations, each Grantor hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a first priority security interest in all of the following property now owned or at any time hereafter acquired by such Grantor, subject to Permitted Liens (as defined below) (collectively, with respect to each Grantor, the "COLLATERAL"): (a) all Accounts Receivable; (b) all Contracts; (c) all Documents; (d) all Equipment; (e) all General Intangibles; (f) all Instruments; (g) all Inventory; (h) all books and records pertaining to the Collateral; and (i) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing. Notwithstanding anything contained in this Agreement or any Loan Document to the contrary, "Collateral" shall not include any property of the type specified in Sections 2(b), (d) (to the extent such Equipment constitutes Fixtures), (e), (f) and (g) if the granting of a Lien by such Grantor hereunder would violate the terms of, or otherwise constitute a default under, any document or instrument to which any Loan Party is a party (other than those documents or instruments between or among the Loan Parties and/or their Affiliates only) relating to the ownership of, or pertaining to any rights or interests held in such property, provided that the terms to be violated or default that would result in the event 7 of the granting of the Lien hereunder are typical or customary in connection with the document or instrument to which they relate. Such security interests are granted as security only and shall not subject any Secured Party to, or in anyway alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral. 3. REPRESENTATIONS AND WARRANTIES. Each Grantor hereby represents and warrants, as to itself and the Collateral in which the security interest is created by it hereunder, that: 3.1 TITLE; NO OTHER LIENS. Except for the security interest granted to the Collateral Agent for the ratable benefit of the Secured Parties pursuant to this Agreement and the other Liens permitted to exist pursuant to the Credit Agreements (the "PERMITTED LIENS"), such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others. No security agreement, financing statement or other public notice with respect to all or any part of such Collateral is on file or of record in any public office, except such as have been filed, pursuant to this Agreement, in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, or in respect of Permitted Liens. 3.2 AUTHORITY. Such Grantor has full power and authority to grant to the Collateral Agent the security interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than any consent or approval that has been obtained. 3.3 ENFORCEABLE OBLIGATION; PERFECTED, FIRST PRIORITY SECURITY INTERESTS. This Agreement constitutes a legal, valid and binding obligation of such Grantor, enforceable against such Grantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), and the security interests granted pursuant to this Agreement (a) upon completion of the filings and other actions specified in SCHEDULE I attached hereto shall constitute perfected security interests in such Collateral in favor of the Collateral Agent for the ratable benefit of the Secured Parties, and (b) are prior to all other Liens (other than Permitted Liens) on such Collateral in existence on the date hereof. 3.4 INVENTORY AND EQUIPMENT. The Inventory and the Equipment owned by such Grantor are kept at the locations listed in SCHEDULE II hereto, which shall be updated from time to time in accordance with Section 4.5 of this Agreement, or at such other locations as shall be permitted by Section 4.4, provided that in the case of any Equipment that in the ordinary course of a Grantor's business is moved to a Vehicle, such Equipment may also be kept on or near such Vehicle as is usual in the ordinary course of business. 8 3.5 CHIEF EXECUTIVE OFFICE. As of the date hereof, such Grantor's chief executive office and chief place of business is located at the location listed in Section 9.01 of the Credit Agreements or under its signature set forth below. 3.6 FARM PRODUCTS. None of such Collateral constitutes, or is the Proceeds of, Farm Products. 4. COVENANTS. Each Grantor covenants and agrees with the Secured Parties that, from and after the date of this Agreement until this Agreement is terminated and the security interests created hereby are released: 4.1 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If an Event of Default shall have occurred and be continuing and if any amount payable under or in connection with any of the Collateral owned by such Grantor shall be or become evidenced by any promissory note, other instrument or chattel paper, upon the request of the Collateral Agent, such promissory note, instrument or Chattel Paper shall be immediately delivered to the Collateral Agent, duly indorsed in a manner reasonably satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Agreement. 4.2 MAINTENANCE OF INSURANCE. Such Grantor shall maintain insurance policies in accordance with the requirements of Section 5.02 of the Credit Agreements. 4.3 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER DOCUMENTATION. (a) Such Grantor shall cause all filings and other actions listed in SCHEDULE I to be taken. Such Grantor shall maintain the security interests created by this Agreement as first, perfected security interests subject only to Permitted Liens and shall defend such security interests against all claims and demands of all persons whomsoever (other than those pursuant to Permitted Liens). (b) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Grantor, such Grantor shall promptly and duly execute and deliver such further instruments and documents and take such further action as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the security interests created hereby. 4.4 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor shall not, except (x) upon prior written notice to the Collateral Agent and delivery to the Collateral Agent of a written supplement to SCHEDULE II showing the additional location or locations at which Inventory or Equipment shall be kept, and (y) if filings under the UCC or otherwise have been made which maintain in favor of the Collateral Agent a valid, legal and perfected security interest in such Collateral subject to no liens, other than Permitted Liens, 9 (a) permit any of the Inventory or Equipment owned by it to be kept at a location other than those listed in SCHEDULE II hereto or Vehicles as described in Section 3.4, except for Inventory and Equipment in transit between locations described in this paragraph (a) or transferred to a foreign Subsidiary in a transaction permitted by the Credit Agreements; (b) change the location of its chief executive office and chief place of business from that specified in Section 3.5; or (c) change its (i) corporate name or any trade name used to identify it in its conduct of business or in the ownership of its properties, (ii) identity or (iii) corporate structure to such an extent that any financing statement filed in favor of the Collateral Agent in connection with this Agreement would become seriously misleading. 4.5 FURTHER IDENTIFICATION OF COLLATERAL. Such Grantor shall furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral owned by it and such other reports in connection with such Collateral as the Collateral Agent may reasonably request, all in reasonable detail. 4.6 NOTICES. Such Grantor shall advise the Collateral Agent promptly, in reasonable detail, at its address set forth in Section 9.01 of the Credit Agreements of: (a) any Lien (other than security interests created hereby or Permitted Liens) on, any material portion of the Collateral; and (b) of the occurrence of any other event which could reasonably be expected to have a material adverse effect on the security interests created hereby or on the aggregate value of (i) the Collateral owned by it and (ii) all other Collateral (as such term is defined in the other Security Documents) of the Borrower and its U.S. Subsidiaries taken as a whole. 4.8 COLLATERAL AGENT'S LIABILITIES AND EXPENSES; INDEMNIFICATION. (a) Notwithstanding anything to the contrary provided herein, the Collateral Agent assumes no liabilities with respect to any claims regarding each Grantor's ownership (or purported ownership) of, or rights or obligations (or purported rights or obligations) arising from, the Collateral or any use (or actual or alleged misuse) whether arising out of any past, current or future event, circumstance, act or omission or otherwise, or any claim, suit, loss, damage, expense or liability of any kind or nature arising out of or in connection with the Collateral or the production, marketing, delivery, sale or provision of goods or services under or in connection with any of the Collateral. All of such liabilities shall, as between the Collateral Agent and the Grantors, be borne exclusively by the Grantors. 10 (b) Each Grantor hereby agrees to pay all expenses of the Collateral Agent and to indemnify the Collateral Agent with respect to any and all losses, claims, damages, liabilities and related expenses in respect of this Agreement or the Collateral in each case to the extent the Borrower is required to do so pursuant to Section 9.05 of the Credit Agreements. (c) Any amounts payable by a Grantor as provided hereunder shall be additional Obligations of it secured hereby and by the other Security Documents. Without prejudice to the survival of any other agreements contained herein, all indemnification and reimbursement obligations contained herein shall survive the payment in full of the principal and interest under the Credit Agreements, the expiration of the Letters of Credit and the termination of the Commitments or this Agreement. 4.9 USE AND DISPOSITION OF COLLATERAL. A Grantor shall not (i) make or permit to be made an assignment, pledge or hypothecation of the Collateral owned by it, and shall grant no other security interest in such Collateral (other than pursuant hereto or except for any Permitted Liens) or (ii) make or permit to be made any transfer of such Collateral, and shall remain at all times in possession thereof other than transfers to the Collateral Agent pursuant to the provisions hereof; notwithstanding the foregoing, such Grantor may use and dispose of such Collateral in any lawful manner not in violation of the provisions of this Agreement, the Credit Agreements or any other Loan Document to which it is a party, unless the Collateral Agent shall, after an Event of Default shall have occurred and during the continuance thereof, notify such Grantor not to sell, convey, lease, assign, transfer or otherwise dispose of any such Collateral other than Inventory in the ordinary course of business, Permitted Foreign Transfers and other than any other transfers between the Borrower or a Wholly Owned Subsidiary that is a Grantor and a Borrower or a Wholly Owned Subsidiary that is a Grantor. 5. PROVISIONS RELATING TO ACCOUNTS. 5.1 GRANTORS REMAIN LIABLE UNDER ACCOUNTS. Anything herein to the contrary notwithstanding, a Grantor shall remain liable under each of the Accounts to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to each such Account. No Secured Party shall have any obligation or liability under any Account (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any Secured Party of any payment relating to such Account pursuant hereto, nor shall any Secured Party be obligated in any manner to perform any of the obligations of a Grantor under or pursuant to any Account (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may 11 have been assigned to it or to which it may be entitled at any time or times. 5.2 ANALYSIS OF ACCOUNTS. The Collateral Agent shall have the right upon the occurrence and during the continuance of an Event of Default to make test verifications of the Accounts in any manner and through any medium that it considers reasonably advisable, and each Grantor shall furnish all such assistance and information as the Collateral Agent may reasonably require in connection with such test verifications. At any time and from time to time upon the occurrence and during the continuance of an Event of Default, upon the Collateral Agent's reasonable request and at the expense of each Grantor, each Grantor shall cause independent public accountants or others reasonably satisfactory to the Collateral Agent to furnish to the Collateral Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Accounts. Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent in its own name or in the name of others may communicate with account debtors on the Accounts to verify with them to the Collateral Agent's reasonable satisfaction the existence, amount and terms of any Accounts. 5.3 COLLECTIONS ON ACCOUNTS. (a) The Collateral Agent hereby authorizes each Grantor to collect the Accounts, and the Collateral Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. If required by the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Accounts, when collected by a Grantor during the continuance of such an Event of Default, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Collateral Agent if required, in a Collateral Account maintained under the sole dominion and control of and on terms and conditions reasonably satisfactory to the Collateral Agent, subject to withdrawal by the Collateral Agent as provided in Section 7.3, and (ii) until so turned over, shall be held by such Grantor in trust for the Secured Parties, segregated from other funds of such Grantor. (b) At the Collateral Agent's reasonable request after the occurrence and during the continuance of an Event of Default, each Grantor shall deliver to the Collateral Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Accounts, including, without limitation, all original orders, invoices and shipping receipts. 5.4 REPRESENTATIONS AND WARRANTIES. (a) As of the date hereof, the place where each Grantor keeps its records concerning the Accounts is at the location listed in SCHEDULE III hereto. (b) As of the date hereof, the amounts owing with respect to Accounts of obligors which are Governmental Authorities do not constitute more than 15% of the average aggregate amount owing on the Accounts owing to UCAR, the Borrower, and any 12 Subsidiaries, taken as a whole, during the most recently ended period of twelve consecutive calendar months. 5.5 COVENANTS. (a) The amount represented by each Grantor to the Secured Parties from time to time as owing by each account debtor or by all account debtors in respect of the Accounts shall at such time be in all material respects the correct amount actually owing by such account debtor or debtors thereunder. (b) Upon the occurrence and during the continuance of an Event of Default, a Grantor shall not grant any extension of the time of payment of any of the Accounts Receivable, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof, or allow any credit or discount whatsoever thereon other than extensions, credits, discounts, compromises or settlements granted or made in the ordinary course of business if the Collateral Agent shall have instructed the Grantors not to grant or make any such extension, credit, discount, compromise, or settlement under any circumstances during the continuance of such Event of Default. (c) Unless a Grantor shall deliver prior written notice, identifying the change of location for its books and records, such Grantor shall not remove its books and records from the location specified in Section 5.4(a). 6. PROVISIONS RELATING TO CONTRACTS. 6.1 GRANTORS REMAIN LIABLE UNDER CONTRACTS. Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each Contract to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with and pursuant to the terms and provisions of such Contract. No Secured Party shall have any obligation or liability under any Contract by reason of or arising out of this Agreement or the receipt by any such Secured Party of any payment relating to such Contract pursuant hereto, nor shall any Secured Party be obligated in any manner to perform any of the obligations of a Grantor under or pursuant to any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Contract, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. 6.2 COMMUNICATION WITH CONTRACTING PARTIES. Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent in its own name or in the name of others may communicate with parties to the Contracts to verify with them to the Collateral Agent's satisfaction the existence, amount and terms of any Contracts. 7. REMEDIES. 13 7.1 NOTICE TO ACCOUNT DEBTORS AND CONTRACT PARTIES. Upon the request of the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default, a Grantor shall notify account debtors on the Accounts and parties to the Contracts that the Accounts and the Contracts have been assigned to the Collateral Agent for the ratable benefit of the Secured Parties and that payments in respect thereof during the continuance of such an Event of Default shall be made directly to the Collateral Agent. 7.2 PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT. In addition to the rights of the Collateral Agent and the Secured Parties specified in Section 5.3 with respect to payments of Accounts, if an Event of Default shall occur and be continuing, all Proceeds received by a Grantor consisting of cash, checks and other near-cash items shall upon the Collateral Agent's request be held by such Grantor in trust for the Secured Parties, segregated from other funds of such Grantor, and shall, upon the Collateral Agent's request (it being understood that the exercise of remedies by the Secured Parties in connection with an Event of Default under Sections VII(g) and VII(h) of the Credit Agreements shall be deemed to constitute a request by the Collateral Agent for the purposes of this sentence) forthwith upon receipt by such Grantor, be turned over to the Collateral Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Collateral Agent, if required) and held by the Collateral Agent in a Collateral Account maintained under the sole dominion and control of the Collateral Agent and on terms and conditions reasonably satisfactory to the Collateral Agent. All Proceeds while held by the Collateral Agent in a Collateral Account (or by such Grantor in trust for the Collateral Agent and the Secured Parties) shall subject to Section 7.3 continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 7.3. 7.3 APPLICATION OF PROCEEDS. If an Event of Default shall have occurred and be continuing, and the Collateral Agent shall have requested a Grantor to take any action set forth in Section 5.3(a) or 7.2 or the Collateral Agent shall have taken any action pursuant to Section 7.4, the Collateral Agent shall apply the proceeds as follows: FIRST, to the payment of the reasonable costs and expenses of the Collateral Agent as set forth in Sections 7.4 and 15; SECOND, to the payment of all amounts of the Obligations owed to the Secured Parties in respect of Loans made by them and outstanding and amounts owing in respect of any L/C Disbursement or Letter of Credit or under any Interest/Exchange Rate Protection Agreement, pro rata as among the Secured Parties in accordance with the amount of such Obligations owed to them; THIRD, to the payment and discharge in full of the Obligations (other than those referred to above), pro rata as among the Secured Parties in accordance with the amount of such Obligations owed to them; and 14 FOURTH, after payment in full of all Obligations, to the applicable Grantor, or its successors or assigns, or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, any Collateral then remaining. 7.4 CODE REMEDIES. If an Event of Default shall have occurred and be continuing, the Collateral Agent, on behalf of the Secured Parties may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon a Grantor or any other person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of any Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Any Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of (to the extent permitted by law) any right or equity of redemption in a Grantor, which right or equity is hereby, to the extent permitted by law, waived or released. Each Grantor further agrees, at the Collateral Agent's request, to assemble the Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at such Grantor's premises or elsewhere. The Collateral Agent shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses incurred therein or incidental to the care or safekeeping of any of such Collateral or reasonably relating to such Collateral or the rights of the Collateral Agent and the Secured Parties hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in accordance with Section 7.3, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(1)(c) of the Code, need the Collateral Agent account for the surplus, if any, to such Grantor. If any notice of a proposed sale or other disposition of such Collateral shall be required by law, such notice shall be in writing and deemed reasonable and proper if given at least 10 days before such sale or other disposition. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or 15 balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. 7.5 WAIVER; DEFICIENCY. Each Grantor waives and agrees not to assert any rights or privileges it may acquire under Section 9-112 of the Code. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay (i) in the case of UCAR, its Obligations or those of the Borrower (including as guarantor) and (ii) in the case of each other Grantor, the Obligations and the reasonable fees and disbursements of any attorneys employed by any Secured Party to collect such deficiency. 8. COLLATERAL AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT; COLLATERAL AGENT'S PERFORMANCE OF GRANTORS' OBLIGATIONS. 8.1 POWERS. Each Grantor hereby irrevocably constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of substitution, during the continuance of an Event of Default, as its true and lawful attorney-in-fact, with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name from time to time in the Collateral Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, such Grantor hereby gives the Collateral Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do the following upon the occurrence and during the continuance of an Event of Default: (a) in the name of such Grantor or its own name, or otherwise, to take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Account, Instrument, General Intangible or Contract or with respect to any other Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Collateral Agent for the purpose of collecting any and all such moneys due under any Account, Instrument, General Intangible or Contract or with respect to any other Collateral whenever payable; (b) to pay or discharge taxes and Liens levied or placed on or threatened against the Collateral (other than Permitted Liens), to effect any repairs or any insurance called for by the terms of this Agreement and to pay all or any part of the premiums therefor and the costs thereof, 16 (c) to execute, in connection with any sale provided for in Section 7.4 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and (d)(i) to direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct; (ii) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (iii) to sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (iv) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any thereof and to enforce any other right in respect of any Collateral; (v) to defend any suit, action or proceeding brought against any Grantor with respect to any Collateral; (vi) to settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, to give such discharges or releases as the Collateral Agent may deem appropriate; and (vii) generally, to use, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and to do, at the Collateral Agent's option and at the expense of such Grantor, at any time, or from time to time, all acts and things which the Collateral Agent reasonably deems necessary to protect, preserve or realize upon such Collateral and the Collateral Agent's and the Secured Parties' security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do. 8.2 PERFORMANCE BY COLLATERAL AGENT OF GRANTOR'S OBLIGATIONS. If any Grantor fails to perform or comply with any of its agreements contained herein, the Collateral Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement. 8.3 GRANTOR'S REIMBURSEMENT OBLIGATION. The expenses of the Collateral Agent reasonably incurred in connection with actions undertaken as provided in this Section 8, together with interest thereon at a rate per annum equal to the default rate of interest set forth in Section 2.07 of the Credit Agreements, from the date payment is demanded by the Collateral Agent to the date reimbursed by a Grantor, shall be payable by the Borrower to the Collateral Agent on demand. 8.4 RATIFICATION; POWER COUPLED WITH AN INTEREST. Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement 17 is terminated and the security interests created hereby are released. 9. DUTY OF COLLATERAL AGENT. The Collateral Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar property for its own account. No Secured Party nor any of its respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of a Grantor or any other person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Secured Parties hereunder are solely to protect the Secured Parties' interests in the Collateral and shall not impose any duty upon any Secured Party to exercise any such powers. The Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. 10. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of the Code, each Grantor authorizes the Collateral Agent to file financing statements with respect to the Collateral without the signature of such Grantor in such form and in such filing offices as the Collateral Agent reasonably determines appropriate to perfect the security interests of the Collateral Agent under this Agreement. A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement for filing in any jurisdiction. 11. AUTHORITY OF COLLATERAL AGENT. Each Grantor acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Collateral Agent and the other Secured Parties, be governed by the Credit Agreements and by such other agreements with respect thereto as may exist from time to time among them but, as between the Collateral Agent and the Grantors, the Collateral Agent shall be conclusively presumed to be acting as agent for the other Secured Parties with full and valid authority so to act or refrain from acting. 12. NOTICES. All notices, requests and demands to or upon the Secured Parties or the Grantors under this Agreement shall be given or made in accordance with Section 9.01 of the Credit Agreements and addressed as follows: (a) if to any Secured Party or any Credit Party, in accordance with Section 9.01 of the Credit Agreements; 18 (b) if to any Grantor that is not a Credit Party, at its address set forth under its signature below. 13. SECURITY INTEREST ABSOLUTE. All rights of the Collateral Agent hereunder, the security interest and all obligations of the Grantors hereunder shall be absolute and unconditional. 14. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by any Grantor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Secured Parties and shall survive the making by the Lenders of the Loans, the execution and delivery to the Lenders of the Loan Documents and the issuance of any Letters of Credit, regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or L/C Disbursement, or any Fee or any other amount payable under or in respect of this Agreement or any other Loan Document is outstanding and unpaid and so long as any Letter of Credit is outstanding and so long as the Commitments have not been terminated. 15. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15. 16. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each Grantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Loan Party or any Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Grantor or any Secured Party or its properties in the courts of any jurisdiction. 19 (b) Each Grantor and each Secured Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. 17. RELEASE. (a) This Agreement and the security interest created hereunder shall terminate when all Obligations have been fully and indefeasibly paid and when the Secured Parties have no further Commitments under the Credit Agreements and no Letters of Credit are outstanding, at which time the Collateral Agent shall execute and deliver to each Grantor, or to such person or persons as such Grantor shall reasonably designate, all Uniform Commercial Code termination statements and similar documents prepared by such Grantor at its expense which such Grantor shall reasonably request to evidence such termination. Any execution and delivery of termination statements or documents pursuant to this Section 17(a) shall be without recourse to or warranty by the Collateral Agent. (b) All Collateral used, sold, transferred or otherwise disposed of, in accordance with the terms of the Credit Agreements (including pursuant to a waiver or amendment of the terms thereof) shall be used, sold, transferred or otherwise disposed of free and clear of the Lien and the security interest created hereunder. In connection with the foregoing, (i) the Collateral Agent shall execute and deliver to each Grantor, or to such person or persons as such Grantor shall reasonably designate, all Uniform Commercial Code termination statements and similar documents prepared by such Grantor at its expense which such Grantor shall reasonably request to evidence the release of the Lien and security interest created hereunder with respect to such Collateral and (ii) any representation, warranty or covenant contained herein relating to such Collateral shall no longer be deemed to be made with respect to such used, sold, transferred or otherwise disposed Collateral. 18. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The parties hereunder shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 20 19. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. 19.1 AMENDMENTS IN WRITING. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Grantors and the Collateral Agent, PROVIDED that any provision of this Agreement may be waived by the Required Secured Parties pursuant to a letter or agreement executed by the Collateral Agent or by telecopy transmission from the Collateral Agent. 19.2 NO WAIVER BY COURSE OF CONDUCT. No Secured Party shall by any act (except by a written instrument pursuant to Section 19.1 hereof) or delay be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of any Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such Secured Party would otherwise have on any future occasion. 20. REMEDIES CUMULATIVE. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 21. SECTION HEADINGS. The section and Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 22. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of each Grantor and the Secured Parties and their successors and assigns, PROVIDED that this Agreement may not be assigned by any Grantor without the prior written consent of the Collateral Agent. 21 23. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 24. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. 25. ADDITIONAL GRANTORS. Pursuant to Section 5.11 of the Credit Agreements, each U.S. Subsidiary that was not in existence or not a U.S. Subsidiary on the date thereof is required to enter into this Agreement as a Grantor upon becoming a U.S. Subsidiary. Upon execution and delivery, after the date hereof, by the Collateral Agent and such U.S. Subsidiary of an instrument in the form of Exhibit A-1, such U.S. Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor hereunder. The execution and delivery of any such instrument shall not require the consent of any Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement. 22 IN WITNESS WHEREOF, the undersigned has caused this Security Agreement to be duly executed and delivered as of the date first above written. UCAR INTERNATIONAL INC. by /s/ Corrado F. DeGasperis ---------------------------------------- Name: Corrado F. DeGasperis Title: Controller UCAR GLOBAL ENTERPRISES INC. by /s/ Corrado F. DeGasperis ---------------------------------------- Name: Corrado F. DeGasperis Title: Controller EACH OF THE SUBSIDIARY GRANTORS LISTED ON SCHEDULE IV HERETO by /s/ Corrado F. DeGasperis ---------------------------------------- Name: Corrado F. DeGasperis Title: Attorney-in-Fact THE CHASE MANHATTAN BANK, as Collateral Agent, by /s/ Marian Schulman ---------------------------------------- Name: Marian Schulman Title: Vice President 23 SCHEDULES: Schedule I Filings and Other Actions Required to Perfect Security Interests Schedule II Inventory and Equipment Schedule III Records of Accounts Schedule IV Subsidiary Grantors SCHEDULE I TO SECURITY AGREEMENT FILINGS AND OTHER ACTIONS REQUIRED TO PERFECT SECURITY INTERESTS Filings I. Filing Offices for: UCAR Carbon Company Inc. UCAR Carbon Technology Corporation a. California: (i) Orange County Clerk and Recorder Santa Ana, CA 92701 (ii) Secretary of State, California b. Connecticut: (i) Town Clerk Danbury (ii) Secretary of State, Connecticut c. Illinois: (i) Crawford County Recorder Robinson, IL 62454 (ii) Secretary of State, Illinois d. New York: (i) Niagara County Clerk Lockport, NY 14094 (ii) Secretary of State, New York e. Ohio: (i) Cuyahoga County Recorder Cleveland, OH 44113 (ii) Secretary of State, Ohio f. Tennessee: (UCAR Carbon Company Inc. Only) (i) Lawrence County Register of Deeds Lawrenceburg, TN 38464 (ii) Maury County Register of Deeds Columbia, TN 38401 (iii) Montgomery County Register Clarksville, TN 37040 (iv) Secretary of State, Tennessee g. West Virginia: (i) Harrison County Clerk Clarksburg, WV 26301 (ii) Secretary of State, West Virginia II. Filing Offices for: UCAR Holdings Inc. UCAR Holdings II, Inc. UCAR Holdings III, Inc. UCAR Carbon Foreign Sales Corporation UCAR Composites Inc. UCAR International Trading Inc. a. Connecticut: (i) Town Clerk Danbury (ii) Secretary of State, Connecticut b. Ohio: (i) Cuyahoga County Recorder Cleveland, OH 44113 (ii) Secretary of State, Ohio c. California (UCAR International Trading Inc. Only): (i) Orange County Clerk and Recorder Santa Ana, CA 92701 (ii) Secretary of State, California III. Filing Offices for UCAR International Inc. and UCAR Global Enterprises Inc.: a. Connecticut (i) Town Clerk Danbury (ii) Secretary of State, Connecticut b. New York: (i) County Clerk, New York County (ii) Secretary of State, New York c. Ohio: (i) Cuyahoga County Recorder Cleveland, OH 44113 (ii) Secretary of State, Ohio IV. Filing Offices for Mortgages of UCAR Carbon Company Inc.: a. Ohio: (i) Cuyahoga County Recorder Cleveland, OH 44113 (ii) Secretary of State, Ohio b. Tennessee: (i) Lawrence County Register of Deeds Lawrenceburg, TN 38464 (ii) Maury County Register of Deeds Columbia, TN 38401 (iii) Montgomery County Register Clarksville, TN 37040 (iv) Secretary of State, Tennessee c. West Virginia: (i) Harrison County Clerk Clarksburg, WV 26301 (ii) Secretary of State, West Virginia d. New York: (i) Niagara County Clerk Lockport, NY 14094 (ii) Secretary of State, New York e. Illinois: (i) Crawford County Clerk Robinson, IL 62454 (ii) Secretary of State, Illinois SCHEDULE II TO SECURITY AGREEMENT INVENTORY AND EQUIPMENT LOCATIONS Highway 43 South Lawrenceburg, TN 38464 Philippi Pike Anmoore, WV 26323 Highway 7, Santa Fe Pike Columbia, TN 38401 Hwy 79N @ Hampton Station Rd. Clarksville, TN 37040 12900 Snow Road Parma, OH 44130 3625 Highland Avenue Niagara Falls, NY 14305 39 Old Ridgebury Road Danbury, CT 06817 Rural Route 3 Robinson, IL 62454 5 Burroughs Irvine, CA 92718 11709 Madison Avenue Lakewood, OH 4107 SCHEDULE III TO SECURITY AGREEMENT RECORDS OF ACCOUNTS Description All records concerning the accounts of UCAR International Inc., UCAR International Acquisitions Inc., UCAR Global Enterprises Inc. and the U.S. Subsidiaries are located at: 12900 Snow Road Parma, OH 44130 SCHEDULE IV TO THE SECURITY AGREEMENT SUBSIDIARY GRANTORS UCAR Carbon Company Inc. UCAR Carbon Technology Corporation UCAR Holdings Inc. UCAR Holdings II Inc. UCAR Holdings III Inc. UCAR International Trading Inc. Union Carbide Grafito, Inc. UCAR Composites Inc. 1 EXHIBIT A-1 TO SECURITY AGREEMENT SUPPLEMENT NO. dated as of [ ], to the Security Agreement dated as of April 22, 1998, as amended and restated as of November 10, 1998 (the "SECURITY AGREEMENT"), among UCAR INTERNATIONAL INC., a Delaware corporation ("UCAR"), UCAR GLOBAL ENTERPRISES INC., a Delaware corporation as borrower (the "BORROWER"), each of the U.S. Subsidiaries (such term and each other capitalized term used but not defined having the meaning given it in the Security Agreement, and if not defined therein, having the meaning given it in Article I of the Credit Agreements), party thereto (together with the Borrower, the "GRANTORS") and THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent (the "COLLATERAL AGENT") for the Secured Parties. A. Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR, the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent and (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT", and together with the Existing Credit Agreement, the "CREDIT AGREEMENTS"). B. The Grantors have entered into the Security Agreement in order to induce the Lenders to make Loans and the Fronting Banks to issue Letters of Credit pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreements. Pursuant to Section 5.11 of the Credit Agreements, each U.S. Subsidiary that was not in existence or not a U.S. Subsidiary on the date thereof is required to enter into the Security Agreement as a Grantor upon becoming a U.S. Subsidiary. Section 25 of the Security Agreement provides that additional U.S. Subsidiaries may become Grantors under the Security Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned (the "NEW GRANTOR") is a U.S. Subsidiary and is executing this Supplement in accordance with the requirements of the Credit Agreements to become a Grantor under the Security Agreement in order to induce the Lenders to make additional Loans and the Fronting Banks to issue additional 2 Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Grantor agree as follows: SECTION 1. In accordance with Section 25 of the Security Agreement, the New Grantor by its signature below becomes a Grantor under the Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Grantor hereby agrees to all the terms and provisions of the Security Agreement applicable to it as a Grantor thereunder. Each reference to a "Grantor" in the Security Agreement shall be deemed to include the New Grantor. The Security Agreement is hereby incorporated herein by reference. SECTION 2. The New Grantor represents and warrants to the Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency or similar laws effecting creditors' rights generally and equitable principles of general applicability. SECTION 3. This Supplement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Grantor and the Collateral Agent. SECTION 4. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Security Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in the Credit Agreements. All communications and notices hereunder to the New Grantor shall be given to it at the address set forth under its signature, with a copy to the Borrower. 3 IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly executed this Supplement to the Security Agreement as of the day and year first above written. [NAME OF NEW GRANTOR], by ------------------------------------ Name: Title: Address: THE CHASE MANHATTAN BANK, as Collateral Agent, by ----------------------------------- Name: Title: EX-10.8 14 EXHIBIT 10.8 EXECUTION COPY 35% PLEDGE AGREEMENT PLEDGE AGREEMENT dated as of November 10, 1998 (the "PLEDGE AGREEMENT"), by UCAR GLOBAL ENTERPRISES INC., a Delaware corporation (the "BORROWER"), UCAR CARBON COMPANY INC., a Delaware corporation, UCAR HOLDINGS INC., a Delaware, corporation and UCAR HOLDINGS II INC., a Delaware corporation UCAR Holdings III Inc., a Delaware corporation, UCAR International Inc., a Delaware corporation (each a "PLEDGOR" and, collectively, the "PLEDGORS"), in favor of THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent for the Secured Parties. Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR International Inc., a Delaware corporation ("UCAR"), the Borrower, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent, (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT" and together with the Existing Credit Agreement, the "US CREDIT AGREEMENTS") and (iii) the Local Credit Facility Agreements (the Local Credit Facility Agreements and US Credit Agreements, the "CREDIT AGREEMENTS"). Capitalized terms used herein but not otherwise defined have the meaning assigned to them in Article I of the Credit Agreements. W I T N E S S E T H : WHEREAS, pursuant to the Credit Agreements, the Lenders have severally agreed to make Loans and the Fronting Banks have agreed to issue Letters of Credit, upon the terms and subject to the conditions set forth therein; WHEREAS, the Pledgors are the legal and beneficial owners of the shares of Pledged Stock issued by the Issuers; WHEREAS, it is a condition precedent to the obligations of the Lenders to make the Loans and the Fronting Banks to issue the Letters of Credit that the U.S. Subsidiaries guarantee payment and performance of the Credit Parties' obligations under the Credit Agreements and the other Loan Documents, that the Borrower guarantee payment and performance of the other Credit Parties' obligations under the Credit Agreements and the other Loan Documents and that UCAR guarantee payment and performance of the 2 Borrower's obligations, including its obligations as a guarantor, under the Credit Agreements and the other Loan Documents; WHEREAS, in satisfaction of such condition, the Pledgors have entered into certain Guarantee Agreements for the benefit of the Secured Parties; and WHEREAS, it is a further condition precedent to the obligations of the Lenders to make the Loans and the Fronting Banks to issue the Letters of Credit that the Pledgors shall have executed and delivered this Pledge Agreement to the Collateral Agent for the ratable benefit of the Secured Parties, to secure payment and performance of the Foreign Subsidiaries' respective obligations under the Credit Agreements, the Guarantee Agreements and the other Loan Documents to which they are party. NOW, THEREFORE, in consideration of the premises and to induce the Secured Parties to enter into the Credit Agreements and to induce the Lenders to make their respective Loans and the Fronting Banks to issue their respective Letters of Credit, each of the Pledgors hereby agrees with the Collateral Agent, for the ratable benefit of the Secured Parties, as follows: 1. DEFINED TERMS. (a) Unless otherwise defined herein, terms defined in the Credit Agreements and used herein shall have the meanings given in the U.S. Credit Agreements. (b) The following terms shall have the following meanings: "AGREEMENT": this Pledge Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "CODE": the Uniform Commercial Code from time to time in effect in the State of New York. "COLLATERAL": the Pledged Stock, and all Proceeds thereof. "COLLATERAL ACCOUNT": any account established to hold money Proceeds, maintained under the sole dominion and control of and on terms and conditions reasonably satisfactory to the Collateral Agent, subject to withdrawal by the Collateral Agent for the account of the Secured Parties and the Pledgors, as provided in Section 8(a) and Section 15. "FOREIGN SUBSIDIARY": any Subsidiary incorporated or otherwise organized outside the United States of America. "INDEMNITEE": the Secured Parties and their respective officers, directors, trustees, affiliates and controlling persons. 3 "ISSUERS": the collective reference to the companies identified on SCHEDULE I attached hereto as the issuers of the Pledged Stock; each, individually, an "ISSUER." "OBLIGATIONS": with respect to each Foreign Subsidiary, the collective reference to its obligations as obligor or guarantor in respect of (i) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Existing Credit Agreement after the maturity of the Loans thereunder and interest accruing at the then applicable rate provided in the Existing Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post- filing or post-petition interest is allowed in such proceeding) on the Loans made under the Existing Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) the unpaid principal of and premium, if any, and interest (including interest accruing at the then applicable rate provided in the Tranche C Facility Credit Agreement after the maturity of the Loans thereunder and interest accruing at the applicable rate provided in the Tranche C Facility Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party thereunder whether or not a claim for post- filing or post-petition interest is allowed in such proceeding) on the Loans made under the Tranche C Facility Credit Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (iii) each payment required to be made by any Credit Party under the Existing Credit Agreement, when and as due, including payments in respect of reimbursements of L/C Disbursements, interest thereon and obligations to provide cash collateral, (iv) each payment required to be made by any Credit Party under the Tranche C Facility Credit Agreement, when and as due, and (v) all other obligations and liabilities of every nature of the Credit Parties under the Credit Agreements from time to time owed to the Secured Parties or any of them, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), which may arise under, out of, or in connection with, the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document or any other Loan Document (including a Local Facility Loan Document) and any obligation of the Borrower or any Credit Party under the Credit Agreements to any Lender under the Credit Agreement pursuant to an Interest/Exchange Rate Protection Agreement or under any other document made, delivered or given in connection with any of the foregoing, in each case whether on 4 account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees and disbursements of counsel to the Collateral Agent or to the Secured Parties that are required to be paid by the Borrower or any Credit Party pursuant to the terms of the Existing Credit Agreement, the Tranche C Facility Credit Agreement, any Guarantee Agreement, any Security Document, any other Loan Document or any Interest/Exchange Rate Protection Agreement with a Lender. For the avoidance of doubt, Obligations as used in this Agreement shall never include an obligation of UCAR, the Borrower or a U.S. Subsidiary. "PLEDGED STOCK": the shares of Capital Stock listed on SCHEDULE I hereto, together with all the stock certificates, options or rights of any nature whatsoever that may be issued or granted by any Issuer to any Pledgor while this Agreement is in effect that are required to be pledged under Section 5 below. "PROCEEDS": all "proceeds" (as such term is defined in Section 9-306(1) of the Uniform Commercial Code in effect in the State of New York on the date hereof) of the Pledged Stock and, in any event, shall include all dividends or other income from the Pledged Stock, collections thereon or distributions with respect thereto. "SECURED PARTIES": (a) the lenders under the Local Facility Credit Agreements, (b) the Lenders of Swiss Term Loans under the Tranche C Facility Credit Agreement, (c) the Lenders holding obligations of the foreign Credit Parties under the Existing Credit Agreement (including, in the form of Revolving Loans or Letter of Credit Exposure), (d) the Fronting Banks that have issued Letters of Credit for the account of a foreign Credit Party under the Existing Credit Agreement, (e) the respective Administrative Agent under each Credit Agreement and (f) the Collateral Agent. "SECURITIES ACT": the Securities Act of 1933, as amended. "US SUBSIDIARY": any Subsidiary that is incorporated or otherwise organized in the United States of America. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section references are to this Agreement unless otherwise specified. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 5 2. PLEDGE; GRANT OF SECURITY INTEREST. Each Pledgor hereby pledges and delivers to the Collateral Agent, for the ratable benefit of the Secured Parties, all the Pledged Stock owned by such Pledgor and hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a first priority security interest in all the Collateral owned by such Pledgor from time to time, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration, upon one or more dates of prepayment or otherwise) of the Obligations. Each Pledgor will cause any shares of Capital Stock of any Subsidiary required to be pledged hereunder to be evidenced by duly executed certificates that are pledged and delivered to the Collateral Agent pursuant to the terms hereof. 3. STOCK POWERS. Concurrently with the delivery to the Collateral Agent of each certificate representing one or more shares of Pledged Stock to the Collateral Agent, the applicable Pledgor shall deliver an undated stock power covering such certificate, duly executed in blank by such Pledgor with, if the Collateral Agent so requests, signature guaranteed. 4. REPRESENTATIONS AND WARRANTIES. Each Pledgor represents and warrants, as to itself and the Pledged Stock and Collateral pledged by it hereunder, that: (a) The shares of Pledged Stock constitute the portion of the issued and outstanding shares of all classes of the Capital Stock of the applicable Issuer set forth on Schedule I. (b) All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable. (c) Subject to Section 21(b), each Pledgor is the legal, record and beneficial owner of the Pledged Stock, free of any and all Liens or options in favor of, or claims of, any other person, except the security interest created by this Agreement. (d) All Capital Stock or other ownership interests in the Subsidiaries will at all times constitute certificated securities for purposes of Articles 8 and 9 of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions. (e) This Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral and, when the Pledged Stock is delivered to the Collateral Agent (or, as applicable in the case of Capital Stock of foreign Subsidiaries, the requisite filings or registrations are made), this Agreement will constitute a duly perfected first priority Lien on, and security interest in, all right, title and interest of the Pledgors thereunder in such Pledged Stock, in each case prior and superior in 6 rights to any other person, subject to the agreements listed in Schedule 3.08. 5. COVENANTS. Each Pledgor, as to itself and the Collateral pledged by it hereunder, covenants and agrees with the Secured Parties that, from and after the date of this Agreement until this Agreement is terminated and the security interest created hereby is released, subject to Section 21(b): (a) If such Pledgor shall, as a result of its ownership of Pledged Stock, become entitled to receive or shall receive any stock certificate (including any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any shares of the Pledged Stock, or otherwise in respect thereof, such Pledgor shall accept the same as the agent of the Secured Parties, hold the same in trust for the Secured Parties and deliver the same forthwith to the Collateral Agent in the exact form received, duly indorsed by such Pledgor to the Collateral Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Pledgor and with, if the Collateral Agent, so requests, signature guaranteed, to be held by the Collateral Agent, subject to the terms hereof, as additional collateral security for the Obligations; PROVIDED that the applicable Pledgor shall pledge only such portion of such Capital Stock that it is not required to pledge pursuant to the Domestic Pledge Agreement. Without prejudice to the terms and conditions of the Credit Agreements, any sums paid upon or in respect of the Pledged Stock upon the liquidation or dissolution (other than any liquidation or dissolution permitted by Section 5.01(a) of the US Credit Agreements) of any Issuer shall be subject to Section 2.12(d) of the US Credit Agreements, or upon and during the continuance of an Event of Default shall upon the written request of the Collateral Agent be paid over to the Collateral Agent to be held and applied by it hereunder as provided in Section 8(a) and Section 15, and in case any distribution of capital shall be made on or in respect of the Pledged Stock or any property shall be distributed upon or with respect to the Pledged Stock pursuant to the recapitalization or reclassification of capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall be subject to Section 2.12(d) of the US Credit Agreements or, upon and during continuance of an Event of Default upon the written request of the Collateral Agent, be delivered to the Collateral Agent to be held and applied by it hereunder as provided in Section 8(a) and Section 15. If any sums of money or property so paid or distributed in respect of the Pledged Stock shall be received by such Pledgor, such Pledgor shall apply such amount in accordance with Section 2.12(d) of the US Credit Agreements, or upon and during the continuance of an Event of Default, shall, upon the written request of the Collateral Agent, until such money or property is paid or 7 delivered to the Collateral Agent, hold such money or property in trust for the Secured Parties, segregated from other funds of such Pledgor, for application in accordance with Section 8(a) and Section 15. (b) Without the prior written consent of the Collateral Agent, such Pledgor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer, except to the extent the same are permitted to be issued under the US Credit Agreements, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Collateral owned by it, except as not prohibited under the terms of the Credit Agreements, (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any person with respect to, any of such Collateral, or any interest therein, except as not prohibited under the terms of the Credit Agreements and for the security interest created by this Agreement or (iv) enter into any agreement or undertaking restricting the right or ability of such Pledgor or the Collateral Agent to sell, assign or transfer any of such Collateral, except as not prohibited under the terms of the Credit Agreements. (c) Such Pledgor shall maintain the security interest created by it under this Agreement as a first priority, perfected security interest and shall defend such security interest against claims and demands of all persons whomsoever. At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Pledgor, such Pledgor shall promptly and duly execute and deliver such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted. If any amount payable under or in connection with any of the Collateral owned by such Pledgor shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall, if so requested by the Collateral Agent, be immediately delivered to the Collateral Agent duly endorsed in a manner reasonably satisfactory to the Collateral Agent, to be held as Collateral pursuant to this Agreement, provided that the use of the Proceeds of such Collateral shall nonetheless be governed by Sections 6 and 7. (d) If such Pledgor shall at any time own or acquire any shares of Capital Stock of a Subsidiary that was not in existence or not a Subsidiary on the date hereof (a "NEW SUBSIDIARY") and such Capital Stock is not required to be pledged pursuant to the Domestic Pledge Agreement, such Pledgor shall (i) immediately deliver such shares of Capital Stock, and all stock certificates evidencing the same, to the Collateral Agent to be held as collateral hereunder, 8 (ii) promptly deliver a supplement to this Pledge Agreement, substantially in the form of Exhibit A-1 to this Agreement (each, a "PLEDGE AGREEMENT SUPPLEMENT") adding such shares of Capital Stock to Schedule I hereto and (iii) promptly cause such New Subsidiary to execute and deliver an Acknowledgment and Consent substantially in the form appended to Annex I to the Pledge Agreement Supplement. The execution and delivery of any such instrument shall not require the consent of any Pledgor hereunder. The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Pledgor as a party to this Agreement. 6. CASH DIVIDENDS; VOTING RIGHTS; PROCEEDS. (a) Unless an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given notice to the Pledgors of the Collateral Agent's intent to exercise its corresponding rights pursuant to Section 7 below, the Pledgors shall be permitted to receive, retain and use all cash dividends paid in accordance with the terms and conditions of the US Credit Agreements in respect of the Pledged Stock and to exercise all voting and corporate rights with respect to the Pledged Stock, PROVIDED, HOWEVER, that no vote shall be cast or corporate right exercised or other action taken (regardless of whether an Event of Default has occurred and is continuing) which would materially and adversely affect the rights of the Collateral Agent or the Secured Parties or their ability to exercise same or result in any violation of any provision of the Credit Agreements, this Agreement or any other Loan Document. (b) Unless an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given notice to the Pledgors of the Collateral Agent's intent to exercise its corresponding rights pursuant to Section 7 below, the Pledgors shall be permitted to receive, retain and use all other Proceeds (in addition to cash dividends as provided under Section 6(a) above) from the Collateral. 7. RIGHTS OF THE SECURED PARTIES AND THE COLLATERAL AGENT. If an Event of Default shall occur and be continuing and the Collateral Agent shall give notice of its intent to exercise such rights to the Pledgors, (i) the Collateral Agent shall have the right to receive any and all Proceeds paid in respect of the Pledged Stock and any and all Proceeds of Proceeds and make application thereof to the Obligations in the manner provided in Section 8(a) and Section 15 and (ii) all shares of the Pledged Stock shall be registered in the name of the Collateral Agent or its nominee, and the Collateral Agent or its nominee may thereafter exercise (1) all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders of any Issuer or otherwise and (2) any and all rights of, conversion, exchange, subscription and any other rights, privileges or options pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including the right to exchange at its discretion any and all the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any 9 Issuer, or upon the exercise by a Pledgor or the Collateral Agent of any right, privilege or option pertaining to such shares of the Pledged Stock and in connection therewith, the right to deposit and deliver any and all the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may reasonably determine), all without liability except to account for property actually received by it, but the Collateral Agent shall have no duty to any Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. All Proceeds that are received by any Pledgor contrary to the provisions of this Section 7 shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Pledgor and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this Section 7 shall be retained by the Collateral Agent in a Collateral Account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 8(a) and Section 15. After all Events of Default under the Credit Agreements have been cured or waived, the Collateral Agent shall, within five Business Days after all such Events of Default have been cured or waived, repay to each Pledgor all cash dividends, interest or principal that such Pledgor would otherwise be permitted to retain pursuant to the terms of Section 6 above, but only to the extent such Proceeds remain in such Collateral Account. 8. REMEDIES. (a) If an Event of Default shall have occurred and be continuing the Collateral Agent shall apply all or any part of the Proceeds held in any Collateral Account in accordance with Section 15. (b) If an Event of Default shall have occurred and be continuing, the Collateral Agent, on behalf of the Secured Parties, may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice, required by law referred to below) to or upon the Pledgors or any other person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or office of the Collateral Agent or any Secured Party or elsewhere upon such terms and conditions as it may reasonably deem advisable and at such prices as it may reasonably deem best, for cash or on credit or for future delivery 10 without assumption of any risk. The Collateral Agent or any Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of (to the extent permitted by law) any right or equity of redemption in a Pledgor which right or equity is, to the extent permitted by law, hereby waived or released. The Collateral Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses incurred in respect thereof or incidental to the care or safekeeping of any of the Collateral or reasonably relating to the Collateral or the any or the rights of the Collateral Agent and the Secured Parties hereunder, including reasonable attorney's fees and disbursements of counsel to the Collateral Agent, to the payment in whole or in part of the Obligations, in the order set forth in Section 15. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be in writing and deemed reasonable and proper if given at least 10 days before such sale or other disposition. The Pledgors shall remain liable for any deficiency if the proceeds of any sale or other disposition of Collateral are insufficient to pay in the case of each Pledgor, its Obligations and the reasonable fees and disbursements of any attorneys employed by the Collateral Agent or any Secured Party to collect such deficiency in its Obligations. 9. REGISTRATION RIGHTS; PRIVATE SALES. (a) If the Collateral Agent shall determine to exercise its right to sell any or all of the Pledged Stock pursuant to Section 8 hereof, and if in the opinion of the Collateral Agent it is necessary or advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act, the Pledgor who owns such Pledged Stock will cause the Issuer thereof to (i) execute and deliver, and cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the reasonable opinion of the Collateral Agent, necessary or advisable to register the Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period expiring on the earlier of (A) one year from the date of the first public offering of the Pledged Stock and (B) such time that all of the Pledged Stock, or that portion thereof to be sold, is sold and (iii) to make all amendments thereto and/or to the related prospectus which, in the reasonable opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor who owns such Pledged Stock agrees to cause such Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Collateral Agent shall reasonably designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act. Each Pledgor jointly and 11 severally agrees to (x) indemnify, defend and hold harmless Collateral Agent and the other Indemnitees from and against all losses, liabilities, expenses, costs (including the reasonable fees and expenses of legal counsel to the Collateral Agent) and claims (including the costs of investigation) that they may incur insofar as any such loss, liability, expense, cost or claim arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus, offering circular or similar document (or any amendment or supplement thereto), or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any writing thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to any Pledgor or the Issuer of such Pledged Stock by the Collateral Agent or any other Secured Party expressly for use therein, and (y) enter into an indemnification agreement with any underwriter of or placement agent for any Pledged Stock, on its standard form, to substantially the same effect. The Pledgors will jointly and severally bear all costs and expenses of carrying out their obligations under this Section 9. (b) The Pledgors recognize that the Collateral Agent may be unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Collateral Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree do so. (c) Each Pledgor further agrees to use its best efforts to do or cause to be done all such other acts as may be reasonably necessary to make such sale or sales of all or any portion of the Pledged Stock owned by it pursuant to this Section valid and binding and in compliance with any and all other applicable requirements of the laws of any jurisdiction. Each Pledgor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Collateral Agent and the Secured Parties, that the Collateral Agent and the Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in the Section shall be specifically enforceable against such Pledgor. 12 10. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER. Each Pledgor hereby authorizes and instructs each Issuer that has issued Pledged Stock pledged by such Pledgor pursuant to Section 2 hereof to comply with any instruction received by it from the Collateral Agent in writing that (a) states that an Event of Default has occurred and (b) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Pledgor, and agrees that each such Issuer shall be fully protected in so complying. 11. COLLATERAL AGENT'S APPOINTMENT AS ATTORNEY-IN- FACT. (a) Each Pledgor hereby irrevocably constitutes, and appoints the Collateral Agent and any officer or agent of the Collateral Agent, with full irrevocable power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Pledgor and in the name of such Pledgor or in the Collateral Agent's own name, from time to time in the Collateral Agent's discretion upon and during the continuance of an Event of Default, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, including without limitation, any financing statements, endorsements, assignments or other instruments of transfer. (b) Each Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in Section 11(a). All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released. 12. DUTY OF COLLATERAL AGENT. The Collateral Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9- 207 of the Code or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar securities and property for its own account, PROVIDED that investments shall be made at the option and sole discretion of the Collateral Agent, and PROVIDED FURTHER that the Collateral Agent shall use reasonable efforts to make such investments. Neither the Collateral Agent, any Secured Party nor any of their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgors or any other person or to take any other action whatsoever with regard to the Collateral or any part thereof. 13. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of the Code, each Pledgor authorizes the Collateral Agent to file financing statements with respect to the Collateral owned by it without the signature of such Pledgor in such form and in such filing offices as the Collateral Agent reasonably determines appropriate to perfect the security interests of the 13 Collateral Agent under this Agreement. A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement for filing in any jurisdiction. 14. AUTHORITY OF COLLATERAL AGENT. Each Pledgor acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out this Agreement shall, as between the Collateral Agent and the Secured Parties, be governed by the Credit Agreements and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and such Pledgor, the Collateral Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting. 15. APPLICATION OF PROCEEDS. The proceeds of any sale of Collateral pursuant to Section 8(b), as well as any Collateral consisting of cash under Section 8(a), shall be applied by the Collateral Agent as follows: FIRST, to the payment of the reasonable costs and expenses of the Collateral Agent as set forth in Section 8(b); SECOND, to the payment of all amounts of the Obligations owed to the Secured Parties, pro rata as among the Secured Parties in accordance with the amount of such Obligations owed them; and THIRD, after payment in full of all Obligations, to the applicable Pledgor, or the successors or assigns thereof, or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, any Collateral then remaining. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. 16. SECURITY INTEREST ABSOLUTE. All rights of the Collateral Agent hereunder, the security interests granted hereunder and all obligations of the Pledgors hereunder shall be absolute and unconditional. 14 17. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by any Pledgor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Secured Parties and shall survive the making by the Lenders of the Loans, the execution and delivery to the Lenders of the Loan Documents and the issuance by the Fronting Banks of the Letters of Credit, regardless of any investigation made by the Secured Parties, or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or L/C Disbursement, or any Fee or any other amount payable under or in respect of this Agreement or any other Loan Document is outstanding and unpaid and so long as the Commitments have not been terminated. 18. COLLATERAL AGENT'S LIABILITIES AND EXPENSES; INDEMNIFICATION. (a) Notwithstanding anything to the contrary provided herein, the Collateral Agent assumes no liabilities with respect to any claims regarding each Pledgor's ownership (or purported ownership) of, or rights or obligations (or purported rights or obligations) arising from, the Collateral or any use (or actual or alleged misuse) whether arising out of any past, current or future event, circumstance, act or omission or otherwise, or any claim, suit, loss, damage, expense or liability of any kind or nature arising out of or in connection with the Collateral. All of such liabilities shall, as between the Collateral Agent and the Pledgors, be borne exclusively by the Pledgors. (b) Each Pledgor hereby agrees to pay all reasonable expenses of the Collateral Agent and to indemnify the Collateral Agent with respect to any and all losses, claims, damages, liabilities and related expenses in respect of this Agreement or the Collateral in each case to the extent the Borrower is required to do so pursuant to Section 9.05 of the US Credit Agreements. (c) Any amounts payable by a Pledgor as provided hereunder shall be additional Obligations of it secured hereby and by its other Security Documents. Without prejudice to the survival of any other agreements contained herein, all indemnification and reimbursement obligations contained herein shall survive the payment in full of the principal and interest under the Credit Agreements, the expiration of the Letters of Credit and the termination of the Commitments or this Agreement. 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19. 15 20. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each Pledgor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Loan Party or any Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Pledgor or any Secured Party or its properties in the courts of any jurisdiction. (b) Each Pledgor and each Secured Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 22 hereof. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. 21. TERMINATION AND RELEASE. (a) This Agreement and the security interest created hereunder shall terminate when all the Obligations have been fully and indefeasibly paid and when the Secured Parties have no further Commitments and no Letters of Credit are outstanding, at which time the Collateral Agent shall reassign and deliver to each Pledgor, or to such person or persons as each Pledgor shall reasonably designate, against receipt, such of the Collateral owned by such Pledgor as shall have not been sold or otherwise applied by the Collateral Agent pursuant to the terms hereof and shall still be held by it hereunder, together with appropriate instructions of reassignment and release. Any such reassignment shall be without recourse to or any warranty by the Collateral Agent and at the expense of such Pledgor. (b) All Collateral sold, transferred or otherwise disposed of, in accordance with the terms of the Credit Agreements (including pursuant to a waiver or amendment of the terms thereof), shall be sold, transferred or otherwise disposed of free and clear of the Lien and the security interest created hereunder. In connection with the foregoing, (i) the Collateral Agent shall 16 execute and deliver to each Pledgor with respect to the Collateral owned by such Pledgor, or to such person or persons as such Pledgor shall reasonably designate, against receipt, such Collateral sold, transferred or otherwise disposed together with appropriate instructions of reassignment and release, (ii) any representation, warranty or covenant contained herein relating to the Collateral shall no longer be deemed to be made with respect to such sold, transferred or otherwise disposed Collateral and (iii) all schedules hereto shall be amended to delete the name of the Issuer. Any such reassignment shall be without recourse or to any warranty by the Collateral Agent and at the expense of such Pledgor. 22. NOTICES. All notices, requests and demands to or upon the Secured Parties or the Pledgors under this Agreement shall be given or made in accordance with Section 9.01 of the US Credit Agreements and addressed as follows: (a) if to any Secured Party, UCAR, or any Credit Party, at its address for notices provided in Section 9.01 of US the Credit Agreements; (b) if to any Subsidiary that is not a Credit Party, at its address set forth under its signature below. 23. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition of enforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. 24. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a) None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgors and the Collateral Agent, PROVIDED that any provision of this Agreement may be waived by the Required Secured Parties pursuant to a letter or agreement executed by the Collateral Agent or by telecopy transmission from the Collateral Agent. (b) Neither the Collateral Agent nor any Secured Party shall by any act (except by a written instrument pursuant in Section 24(a) hereof) or delay be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of any Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise of any other right, power or privilege. A waiver by any Secured Party of any right or remedy 17 hereunder on any one occasion shall not be construed as a bar to any right or remedy which such Secured Party would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 25. SECTION HEADINGS. The section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the successors and assigns of the Pledgors and shall inure to the benefit of the Pledgors, the Collateral Agent and the Secured Parties and their successors and assigns, PROVIDED that this Agreement may not be assigned by the Pledgors without the prior written consent of the Collateral Agent and the Secured Parties. 27. COUNTERPARTS. This Agreement may be executed in two or more original counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. 28. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 18 IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. UCAR GLOBAL ENTERPRISES INC. by /s/ Corrado F. DeGasperis ------------------------------------------ Name: Corrado F. DeGasperis Title: Controller UCAR CARBON COMPANY INC. by /s/ Corrado F. DeGasperis ------------------------------------------ Name: Corrado F. DeGasperis Title: Controller UCAR HOLDINGS INC. by /s/ Corrado F. DeGasperis ------------------------------------------ Name: Corrado F. DeGasperis Title: Controller UCAR HOLDINGS II INC. by /s/ Corrado F. DeGasperis ------------------------------------------ Name: Corrado F. DeGasperis Title: Controller 19 UCAR HOLDINGS III INC. by /s/ Peter B. Mancino ------------------------------------------ Name: Peter B. Mancino Title: Vice President UCAR INTERNATIONAL INC. by /s/ Peter B. Mancino ------------------------------------------ Name: Peter B. Mancino Title: Vice President SCHEDULE I PLEDGED STOCK PERCENTAGE PLEDGOR ISSUER PLEDGED STOCK PLEDGED UCAR Global UCAR Carbon S.A. No Certificates 30.26% Enterprises Inc. UCAR S.A. 61,247 Shares, 34.9% Certificate No. 4 UCAR Holdings S.A. No Certificates .1% UCAR Carbon Unicarbon Comercial No Certificates 34.9% Company Inc. Ltda. UCAR Limited 5,249,999 shares 34.9% Certificate No.9 UCAR Foreign Sales 35 shares 35% Corporation EMSA (Pty.) Ltd. 2,187,500 shares 35% Certificate No. 37 Carbographite Limited 1,394 shares 34.8% Certificate No. 43 UCAR Holdings S.A. No Certificates * UCAR Electrodos S.L. No Certificates .1% UCAR S.p.A. No Certificates .1% UCAR Mexicana S.A. de 1 Share .1% C.V. Certificate No. 02 UCAR Holdings Inc. UCAR Mexicana S.A. de 145,291,474 Shares 34.9% C.V. Certificates No. 03, 04, 07, and 08 UCAR S.p.A. No Certificates 34.9% UCAR Holdings II UCAR Inc. 350 shares 35% Inc. Certificate No. 4 UCAR Electrodos S.L. No Certificates 34.9% UCAR Holdings S.A. No Certificates 34.9% UCAR Holdings III UCAR Holdings S.A. No Certificates * Inc. UCAR International UCAR Holdings S.A. No Certificates * Inc. ===================== ========================= ==================== =========== * less than .1% EXHIBIT A-1 TO PLEDGE AGREEMENT [FORM OF] PLEDGE AGREEMENT SUPPLEMENT PLEDGE AGREEMENT SUPPLEMENT, dated as of [ ] (this "SUPPLEMENT"), made by , a [ ] corporation (the "PLEDGOR"), in favor of THE CHASE MANHATTAN BANK, a New York banking corporation, as collateral agent for the Secured Parties. Reference is made to (i) the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time, the "EXISTING CREDIT AGREEMENT"), among UCAR International Inc., a Delaware corporation ("UCAR"), UCAR Global Enterprises Inc., a Delaware corporation (the "BORROWER"), the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent, (ii) the Credit Agreement dated as of November 10, 1998, among UCAR, the Borrower, UCAR S.A., the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent (as the same may be amended, supplemented or otherwise modified from time to time, the "TRANCHE C FACILITY CREDIT AGREEMENT" and together with the Existing Credit Agreement, the "US CREDIT AGREEMENTS") and (iii) the Local Credit Facility Agreements (the Local Credit Facility Agreements and US Credit Agreements, the "CREDIT AGREEMENTS"). Capitalized terms used herein but not otherwise defined have the meaning assigned to them in Article I of the Credit Agreements. 1. Reference is hereby made to that certain Pledge Agreement, dated as of November 10, 1998 (as amended, supplemented or otherwise modified as of the date hereof, the "PLEDGE AGREEMENT"), made by UCAR, the Borrower and certain U.S. Subsidiaries in favor of the Collateral Agent. 2. The Pledgor hereby confirms and reaffirms the security interest in the Collateral granted to the Collateral Agent for the benefit of the Secured Parties under the Pledge Agreement, and, as additional collateral security for the prompt and complete payment when due (whether at stated maturity, by acceleration or otherwise) of the Obligations and in order to induce the Secured Parties to make Loans and extend Letters of Credit under the Credit Agreements and the other Loan Documents, the Pledgor hereby delivers to the Collateral Agent, for the benefit of the Secured Parties, all of the issued and outstanding shares of Capital Stock of [INSERT NAME OF NEW SUBSIDIARY] (the "NEW ISSUER") listed in SCHEDULE 1 hereto, together with all stock certificates, options, or rights of any nature whatsoever which may be issued or granted by the New Issuer in respect of such stock while the Pledge Agreement, as supplemented hereby, is in force (the "ADDITIONAL PLEDGED STOCK"; as used in the Pledge Agreement as supplemented by this Supplement, "PLEDGED STOCK" shall be deemed to include the Additional Pledged Stock) and hereby grants to the Collateral Agent, for 2 the benefit of the Secured Parties, a first security interest in the Additional Pledged Stock and all Proceeds thereof. 3. The Pledgor hereby represents and warrants that the representations and warranties contained in Section 4 of the Pledge Agreement are true and correct on the date of this Supplement with references therein to the "PLEDGED STOCK" to include the Additional Pledged Stock, with references therein to the "ISSUERS" to include the New Issuer, and with references to the "PLEDGE AGREEMENT" to mean the Pledge Agreement as supplemented by this Supplement. 4. This Supplement is supplemental to the Pledge Agreement, forms a part thereof and is subject to the terms thereof and the Pledge Agreement is hereby supplemented as provided herein. Without limiting the foregoing, SCHEDULE I to the Pledge Agreement shall hereby be deemed to include each item listed on SCHEDULE I to this Supplement and all references in the Pledge Agreement (other than in Section 4 therein) to (a) "PLEDGED STOCK" shall be deemed to, and shall, include the Additional Pledged Stock and (b) "ISSUERS" shall be deemed to, and shall, include the New Issuer. IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have caused this Supplement to be duly executed and delivered on the date first set forth above. [PLEDGOR] by ____________________ Name: Title: THE CHASE MANHATTAN BANK, as Collateral Agent by ____________________ Name: Title: SCHEDULE I TO PLEDGE AGREEMENT SUPPLEMENT PLEDGED STOCK OWNERSHIP PLEDGOR ISSUER PLEDGED STOCK INTEREST ================== ================== ================== ================== Annex I TO PLEDGE AGREEMENT SUPPLEMENT ACKNOWLEDGMENT AND CONSENT The undersigned hereby acknowledges receipt of a copy of the foregoing Supplement and the Pledge Agreement referred to therein (the "PLEDGE AGREEMENT"). The undersigned agrees for the benefit of the Secured Parties as follows: 1. The undersigned will be bound by the terms of the Pledge Agreement and will comply with such terms insofar as such terms are applicable to the undersigned. 2. The undersigned will notify the Agent promptly in writing of the occurrence of any of the events described in Section 5(a) of the Pledge Agreement. 3. The terms of Section 9(c) of the Pledge Agreement shall apply to it, MUTATIS MUTANDIS, with respect to all actions that may be required of it under or pursuant to or arising out of Section 9 of the Pledge Agreement. [NAME OF ISSUER] By ___________________________ Name: Title : Address for Notices: ------------------------------ ------------------------------ Telecopy: _______________ EX-10.9(A) 15 EXHIBIT 10.9(a) CONFORMED COPY Italian Facility AMENDMENT dated as of November 10, 1998 (this "AMENDMENT"), among UCAR S.p.A., an Italian corporation (the "BORROWER"), the financial institutions party hereto (the "LENDERS"), and THE CHASE MANHATTAN BANK, MILAN BRANCH, as agent (in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders. A. Reference is made to the Local Facility Credit Agreement dated as of March 19, 1997 (the "CREDIT AGREEMENT") among the Borrower, the Lenders party thereto and the Administrative Agent. Capitalized terms used but not otherwise defined herein have the meanings assigned to them in the Credit Agreement. B. The Borrower has requested that the Lenders amend certain provisions of the Credit Agreement. The Lenders are willing to do so, subject to the terms and conditions of this Amendment. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1.01. AMENDMENTS TO SECTION 1.01. (a) The definition of "INTEREST COMPONENT" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "1.03333333333%" contained therein with a reference to "1.03%". (b) The definition of "LETTER OF CREDIT" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "U.S. Credit Agreement" with a reference to "Existing U.S. Credit Agreement". (c) The definition of "LOAN DOCUMENTS" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "Letter" contained therein with a reference to "Letters". (d) The definition of "LOCAL CURRENCY" or "LIT" shall mean the lawful currency of Italy. (e) The definition of "SECURITY DOCUMENTS" in Section 1.01 of the Credit Agreement is hereby replaced in its entirety with the following: "SECURITY DOCUMENTS" shall mean the agreements set forth on Schedule 1.01 and each of the agreements and other instruments and documents executed and delivered pursuant to the agreements set forth on 2 Schedule 1.01, pursuant to Section 5.03 hereof or pursuant to Section 5.11 of the U.S. Credit Agreements; PROVIDED that the agreements and other instruments and documents delivered pursuant to Section 5.11 of the U.S. Credit Agreements shall only constitute Security Documents hereunder to the extent that they serve to guarantee or secure the Obligations of the Borrower hereunder or Obligations of the Borrower in respect of Tranche A Letters of Credit under the Existing U.S. Credit Agreement. (f) The definition of "U.S. CREDIT AGREEMENT" in Section 1.01 of the Credit Agreement is hereby deleted in its entirety. (g) The following definitions are hereby added to Section 1.01 of the Credit Agreement in the appropriate alphabetical order: "EXISTING U.S. CREDIT AGREEMENT" shall mean the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time), among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent, which is attached hereto as Exhibit D-1. "TARGET OPERATING DAY" means any day that is not (i) a Saturday or Sunday, (ii) Christmas Day or New Year's Day or (iii) any other day on which the Trans European Automated Real-time Gross Settlement Express Transfer System ("TARGET") (or any successor settlement system) is not operating (as determined by the Administrative Agent). "TRANCHE C FACILITY CREDIT AGREEMENT" shall mean the Credit Agreement dated as of November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time), among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation, UCAR S.A., a Swiss corporation, the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent, which is attached hereto as Exhibit D-2. 3 "U.S. CREDIT AGREEMENTS" shall mean the Existing U.S. Credit Agreement and the Tranche C Facility Credit Agreement. SECTION 1.02. MODIFICATION OF CREDIT AGREEMENT. (a) Unless otherwise specified in paragraph (b) below, all references in the Credit Agreement to "U.S. Credit Agreement" are hereby replaced with references to "U.S. Credit Agreements". (b) The references to U.S. Credit Agreement in Sections 3.02 and 9.16 of the Credit Agreement are hereby replaced with references to "Existing U.S. Credit Agreement". SECTION 1.03. REPLACEMENT OF SCHEDULE 1.01 TO CREDIT AGREEMENT. Schedule 1.01 to the Credit Agreement is hereby replaced in its entirety with Schedule 1.01 attached hereto. SECTION 1.04. REPLACEMENT OF EXHIBIT D TO CREDIT AGREEMENT. Exhibit D to the Credit Agreement is hereby replaced in its entirety with Exhibits D-1 and D-2 attached hereto. SECTION 1.05. REPLACEMENT OF SECOND SENTENCE OF SECTION 5.03. The second sentence in Section 5.03 of the Credit Agreement is hereby replaced in its entirety with the following: In addition, from time to time, the Borrower and the Subsidiaries will, at their cost and expense, on or promptly (but in any event within 10 Business Days) following the date of acquisition by the Borrower or any Subsidiary or any new subsidiary (subject to the receipt of required consents from Governmental Authorities and required consents of other third parties), promptly secure the Obligations of the Borrower and, to the extent permitted by law, the other foreign Credit Parties under the U.S. Credit Agreements (the "FOREIGN OBLIGATIONS") by causing the following to occur: (i) promptly upon creating or acquiring any additional subsidiary, the Capital Stock of such subsidiary will be pledged pursuant to a pledge agreement reasonably satisfactory in form and substance to the Administrative Agent and (ii) such subsidiary will become a guarantor of the Obligations pursuant to a subsidiary guarantee agreement and provide security 4 for the Foreign Obligations pursuant to a security agreement, in each case reasonably satisfactory in form and substance to the Administrative Agent. SECTION 1.06. Amendment to Section 9.17. Section 9.17 of the Credit Agreement is hereby replaced in its entirety with the following: In the event that any obligation of any Loan Party (a) under this Agreement or (b) any other Loan Document in respect of the obligations under this Agreement (a "CLAIM") is paid with the proceeds of a Tranche A L/C Disbursement, the Borrower, the Administrative Agent and the Lenders hereby agree that Tranche A Lenders under the Existing U.S. Credit Agreement holding participations in such Tranche A L/C Disbursement shall be subrogated to the rights of the Administrative Agent and the Lenders hereunder and under each other Loan Document in respect of such Claim to the extent of such proceeds; PROVIDED that such right of subrogation shall not be effective until, and shall be subordinated to, payment in full of all Claims. SECTION 1.07. AMENDMENT TO SECTION 9.19. The reference to "Section 2.10(b)" in Section 9.19 of the Credit Agreement is hereby replaced with a reference to "Section 2.11(b)". SECTION 1.08. AMENDMENT TO ARTICLE IX. Article IX of the Credit Agreement is hereby amended by adding the following Section at the end thereof: SECTION 9.20. EUROPEAN ECONOMIC AND MONETARY UNION. (a) DEFINITIONS. In this Section 9.20 and in each other provision of this Agreement to which reference is made in this Section 9.20 expressly or by implication, the following terms have the meanings given to them in this Section 9.20: "COMMENCEMENT OF THE THIRD STAGE OF EMU" means the date of commencement of the third stage of EMU (at the date of this Agreement expected to be January 1, 1999) or the date on which circumstances arise which (in the opinion of the Administrative Agent) have substantially the same effect and result in substantially the same consequences as commencement of the third stage of EMU as contemplated by the Treaty on European Union; 5 "EMU" means economic and monetary union as contemplated in the Treaty on European Union; "EMU LEGISLATION" means legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency (whether known as the euro or otherwise), being in part the implementation of the third stage of EMU; "EURO" means the single currency of participating member states of the European Union; "EURO UNIT" means the currency unit of the euro; "NATIONAL CURRENCY UNIT" means the unit of currency (other than a euro unit) of a participating member state; "PARTICIPATING MEMBER STATE" means each state so described i nany EMU legislation; and "TREATY ON EUROPEAN UNION" means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992, and came into force on November 1, 1993), as amended from time to time. (b) EFFECTIVENESS OF PROVISIONS. The provisions of paragraphs (c) to (j) below (inclusive) shall be effective at and from the commencement of the third stage of EMU, PROVIDED, that if and to the extent that any such provision relates to any state (or the currency of such state) that is not a participating member state on the commencement of the third stage of EMU, such provision shall become effective in relation to such state (and the currency of such state) at and from the date on which such state becomes a participating member state. (c) REDENOMINATION AND FOREIGN CURRENCIES. Each obligation under this Agreement of a party to this Agreement which has been denominated in the national currency unit of a participating member state shall be redenominated into the euro unit in accordance with EMU legislation, PROVIDED, that if and to the extent that any EMU legislation provides that following the commencement of the third stage of EMU an amount 6 denominated either in the euro or in the national currency unit of a participating member state and payable within that participating member state by crediting an account of the creditor can be paid by the debtor either in the euro unit or in that national currency unit, each party to this Agreement shall be entitled to pay or repay any such amount either in the euro unit or in such national currency unit. (d) LOANS. Any Loan in the currency of a participating member state shall be made in the euro unit. (e) BUSINESS DAYS. (i) With respect to any amount denominated or to be denominated in the euro or a national currency unit, any reference to a "Business Day" shall be construed as a reference to a day (other than a Saturday or Sunday) on which banks are generally open for business in (A) London and New York City and (B) Frankfurt am Main, Germany (or such principal financial center or centers in such participating member state or states as the Administrative Agent may from time to time nominate for this purpose). (ii) For purposes of determining the date on which the LIBO Rate is determined under this Agreement for any Loan denominated in the euro (or any national currency unit) for any Interest Period therefor and for purposes of determining the first and last day of any Interest Period, references in this Agreement to "Business Days" shall be deemed to be references to TARGET Operating Days. (f) PAYMENTS TO THE ADMINISTRATIVE AGENT. Sections 2.17 shall be construed so that, in relation to the payment of any amount of euro units or national currency units, such amount shall be made available to the Administrative Agent in immediately available, freely transferable, cleared funds to such account with such bank in Frankfurt am Main, Germany (or such other principal financial center in such participating member state as the Administrative Agent may from time to time nominate for this purpose) as the Administrative Agent shall from time to time nominate for this purpose. 7 (g) PAYMENTS BY THE ADMINISTRATIVE AGENT TO THE LENDERS. Any amount payable by the Administrative Agent to the Lenders under this Agreement in the currency of a participating member state shall be paid in the euro unit. (h) PAYMENTS BY THE ADMINISTRATIVE AGENT GENERALLY. With respect to the payment of any amount denominated in the euro or in a national currency unit, the Administrative Agent shall not be liable to the Borrower or any of the Lenders in any way whatsoever for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by the Administrative Agent if the Administrative Agent shall have taken all relevant steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds (in the euro unit or, as the case may be, in a national currency unit) to the account with the bank in the principal financial center in the participating member state which the Borrower or, as the case may be, any Lender shall have specified for such purpose. In this paragraph (h), "all relevant steps" means all such steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as the Administrative Agent may from time to time determine for the purpose of clearing or settling payments of the euro. (i) BASIS OF ACCRUAL. If the basis of accrual of interest or fees expressed in this Agreement with respect to the currency of any state that becomes a participating state shall be inconsistent with any convention or practice in the London Interbank Market or, as the case may be, the Milan Interbank Market for the basis of accrual of interest or fees in respect of the euro, such convention or practice shall replace such expressed basis effective as of and from the date on which such state becomes a participating member state; PROVIDED, that if any Loan in the currency of such state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Loan, at the end of the then current Interest Period. (j) ROUNDING AND OTHER CONSEQUENTIAL CHANGES. Without prejudice and in addition to any method of conversion or rounding prescribed by any EMU legislation and without prejudice to the respective 8 liabilities for indebtedness of the Borrower to the Lenders and the Lenders to the Borrower under or pursuant to this Agreement: (i) each reference in this Agreement to a minimum amount (or an integral multiple thereof) in a national currency unit to be paid to or by the Administrative Agent shall be replaced by a reference to such reasonably comparable and convenient amount (or an integral multiple thereof) in the euro unit as the Administrative Agent may from time to time specify; and (ii) except as expressly provided in this Section 9.20, each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time reasonably specify to be necessary or appropriate to reflect the introduction of or changeover to the euro in participating member states in accordance with customary practices in the market. SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on the date of the satisfaction in full of the following conditions precedent (the "AMENDMENT EFFECTIVE DATE"): (a) The Administrative Agent shall have received duly executed counterparts hereof which, when taken together, bear the authorized signatures of the Borrower, the Lenders and the Administrative Agent. (b) The Administrative Agent shall have received favorable written opinion by Gianni, Origoni & Partners, substantially similar to the opinion given by such person on March 19, 1997 in connection with execution of the Credit Agreement, in form and substance satisfactory to the Administrative Agent and its counsel. (c) The amendment and restatement of the Existing U.S. Credit Agreement and the (ii) Tranche C Facility Credit Agreement shall have become effective in accordance with its respective terms. SECTION 3. CREDIT AGREEMENT. Except as specifically stated herein, the Credit Agreement shall continue in full force and effect in accordance with the provisions thereof 9 and all Security Documents issued or granted in connection thereto shall continue in full force and effect. As used therein, the terms "Agreement", "herein", "hereunder", "hereto", "hereof" and words of similar import shall, unless the context otherwise requires, refer to the Credit Agreement as modified hereby. SECTION 4. APPLICABLE LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF ITALY. SECTION 5. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which shall be an original but all of which, when taken together, shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Amendment by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 6. EXPENSES. The Borrower agrees to reimburse the Administrative Agent for its out-of-pocket expenses in connection with this Amendment, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent. 10 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written. UCAR S.p.A., by /S/ VITTORIO BELLINA ----------------------------------- Name: Vittorio Bellina Title: Director THE CHASE MANHATTAN BANK, MILAN BRANCH, individually and as Administrative Agent, by /S/ MARIAN SCHULMAN ----------------------------------- Name: Marian Schulman Title: Vice President BANCA COMMERCIALE ITALIANA S.P.A., FILIALE DI MILANO, by /S/ KAREN PURELIS ----------------------------------- Name: Karen Purelis Title: Vice President and Attorney-in-Fact by /S/ CHARLES DOUGERTY ----------------------------------- Name: Charles Doughterty Title: Vice President and Attorney-in-Fact 1 SCHEDULE 1.01 to the Local Facility Credit Agreement for Italy SECURITY DOCUMENTS 1. Pledge Agreement by UCAR International Inc., UCAR Global Enterprises Inc. and certain U.S. Subsidiaries, dated October 19, 1995, as amended and restated on November 10, 1998. 2. Pledge Agreement (35%) by certain U.S. Subsidiaries, dated November 10, 1998. 3. Parent Guarantee Agreement made by UCAR International Inc. and UCAR Global Enterprises Inc., dated October 19, 1995, as amended and restated on November 10, 1998. 4. Subsidiary Guarantee Agreement by each U.S. Subsidiary, dated October 19, 1995, as amended and restated on November 10, 1998. 5. Security Agreement by UCAR International Inc., UCAR Global Enterprises Inc. and the U.S. Subsidiaries, dated April 22, 1998, as amended and restated on November 10, 1998. 6. Intellectual Property Security Agreement by UCAR Global Enterprises Inc. and the U.S. Subsidiaries, dated April 22, 1998, as amended and restated on November 10, 1998. 7. Subsidiary Guarantee by UCAR S.p.A., dated March 19, 1997, as amended on November 10, 1998. 8. Mexican Subsidiaries Guarantee by Servicios Administrativos Carmex S.A. de C.V. and Servicios DYC S.A. de C.V., dated November 10, 1998. 9. Mexican Subsidiaries Guarantee by UCAR Carbon Mexicana S.A. de C.V. and UCAR Mexicana S.A. de C.V., dated November 10, 1998. 10. Pledge by UCAR Holdings Inc., UCAR Mexicana S.A. de C.V. and UCAR Carbon Mexicana S.A. de C.V. of 35% of the shares of UCAR Mexicana S.A. de C.V., 99.94% of the shares of UCAR Carbon Mexicana and 100% of the shares of Servicios Administrativos Carmex S.A. de C.V. and Servicios DYC S.A. de C.V., respectively, dated November 10, 1998. 11. Mexican Mortgage dated November 10, 1998. 12. Pledge by UCAR Holdings Inc. of 65% of the shares of UCAR S.p.A., dated November 10, 1998. 2 13. Pledge by UCAR Holdings Inc. of 65% of the shares of UCAR Mexicana S.A. de C.V., dated November 10, 1998. 14. Pledge by UCAR Holdings II Inc. of 65% of the shares of UCAR Holdings S.A., dated May 7, 1998, as amended on November 10, 1998. 15. Pledge by UCAR Holdings II Inc. of 65% of the shares of UCAR Electrodos, S.L., dated October 19, 1995, as amended on March 19, 1997 and November 10, 1998. 16. Pledge by UCAR Carbon Company Inc. of 65% of the shares of EMSA (Property) Ltd. and Carbographite Limited, dated November 10, 1998. 17. Pledge by UCAR Carbon Company Inc. of 65% of the shares of UCAR Limited, dated November 10, 1998. 18. Pledge by UCAR S.p.A. of 100% of the shares of UCAR Energia S.r.l. and UCAR Specialties S.r.l., dated March 19, 1997. 19. Pledge by UCAR Holdings Inc. of 34.9% of the shares of UCAR S.p.A., dated November 10, 1998. 20. Italian Mortgage (in favor of BCI only), dated November 10, 1998. 21. Italian Security Interest Agreement dated July 29, 1998. EX-10.10(A) 16 EXHIBIT 10.10(a) EXECUTION COPY Spanish Facility AMENDMENT dated as of November 10, 1998 (this "AMENDMENT"), among UCAR ELECTRODOS S.L., a Spanish corporation (the "BORROWER"), the financial institutions party hereto (the "LENDERS"), and THE CHASE MANHATTAN BANK, C.M.B., S.A., as agent (in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders. A. Reference is made to the Local Facility Credit Agreement dated as of March 19, 1997 (the "CREDIT AGREEMENT") among the Borrower, the Lenders party thereto and the Administrative Agent. Capitalized terms used but not otherwise defined herein have the meanings assigned to them in the Credit Agreement. B. The Borrower has requested that the Lenders amend certain provisions of the Credit Agreement. The Lenders are willing to do so, subject to the terms and conditions of this Amendment. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1.01. AMENDMENTS TO SECTION 1.01. (a) The definition of "INTEREST COMPONENT" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "1.03333333333%" contained therein with a reference to "1.03%". (b) The definition of "LETTER OF CREDIT" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "U.S. Credit Agreement" with a reference to "Existing U.S. Credit Agreement". (c) The definition of "LOAN DOCUMENTS" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "Letter" contained therein with a reference to "Letters". (d) The definition of "SECURITY DOCUMENTS" in Section 1.01 of the Credit Agreement is hereby replaced in its entirety with the following: "SECURITY DOCUMENTS" shall mean the agreements set forth on Schedule 1.01 and each of the agreements and other instruments and documents executed and delivered pursuant to the agreements set forth on Schedule 1.01, pursuant to Section 5.03 hereof or pursuant to Section 5.11 of the U.S. Credit Agreements; PROVIDED that the agreements and other instruments and documents delivered pursuant to Section 5.11 of the U.S. Credit Agreements shall 2 only constitute Security Documents hereunder to the extent that they serve to guarantee or secure the Obligations of the Borrower hereunder or Obligations of the Borrower in respect of Tranche A Letters of Credit under the Existing U.S. Credit Agreement. (e) The definition of "U.S. CREDIT AGREEMENT" in Section 1.01 of the Credit Agreement is hereby deleted in its entirety. (f) The following definitions are hereby added to Section 1.01 of the Credit Agreement in the appropriate alphabetical order: "EXISTING U.S. CREDIT AGREEMENT" shall mean the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time), among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent, which is attached hereto as Exhibit D-1. "TRANCHE C FACILITY CREDIT AGREEMENT" shall mean the Credit Agreement dated as of November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time), among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation, UCAR S.A., a Swiss corporation, the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent, which is attached hereto as Exhibit D-2. "U.S. CREDIT AGREEMENTS" shall mean the Existing U.S. Credit Agreement and the Tranche C Facility Credit Agreement. SECTION 1.02. MODIFICATION OF CREDIT AGREEMENT. (a) Unless otherwise specified in paragraph (b) below, all references in the Credit Agreement to "U.S. Credit Agreement" are hereby replaced with references to "U.S. Credit Agreements". 3 (b) The references to U.S. Credit Agreement in Sections 3.02 and 9.16 of the Credit Agreement are hereby replaced with references to "Existing U.S. Credit Agreement". SECTION 1.03. REPLACEMENT OF SCHEDULES 1.01 AND 2.06 TO CREDIT AGREEMENT. Schedules 1.01 and 2.06 to the Credit Agreement are hereby replaced in their entirety with Schedules 1.01 and 2.06 attached hereto. SECTION 1.04. REPLACEMENT OF EXHIBIT D TO CREDIT AGREEMENT. Exhibit D to the Credit Agreement is hereby replaced in its entirety with Exhibits D-1 and D-2 attached hereto. SECTION 1.05. REPLACEMENT OF SECOND SENTENCE OF SECTION 5.03. The second sentence in Section 5.03 of the Credit Agreement is hereby replaced in its entirety with the following: In addition, from time to time, the Borrower and the Subsidiaries will, at their cost and expense, on or promptly (but in any event within 10 Business Days) following the date of acquisition by the Borrower or any Subsidiary or any new subsidiary (subject to the receipt of required consents from Governmental Authorities and required consents of other third parties), promptly secure the Obligations of the Borrower and, to the extent permitted by law, the other foreign Credit Parties under the U.S. Credit Agreements (the "FOREIGN OBLIGATIONS") by causing the following to occur: (i) promptly upon creating or acquiring any additional subsidiary, the Capital Stock of such subsidiary will be pledged pursuant to a pledge agreement reasonably satisfactory in form and substance to the Administrative Agent and (ii) such subsidiary will become a guarantor of the Obligations pursuant to a subsidiary guarantee agreement and provide security for the Foreign Obligations pursuant to a security agreement, in each case reasonably satisfactory in form and substance to the Administrative Agent. SECTION 1.06 AMENDMENT TO SECTION 9.17. Section 9.17 of the Credit Agreement is hereby replaced in its entirety with the following: In the event that any obligation of any Loan Party (a) under this Agreement or (b) any other Loan Document in respect of the obligations under this Agreement (a "CLAIM") is paid with the proceeds of a Tranche A L/C 4 Disbursement, the Borrower, the Administrative Agent and the Lenders hereby agree that Tranche A Lenders under the Existing U.S. Credit Agreement holding participations in such Tranche A L/C Disbursement shall be subrogated to the rights of the Administrative Agent and the Lenders hereunder and under each other Loan Document in respect of such Claim to the extent of such proceeds; PROVIDED that such right of subrogation shall not be effective until, and shall be subordinated to, payment in full of all Claims. SECTION 1.07. AMENDMENT TO SECTION 9.20. The reference to "Section 2.10(b)" in Section 9.20 of the Credit Agreement is hereby replaced with a reference to "Section 2.11(b)". SECTION 1.08. AMENDMENT TO ARTICLE IX. Article IX of the Credit Agreement is hereby amended by adding the following Section at the end thereof: SECTION 9.21. EUROPEAN ECONOMIC AND MONETARY UNION. (a) DEFINITIONS. In this Section 9.21 and in each other provision of this Agreement to which reference is made in this Section 9.21 expressly or by implication, the following terms have the meanings given to them in this Section 9.21: "COMMENCEMENT OF THE THIRD STAGE OF EMU" means the date of commencement of the third stage of EMU (at the date of this Agreement expected to be January 1, 1999) or the date on which circumstances arise which (in the opinion of the Administrative Agent) have substantially the same effect and result in substantially the same consequences as commencement of the third stage of EMU as contemplated by the Treaty on European Union; "EMU" means economic and monetary union as contemplated in the Treaty on European Union; "EMU LEGISLATION" means legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency (whether known as the euro or otherwise), being in part the implementation of the third stage of EMU; "EURO" means the single currency of participating member states of the European Union; 5 "EURO UNIT" means the currency unit of the euro; "NATIONAL CURRENCY UNIT" means the unit of currency (other than a euro unit) of a participating member state; "PARTICIPATING MEMBER STATE" means each state so described in any EMU legislation; and "TREATY ON EUROPEAN UNION" means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992, and came into force on November 1, 1993), as amended from time to time. (b) EFFECTIVENESS OF PROVISIONS. The provisions of paragraphs (c) to (j) below (inclusive) shall be effective at and from the commencement of the third stage of EMU, PROVIDED, that if and to the extent that any such provision relates to any state (or the currency of such state) that is not a participating member state on the commencement of the third stage of EMU, such provision shall become effective in relation to such state (and the currency of such state) at and from the date on which such state becomes a participating member state. (c) REDENOMINATION AND FOREIGN CURRENCIES. Each obligation under this Agreement of a party to this Agreement which has been denominated in the national currency unit of a participating member state shall be redenominated into the euro unit in accordance with EMU legislation, PROVIDED, that if and to the extent that any EMU legislation provides that following the commencement of the third stage of EMU an amount denominated either in the euro or in the national currency unit of a participating member state and payable within that participating member state by crediting an account of the creditor can be paid by the debtor either in the euro unit or in that national currency unit, each party to this Agreement shall be entitled to pay or repay any such amount either in the euro unit or in such national currency unit. (d) LOANS. Any Loan in the currency of a participating member state shall be made in the euro unit. 6 (e) BUSINESS DAYS. (i) With respect to any amount denominated or to be denominated in the euro or a national currency unit, any reference to a "Business Day" shall be construed as a reference to a day (other than a Saturday or Sunday) on which banks are generally open for business in (A) London and New York City and (B) Frankfurt am Main, Germany (or such principal financial center or centers in such participating member state or states as the Administrative Agent may from time to time nominate for this purpose). (ii) For purposes of determining the date on which the LIBO Rate or the MIBOR Rate is determined under this Agreement for any Loan denominated in the euro (or any national currency unit) for any Interest Period therefor and for purposes of determining the first and last day of any Interest Period, references in this Agreement to "Business Days" shall be deemed to be references to TARGET Operating Days. (f) PAYMENTS TO THE ADMINISTRATIVE AGENT. Sections 2.17 shall be construed so that, in relation to the payment of any amount of euro units or national currency units, such amount shall be made available to the Administrative Agent in immediately available, freely transferable, cleared funds to such account with such bank in Frankfurt am Main, Germany (or such other principal financial center in such participating member state as the Administrative Agent may from time to time nominate for this purpose) as the Administrative Agent shall from time to time nominate for this purpose. (g) PAYMENTS BY THE ADMINISTRATIVE AGENT TO THE LENDERS. Any amount payable by the Administrative Agent to the Lenders under this Agreement in the currency of a participating member state shall be paid in the euro unit. (h) PAYMENTS BY THE ADMINISTRATIVE AGENT GENERALLY. With respect to the payment of any amount denominated in the euro or in a national currency unit, the Administrative Agent shall not be liable to the Borrower or any of the Lenders in any way whatsoever for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by the Administrative Agent if the 7 Administrative Agent shall have taken all relevant steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds (in the euro unit or, as the case may be, in a national currency unit) to the account with the bank in the principal financial center in the participating member state which the Borrower or, as the case may be, any Lender shall have specified for such purpose. In this paragraph (h), "all relevant steps" means all such steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as the Administrative Agent may from time to time determine for the purpose of clearing or settling payments of the euro. (i) BASIS OF ACCRUAL. If the basis of accrual of interest or fees expressed in this Agreement with respect to the currency of any state that becomes a participating state shall be inconsistent with any convention or practice in the London Interbank Market or, as the case may be, the Madrid Interbank Market for the basis of accrual of interest or fees in respect of the euro, such convention or practice shall replace such expressed basis effective as of and from the date on which such state becomes a participating member state; PROVIDED, that if any Loan in the currency of such state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Loan, at the end of the then current Interest Period. (j) ROUNDING AND OTHER CONSEQUENTIAL CHANGES. Without prejudice and in addition to any method of conversion or rounding prescribed by any EMU legislation and without prejudice to the respective liabilities for indebtedness of the Borrower to the Lenders and the Lenders to the Borrower under or pursuant to this Agreement: (i) each reference in this Agreement to a minimum amount (or an integral multiple thereof) in a national currency unit to be paid to or by the Administrative Agent shall be replaced by a reference to such reasonably comparable and convenient amount (or an integral multiple thereof) in the euro unit as the Administrative Agent may from time to time specify; and 8 (ii) except as expressly provided in this Section 9.21, each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time reasonably specify to be necessary or appropriate to reflect the introduction of or changeover to the euro in participating member states in accordance with customary practices in the market. SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on the date of the satisfaction in full of the following conditions precedent (the "AMENDMENT EFFECTIVE DATE"): (a) The Administrative Agent shall have received duly executed counterparts hereof which, when taken together, bear the authorized signatures of the Borrower, the Lenders and the Administrative Agent. (b) The Administrative Agent shall have received favorable written opinion by Uria & Menendez, substantially similar to the opinion given by such person on March 19, 1997 in connection with execution of the Credit Agreement, in form and substance satisfactory to the Administrative Agent and its counsel. (c) The (i) amendment and restatement of the Existing U.S. Credit Agreement and the (ii) Tranche C Facility Credit Agreement shall have become effective in accordance with its respective terms. SECTION 3. CREDIT AGREEMENT. Except as specifically stated herein, the Credit Agreement shall continue in full force and effect in accordance with the provisions thereof. As used therein, the terms "Agreement", "herein", "hereunder", "hereto", "hereof" and words of similar import shall, unless the context otherwise requires, refer to the Credit Agreement as modified hereby. SECTION 4. APPLICABLE LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE KINGDOM OF SPAIN. SECTION 5. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which shall be an original but all of which, when taken together, shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Amendment by 9 telecopy shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 6. EXPENSES. The Borrower agrees to reimburse the Administrative Agent for its out-of-pocket expenses in connection with this Amendment, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written. UCAR ELECTRODOS, S.L., by /S/ HONORATO ECHEVARRIO -------------------------------------- Name:Honorato Echevarrio Title:General Manager by /S/ INAKI SARRIONANDIA -------------------------------------- Name:Inaki Sarrionandia Title:Chief Financial Officer THE CHASE MANHATTAN BANK, C.M.B., S.A., individually and as Administrative Agent, by: /S/ ADOLFO CAREAGA -------------------------------------- Name:Adolfo Careaga Title:Vice President 1 SCHEDULE 1.01 to the Local Facility Credit Agreement for Spain SECURITY DOCUMENTS 1. Pledge Agreement by UCAR International Inc., UCAR Global Enterprises Inc. and certain U.S. Subsidiaries, dated October 19, 1995, as amended and restated on November 10, 1998. 2. Pledge Agreement (35%) by certain U.S. Subsidiaries, dated November 10, 1998. 3. Parent Guarantee Agreement made by UCAR International Inc. and UCAR Global Enterprises Inc., dated October 19, 1995, as amended and restated on November 10, 1998. 4. Subsidiary Guarantee Agreement by each U.S. Subsidiary, dated October 19, 1995, as amended and restated on November 10, 1998. 5. Security Agreement by UCAR International Inc., UCAR Global Enterprises Inc. and the U.S. Subsidiaries, dated April 22, 1998, as amended and restated on November 10, 1998. 6. Intellectual Property Security Agreement by UCAR Global Enterprises Inc. and the U.S. Subsidiaries, dated April 22, 1998, as amended and restated on November 10, 1998. 7. Subsidiary Guarantee by UCAR S.p.A., dated March 19, 1997, as amended on November 10, 1998. 8. Mexican Subsidiaries Guarantee by Servicios Administrativos Carmex S.A. de C.V. and Servicios DYC S.A. de C.V., dated November 10, 1998. 9. Mexican Subsidiaries Guarantee by UCAR Carbon Mexicana S.A. de C.V. and UCAR Mexicana S.A. de C.V., dated November 10, 1998. 10. Pledge by UCAR Holdings Inc., UCAR Mexicana S.A. de C.V. and UCAR Carbon Mexicana S.A. de C.V. of 35% of the shares of UCAR Mexicana S.A. de C.V., 99.94% of the shares of UCAR Carbon Mexicana and 100% of the shares of Servicios Administrativos Carmex S.A. de C.V. and Servicios DYC S.A. de C.V., respectively, dated November 10, 1998. 11. Mexican Mortgage dated November 10, 1998. 12. Pledge by UCAR Holdings Inc. of 65% of the shares of UCAR S.p.A., dated November 10, 1998. 13. Pledge by UCAR Holdings Inc. of 65% of the shares of UCAR Mexicana S.A. de C.V., dated November 10, 1998. 14. Pledge by UCAR Holdings II Inc. of 65% of the shares of UCAR Holdings S.A., dated May 7, 1998, as amended on November 10, 1998. 15. Pledge by UCAR Holdings II Inc. of 65% of the shares of UCAR Electrodos, S.L., dated October 19, 1995, as amended on March 19, 1997 and November 10, 1998. 16. Pledge by UCAR Carbon Company Inc. of 65% of the shares of EMSA (Property) Ltd. and Carbographite Limited, dated November 10, 1998. 17. Pledge by UCAR Carbon Company Inc. of 65% of the shares of UCAR Limited, dated November 10, 1998. 2 18. Pledge by UCAR Holdings II Inc. of 35% of stock of UCAR Electrodos, S.L., dated November 10, 1998. 19. Spanish Mortgage dated November 10, 1998. 1 SCHEDULE 2.06 To the Local Facility Credit Agreement for Spain PRICING The following terms shall have the meanings specified below: "ADJUSTED LIBO RATE" shall mean, with respect to any Eurocurrency Borrowing denominated in Dollars for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves. "ADJUSTED MIBOR RATE" shall mean the MIBOR Rate on any day plus the Adjustment Factor. "ADJUSTMENT FACTOR" shall mean a fraction (rounded upwards, if necessary, to the next 1/16 of 1%), the numerator of which is the aggregate amount of all brokerage fees, commissions or any other expenses, fees and taxes to be paid by the Administrative Agent on behalf of the Lenders in connection with obtaining such deposits expressed as a decimal and the denominator of which is the aggregate amount of such deposits obtained. "ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate, including the failure of the Federal Reserve Bank of New York to publish rates or the inability of the Administrative Agent to obtain quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined by reference to the most recently available such rate until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Federal Funds Effective Rate shall be effective on the effective date of such change. "EURIBOR RATE" shall mean, with respect to any Eurocurrency Borrowing denominated in Local Currency for any Interest Period, the rate published on the Reuters screen for such Local Currency at 11.00 a.m.(Standard time) two TARGET Operating Days before the first day of each Interest Period at which Local Currency deposits for a maturity comparable to such Interest Period are offered in the European interbank market. "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight Federal 2 Funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "LIBO RATE" shall mean, with respect to any Eurocurrency Borrowing denominated in Dollars, the rate (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits approximately equal in principal amount to, the Administrative Agent's portion of such Eurocurrency Borrowing denominated in Dollars and for a maturity comparable to such Interest Period are offered to the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "MIBOR RATE" shall mean, with respect to any Eurocurrency Borrowing denominated in Local Currency for any Interest Period, the rate of interest quoted in the MBOR page of Reuters at or about 11.00 a.m.(Standard time) two Business Days before the first day of each Interest Period at which Local Currency deposits of an amount equal or similar to the principal amount or the relevant Borrowing and with a maturity equal or similar to such Interest Period are offered in the Madrid interbank market; PROVIDED, HOWEVER, that from that date on which the MIBOR Rate ceases to exist, all references to the MIBOR Rate shall be deemed references to the EURIBOR Rate. "TARGET OPERATING DAY" means any day that is not (i) a Saturday or Sunday, (ii) Christmas Day or New Year's Day or (iii) any other day on which the Trans European Automated Real-time Gross Settlement Express Transfer System ("TARGET") (or any successor settlement system) is not operating (as determined by the Administrative Agent). "STATUTORY RESERVES" shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent is subject with respect to Eurocurrency Liabilities (as defined in Regulation D of the Board) or other categories of liabilities or deposits by reference to which the LIBO Rate is determined. Such 3 reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans denominated in Dollars shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets which may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. EX-10.11(A) 17 EXHIBIT 10.11(a) CONFORMED COPY French Facility AMENDMENT dated as of November 10, 1998 (this "AMENDMENT"), among UCAR HOLDINGS S.A., a French company incorporated in the form of a societe anonyme with its registered office at 4 Place des Etats-Unis, Zone Silic, 94750 Rungis, France (the "BORROWER"), the financial institutions party hereto (the "LENDERS"), and THE CHASE MANHATTAN BANK, PARIS BRANCH, as agent (in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders. A. Reference is made to the Local Facility Credit Agreement dated as of March 19, 1997 (the "CREDIT AGREEMENT") among the Borrower, the Lenders party thereto and the Administrative Agent. Capitalized terms used but not otherwise defined herein have the meanings assigned to them in the Credit Agreement. B. The Borrower has requested that the Lenders amend certain provisions of the Credit Agreement. The Lenders are willing to do so, subject to the terms and conditions of this Amendment. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1.01. AMENDMENTS TO SECTION 1.01. (a) The definition of "INTEREST COMPONENT" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "1.03333333333%" contained therein with a reference to "1.03%". (b) The definition of "LETTER OF CREDIT" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "U.S. Credit Agreement" with a reference to "Existing U.S. Credit Agreement". (c) The definition of "LOAN DOCUMENTS" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "Letter" contained therein with a reference to "Letters". (d) The definition of "SECURITY DOCUMENTS" in Section 1.01 of the Credit Agreement is hereby replaced in its entirety with the following: "SECURITY DOCUMENTS" shall mean the agreements set forth on Schedule 1.01 and each of the agreements and other instruments and documents executed and delivered pursuant to the agreements set forth on Schedule 1.01, pursuant to Section 5.03 hereof or pursuant 2 to Section 5.11 of the Existing U.S. Credit Agreement; PROVIDED that the agreements and other instruments and documents delivered pursuant to Section 5.11 of the Existing U.S. Credit Agreement shall only constitute Security Documents hereunder to the extent that they serve to guarantee or secure the Obligations of the Borrower hereunder or Obligations of the Borrower in respect of Tranche A Letters of Credit under the Existing U.S. Credit Agreement. (e) The definition of "U.S. CREDIT AGREEMENT" in Section 1.01 of the Credit Agreement is hereby deleted in its entirety. (f) The following definitions are hereby added to Section 1.01 of the Credit Agreement in the appropriate alphabetical order: "EXISTING U.S. CREDIT AGREEMENT" shall mean the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time), among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent, which is attached hereto as Exhibit D-1. "TRANCHE C FACILITY CREDIT AGREEMENT" shall mean the Credit Agreement dated as of November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time), among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation, UCAR S.A., a Swiss corporation, the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent, which is attached hereto as Exhibit D-2. "U.S. CREDIT AGREEMENTS" shall mean the Existing U.S. Credit Agreement and the Tranche C Facility Credit Agreement. SECTION 1.02. MODIFICATION OF CREDIT AGREEMENT. (a) Unless otherwise specified in paragraph (b) below, all 3 references in the Credit Agreement to "U.S. Credit Agreement" are hereby replaced with references to "Existing U.S. Credit Agreement". (b) The references to "U.S. Credit Agreement" in Article VII(h) and Section 5.03 of the Credit Agreement are hereby replaced with references to "U.S. Credit Agreements". SECTION 1.03. REPLACEMENT OF SCHEDULES 1.01 AND 2.06 TO CREDIT AGREEMENT. Schedules 1.01 and 2.06 to the Credit Agreement are hereby replaced in their entirety with Schedules 1.01 and 2.06 attached hereto. SECTION 1.04. REPLACEMENT OF EXHIBIT D TO CREDIT AGREEMENT. Exhibit D to the Credit Agreement is hereby replaced in its entirety with Exhibits D-1 and D-2 attached hereto. SECTION 1.05. REPLACEMENT OF SECOND SENTENCE OF SECTION 5.03. The second sentence in Section 5.03 of the Credit Agreement is hereby replaced in its entirety with the following: In addition, from time to time, the Borrower and the Subsidiaries will, at their cost and expense, on or promptly (but in any event within 10 Business Days) following the date of acquisition by the Borrower or any Subsidiary of any new subsidiary (subject to the receipt of required consents from Governmental Authorities and required consents of other third parties), promptly secure the Obligations of the Borrower and, to the extent permitted by law, the other foreign Credit Parties under the U.S. Credit Agreements (the "FOREIGN OBLIGATIONS") by causing the following to occur: (i) promptly upon creating or acquiring any additional subsidiary, the Capital Stock of such subsidiary will be pledged pursuant to a pledge agreement reasonably satisfactory in form and substance to the Administrative Agent and (ii) such subsidiary will become a guarantor of the Obligations pursuant to a subsidiary guarantee agreement and provide security for the Foreign Obligations pursuant to a security agreement, in each case reasonably satisfactory in form and substance to the Administrative Agent. SECTION 1.06. AMENDMENT TO SECTION 9.17. Section 9.17 of the Credit Agreement is hereby replaced in its entirety with the following: 4 In the event that any obligation of any Loan Party (a) under this Agreement or (b) any other Loan Document in respect of the obligations under this Agreement (a "CLAIM") is paid with the proceeds of a Tranche A L/C Disbursement, the Borrower, the Administrative Agent and the Lenders hereby agree that Tranche A Lenders under the Existing U.S. Credit Agreement holding participations in such Tranche A L/C Disbursement shall be subrogated to the rights of the Administrative Agent and the Lenders hereunder and under each other Loan Document in respect of such Claim to the extent of such proceeds; PROVIDED that such right of subrogation shall not be effective until, and shall be subordinated to, payment in full of all Claims. To this effect, a letter of release ("QUITTANCE SUBROGATIVE") in the form of Schedule 2.08 attached hereto shall be delivered to the relevant Fronting Bank by the Administrative Agent on behalf of the Lenders simultaneously with each payment of any obligation with the proceeds of a Tranche A L/C Disbursement. SECTION 1.07. AMENDMENT TO SECTION 9.20. The reference to "Section 2.10(b)" in Section 9.20 of the Credit Agreement is hereby replaced with a reference to "Section 2.11(b)." SECTION 1.08. AMENDMENT TO ARTICLE IX. Article IX of the Credit Agreement is hereby amended by adding the following Section at the end thereof: SECTION 9.21. EUROPEAN ECONOMIC AND MONETARY UNION. (a) DEFINITIONS. In this Section 9.21 and in each other provision of this Agreement to which reference is made in this Section 9.21 expressly or by implication, the following terms have the meanings given to them in this Section 9.21: "COMMENCEMENT OF THE THIRD STAGE OF EMU" means the date of commencement of the third stage of EMU (at the date of this Agreement expected to be January 1, 1999) or the date on which circumstances arise which (in the opinion of the Administrative Agent) have substantially the same effect and result in substantially the same consequences as commencement of the third stage of EMU as contemplated by the Treaty on European Union; "EMU" means economic and monetary union as contemplated in the Treaty on European Union; 5 "EMU LEGISLATION" means legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency (whether known as the euro or otherwise), being in part the implementation of the third stage of EMU; "EURO" means the single currency of participating member states of the European Union; "EURO UNIT" means the currency unit of the euro; "NATIONAL CURRENCY UNIT" means the unit of currency (other than a euro unit) of a participating member state; "PARTICIPATING MEMBER STATE" means each state so described in any EMU legislation; and "TREATY ON EUROPEAN UNION" means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992, and came into force on November 1, 1993), as amended from time to time. (b) EFFECTIVENESS OF PROVISIONS. The provisions of paragraphs (c) to (j) below (inclusive) shall be effective at and from the commencement of the third stage of EMU, PROVIDED, that if and to the extent that any such provision relates to any state (or the currency of such state) that is not a participating member state on the commencement of the third stage of EMU, such provision shall become effective in relation to such state (and the currency of such state) at and from the date on which such state becomes a participating member state. (c) REDENOMINATION AND FOREIGN CURRENCIES. Each obligation under this Agreement of a party to this Agreement which has been denominated in the national currency unit of a participating member state shall be redenominated into the euro unit in accordance with EMU legislation, PROVIDED, that if and to the extent that any EMU legislation provides that following the commencement of the third stage of EMU an amount denominated either in the euro or in the national currency unit of a participating member state and payable within that participating member state by 6 crediting an account of the creditor can be paid by the debtor either in the euro unit or in that national currency unit, each party to this Agreement shall be entitled to pay or repay any such amount either in the euro unit or in such national currency unit. (d) LOANS. Any Loan in the currency of a participating member state shall be made in the euro unit. (e) BUSINESS DAYS. (i) With respect to any amount denominated or to be denominated in the euro or a national currency unit, any reference to a "Business Day" shall be construed as a reference to a day (other than a Saturday or Sunday) on which banks are generally open for business in (A) Paris and New York City and (B) Frankfurt am Main, Germany (or such principal financial center or centers in such participating member state or states as the Administrative Agent may from time to time nominate for this purpose). (ii) For purposes of determining the date on which the LIBO Rate or the PIBO Rate is determined under this Agreement for any Loan denominated in the euro (or any national currency unit) for any Interest Period therefor and for purposes of determining the first and last day of any Interest Period, references in this Agreement to "Business Days" shall be deemed to be references to TARGET Operating Days. (f) PAYMENTS TO THE ADMINISTRATIVE AGENT. Sections 2.17 shall be construed so that, in relation to the payment of any amount of euro units or national currency units, such amount shall be made available to the Administrative Agent in immediately available, freely transferable, cleared funds to such account with such bank in Frankfurt am Main, Germany (or such other principal financial center in such participating member state as the Administrative Agent may from time to time nominate for this purpose) as the Administrative Agent shall from time to time nominate for this purpose. (g) PAYMENTS BY THE ADMINISTRATIVE AGENT TO THE LENDERS. Any amount payable by the Administrative Agent to the Lenders under this Agreement in the currency of a participating member state shall be paid in the euro unit. 7 (h) PAYMENTS BY THE ADMINISTRATIVE AGENT GENERALLY. With respect to the payment of any amount denominated in the euro or in a national currency unit, the Administrative Agent shall not be liable to the Borrower or any of the Lenders in any way whatsoever for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by the Administrative Agent if the Administrative Agent shall have taken all relevant steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds (in the euro unit or, as the case may be, in a national currency unit) to the account with the bank in the principal financial center in the participating member state which the Borrower or, as the case may be, any Lender shall have specified for such purpose. In this paragraph (h), "all relevant steps" means all such steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as the Administrative Agent may from time to time determine for the purpose of clearing or settling payments of the euro. (i) BASIS OF ACCRUAL. If the basis of accrual of interest or fees expressed in this Agreement with respect to the currency of any state that becomes a participating state shall be inconsistent with any convention or practice in the London Interbank Market or, as the case may be, the Paris Interbank Market for the basis of accrual of interest or fees in respect of the euro, such convention or practice shall replace such expressed basis effective as of and from the date on which such state becomes a participating member state; PROVIDED, that if any Loan in the currency of such state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Loan, at the end of the then current Interest Period. (j) ROUNDING AND OTHER CONSEQUENTIAL CHANGES. Without prejudice and in addition to any method of conversion or rounding prescribed by any EMU legislation and without prejudice to the respective liabilities for indebtedness of the Borrower to the Lenders and the Lenders to the Borrower under or pursuant to this Agreement: (i) each reference in this Agreement to a minimum amount (or an integral multiple thereof) 8 in a national currency unit to be paid to or by the Administrative Agent shall be replaced by a reference to such reasonably comparable and convenient amount (or an integral multiple thereof) in the euro unit as the Administrative Agent may from time to time specify; and (ii) except as expressly provided in this Section 9.21, each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time reasonably specify to be necessary or appropriate to reflect the introduction of or changeover to the euro in participating member states in accordance with customary practices in the market. SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on the date of the satisfaction in full of the following conditions precedent (the "AMENDMENT EFFECTIVE DATE"): (a) The Administrative Agent shall have received favorable written opinions by Dubarry & Associes, counsel to UCAR Holdings S.A., and Gide Loyrette Nouel, French counsel to the Administrative Agent, as well as a certificate issued by the Chairman of the Board of Directors of UCAR Holdings S.A. in form and substance satisfactory to the Administrative Agent. (b) The (i) amendment and restatement of the Existing U.S. Credit Agreement and the (ii) Tranche C Facility Credit Agreement shall have become effective in accordance with its respective terms. SECTION 3. CREDIT AGREEMENT. Except as specifically stated herein, the Credit Agreement shall continue in full force and effect in accordance with the provisions thereof. As used therein, the terms "Agreement", "herein", "hereunder", "hereto", "hereof" and words of similar import shall, unless the context otherwise requires, refer to the Credit Agreement as modified hereby. SECTION 4. APPLICABLE LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF FRANCE. SECTION 5. EXPENSES. The Borrower agrees to reimburse the Administrative Agent for its out-of-pocket expenses in connection with this Amendment, including the reasonable 9 fees, charges and disbursements of Cravath, Swaine & Moore, U.S. counsel for the Administrative Agent and Gide Loyrette Nouel, French counsel for the Administrative Agent. SECTION 6. EFFECTIVE GLOBAL RATE. For the purposes of Articles L-313-1 and seq. of the French Consumer Code, the effective global rate ("TAUX EFFECTIF GLOBAL") payable by the Borrower under the Credit Agreement, as amended by this Amendment, and the Existing U.S. Credit Agreement, is 6.75 percent per annum in the case of ABR Loans, 6.53 percent in the case of Eurocurrency Loans denominated in US Dollars and 4.76 percent in the case of Eurocurrency Loans denominated in French Francs. The effective global rate has been computed on the assumption of a notice of drawing for an ABR Loan or a Eurocurrency Loan, as the case may be, of US Dollars 130,600,000 or its equivalent in French Francs, made available to the Borrower on November 10, 1998 for successive Interest Periods of one month until Maturity Date (as defined in the Credit Agreement). The effective global rate takes into account (a) the contractual interest rate applicable under Section 2.06 (Alternate Base Rate, Adjusted LIBO Rate or PIBO Rate, as the case may be, as determined on the date hereof) of the Credit Agreement (b) (i) the spread on Interest of Loan at the rate of 0.25% calculated on the amount of U.S. Dollar 130,600,000, (ii) the Letter of Credit fee at the rate of 0.75% calculated on the amount of U.S. Dollar 130,600,000, (iii) the Fronting Bank fee at a rate of 0.25% calculated on the amount of U.S. Dollar 130,600,000 as well as (c) any fees, costs and other expenses to be borne by the Borrower which the said Code require to be taken into account. 10 Made in New York, United States of America on November 10, 1998 in four original copies. UCAR HOLDINGS S.A., by: /S/ CORRADO DEGASPERIS ------------------------------------- Name: Corrado DeGasperis Title: Controller THE CHASE MANHATTAN BANK, PARIS BRANCH, individually and as Administrative Agent, by: /S/ MARIAN SCHULMAN ------------------------------------- Name: Marian Schulman Title: Vice President BANQUE PARIBAS, by: /S/ JOHN J. MCCORMICK, III ------------------------------------- Name: John J. McCormick, III Title: Vice President by: /S/ DAVID I. CANAVAN ------------------------------------- Name: David I. Canavan Title: Director 1 SCHEDULE 1.01 to the Local Facility Credit Agreement for France SECURITY DOCUMENTS 1. Pledge Agreement by UCAR International Inc., UCAR Global Enterprises Inc. and certain U.S. Subsidiaries, dated October 19, 1995, as amended and restated on November 10, 1998. 2. Pledge Agreement (35%) by certain U.S. Subsidiaries, dated November 10, 1998. 3. Parent Guarantee Agreement made by UCAR International Inc. and UCAR Global Enterprises Inc., dated October 19, 1995, as amended and restated on November 10, 1998. 4. Subsidiary Guarantee Agreement by each U.S. Subsidiary, dated October 19, 1995, as amended and restated on November 10, 1998. 5. Security Agreement by UCAR International Inc., UCAR Global Enterprises Inc. and the U.S. Subsidiaries, dated April 22, 1998, as amended and restated on November 10, 1998. 6. Intellectual Property Security Agreement by UCAR Global Enterprises Inc. and the U.S. Subsidiaries, dated April 22, 1998, as amended and restated on November 10, 1998. 7. Subsidiary Guarantee by UCAR S.p.A., dated March 19, 1997, as amended on November 10, 1998. 8. Mexican Subsidiaries Guarantee by Servicios Administrativos Carmex S.A. de C.V. and Servicios DYC S.A. de C.V., dated November 10, 1998. 9. Mexican Subsidiaries Guarantee by UCAR Carbon Mexicana S.A. de C.V. and UCAR Mexicana S.A. de C.V., dated November 10, 1998. 10. Pledge by UCAR Holdings Inc., UCAR Mexicana S.A. de C.V. and UCAR Carbon Mexicana S.A. de C.V. of 35% of the shares of UCAR Mexicana S.A. de C.V., 99.94% of the shares of UCAR Carbon Mexicana and 100% of the shares of Servicios Administrativos Carmex S.A. de C.V. and Servicios DYC S.A. de C.V., respectively, dated November 10, 1998. 11. Mexican Mortgage dated November 10, 1998. 12. Pledge by UCAR Holdings Inc. of 65% of the shares of UCAR S.p.A., dated November 10, 1998. 13. Pledge by UCAR Holdings Inc. of 65% of the shares of UCAR Mexicana S.A. de C.V., dated November 10, 1998. 14. Pledge by UCAR Holdings II Inc. of 65% of the shares of UCAR Holdings S.A., dated May 7, 1998, as amended on November 10, 1998. 15. Pledge by UCAR Holdings II Inc. of 65% of the shares of UCAR Electrodos, S.L., dated October 19, 1995, as amended on March 19, 1997 and November 10, 1998. 16. Pledge by UCAR Carbon Company Inc. of 65% of the shares of EMSA (Property) Ltd. and Carbographite Limited, dated November 10, 1998. 17. Pledge by UCAR Carbon Company Inc. of 65% of the shares of UCAR Limited, dated November 10, 1998. 2 18. Pledge by UCAR Holdings III Inc. and UCAR Holdings S.A. of 100% of the shares of UCAR S.N.C., dated March 19, 1997. 19. Pledge by UCAR Holdings II Inc. of 35% of the shares of UCAR Holdings S.A., dated November 10, 1998. 1 SCHEDULE 2.06 To the Local Facility Credit Agreement for France PRICING The following terms shall have the meanings specified below: "ADJUSTED LIBO RATE" shall mean, with respect to any Eurocurrency Borrowing denominated in Dollars for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves. "ALTERNATE BASE RATE" shall mean, for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate, including the failure of the Federal Reserve Bank of New York to publish rates or the inability of the Administrative Agent to obtain quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined by reference to the most recently available such rate until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Federal Funds Effective Rate shall be effective on the effective date of such change. "EURIBOR RATE" shall mean, with respect to any Eurocurrency Borrowing denominated in Local Currency for any Interest Period, the rate published on the Telerate screen for such Local Currency at 11.00 a.m.(Standard time) two TARGET Operating Days before the first day of each Interest Period at which Local Currency deposits for a maturity comparable to such Interest Period are offered in the European interbank market. "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "LIBO RATE" shall mean, with respect to any Eurocurrency Borrowing denominated in Dollars, the rate (rounded upwards, if necessary, to the next 1/16 of 1%) at 2 which dollar deposits approximately equal in principal amount to, the Administrative Agent's portion of such Eurocurrency Borrowing denominated in Dollars and for a maturity comparable to such Interest Period are offered to the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "PIBO RATE" shall mean, with respect to any Eurocurrency Borrowing denominated in Local Currency for any Interest Period, the rate published on page 20041 of the Telerate screen at 11.00 a.m.(Standard time) one Business Day before the first day of each Interest Period at which Local Currency deposits for a maturity comparable to such Interest Period are offered in the Paris interbank market; PROVIDED, HOWEVER, that from that date on which the PIBO Rate ceases to exist, all references to PIBO Rate shall be deemed references to the EURIBOR Rate. "TARGET OPERATING DAY" means any day that is not (i) a Saturday or Sunday, (ii) Christmas Day or New Year's Day or (iii) any other day on which the Trans European Automated Real-time Gross Settlement Express Transfer System ("TARGET") (or any successor settlement system) is not operating (as determined by the Administrative Agent); and "STATUTORY RESERVES" shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent is subject with respect to Eurocurrency Liabilities (as defined in Regulation D of the Board) or other categories of liabilities or deposits by reference to which the LIBO Rate is determined. Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans denominated in Dollars shall be deemed to constitute Eurocurrency Liabilities and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets which may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. EX-10.12(A) 18 EXHIBIT 10.12(a) CONFORMED COPY Canadian Facility AMENDMENT dated as of November 10, 1998 (this "AMENDMENT"), among UCAR INC., an Ontario corporation (the "BORROWER"), the financial institutions party hereto (the "LENDERS"), and THE CHASE MANHATTAN BANK OF CANADA, as agent (in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders. A. Reference is made to the Local Facility Credit Agreement dated as of March 19, 1997 (the "CREDIT AGREEMENT") among the Borrower, the Lenders party thereto and the Administrative Agent. Capitalized terms used but not otherwise defined herein have the meanings assigned to them in the Credit Agreement. B. The Borrower has requested that the Lenders amend certain provisions of the Credit Agreement and the Security Documents. The Lenders are willing to do so, subject to the terms and conditions of this Amendment. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1.01. AMENDMENTS TO SECTION 1.01. (a) The definition of "INTEREST COMPONENT" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "1.03333333333%" contained therein with a reference to "1.03%". (b) The definition of "LETTER OF CREDIT" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "U.S. Credit Agreement" with a reference to "Existing U.S. Credit Agreement". (c) The definition of "LOAN DOCUMENTS" in Section 1.01 of the Credit Agreement is hereby amended by replacing the reference to "Letter" contained therein with a reference to "Letters". (d) The definition of "SECURITY DOCUMENTS" in Section 1.01 of the Credit Agreement is hereby replaced in its entirety with the following: "SECURITY DOCUMENTS" shall mean the agreements set forth on Schedule 1.01 and each of the agreements and other instruments and documents executed and delivered pursuant to the agreements set forth on Schedule 1.01, pursuant to Section 5.03 hereof or pursuant to Section 5.11 of the U.S. Credit Agreements; PROVIDED that the agreements and other instruments and documents delivered 2 pursuant to Section 5.11 of the U.S. Credit Agreements shall only constitute Security Documents hereunder to the extent that they serve to guarantee or secure the Obligations of the Borrower hereunder or Obligations of the Borrower in respect of Tranche A Letters of Credit under the Existing U.S. Credit Agreement. (e) The definition of "U.S. CREDIT AGREEMENT" in Section 1.01 of the Credit Agreement is hereby deleted in its entirety. (f) The following definitions are hereby added to Section 1.01 of the Credit Agreement in the appropriate alphabetical order: "EXISTING U.S. CREDIT AGREEMENT" shall mean the Credit Agreement dated as of October 19, 1995, as amended and restated as of March 19, 1997 and November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time), among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation, the Subsidiary Borrowers party thereto, the Lenders party thereto, the Fronting Banks party thereto and The Chase Manhattan Bank, as administrative agent and collateral agent, which is attached hereto as Exhibit D-1. "TRANCHE C FACILITY CREDIT AGREEMENT" shall mean the Credit Agreement dated as of November 10, 1998 (as the same may be amended, supplemented or otherwise modified from time to time), among UCAR International Inc., a Delaware corporation, UCAR Global Enterprises Inc., a Delaware corporation, UCAR S.A., a Swiss corporation, the Lenders party thereto, The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, and Morgan Guaranty Trust Company of New York, as syndication agent, which is attached hereto as Exhibit D-2. "U.S. CREDIT AGREEMENTS" shall mean the Existing U.S. Credit Agreement and the Tranche C Facility Credit Agreement. SECTION 1.02. MODIFICATION OF CREDIT AGREEMENT. (a) Unless otherwise specified in paragraph (b) below, all references in the Credit Agreement to "U.S. Credit Agreement" are hereby replaced with references to "U.S. Credit Agreements". 3 (b) The references to U.S. Credit Agreement in Sections 3.02 and 9.17 of the Credit Agreement are hereby replaced with references to "Existing U.S. Credit Agreement". SECTION 1.03. REPLACEMENT OF SCHEDULE 1.01 TO CREDIT AGREEMENT. Schedule 1.01 to the Credit Agreement is hereby replaced in its entirety with Schedule 1.01 attached hereto. SECTION 1.04. REPLACEMENT OF EXHIBIT D TO CREDIT AGREEMENT. Exhibit D to the Credit Agreement is hereby replaced in its entirety with Exhibits D-1 and D-2 attached hereto. SECTION 1.05. REPLACEMENT OF SECOND SENTENCE OF SECTION 5.03. The second sentence in Section 5.03 of the Credit Agreement is hereby replaced in its entirety with the following: In addition, from time to time, the Borrower and the Subsidiaries will, at their cost and expense, on or promptly (but in any event within 10 Business Days) following the date of acquisition by the Borrower or any Subsidiary or any new subsidiary (subject to the receipt of required consents from Governmental Authorities and required consents of other third parties), promptly secure the Obligations of the Borrower and, to the extent permitted by law, the other foreign Credit Parties under the U.S. Credit Agreements (the "FOREIGN OBLIGATIONS") by causing the following to occur: (i) promptly upon creating or acquiring any additional subsidiary, the Capital Stock of such subsidiary will be pledged pursuant to a pledge agreement reasonably satisfactory in form and substance to the Administrative Agent and (ii) such subsidiary will become a guarantor of the Obligations pursuant to a subsidiary guarantee agreement and provide security for the Foreign Obligations pursuant to a security agreement, in each case reasonably satisfactory in form and substance to the Administrative Agent. SECTION 1.06. AMENDMENT TO SECTION 9.17. Section 9.17 of the Credit Agreement is hereby replaced in its entirety with the following: In the event that any obligation of any Loan Party (a) under this Agreement or (b) any other Loan Document in respect of the obligations under this Agreement (a "CLAIM") is paid with the proceeds of a Tranche A L/C Disbursement, the Borrower, the Administrative Agent 4 and the Lenders hereby agree that Tranche A Lenders under the Existing U.S. Credit Agreement holding participations in such Tranche A L/C Disbursement shall be subrogated to the rights of the Administrative Agent and the Lenders hereunder and under each other Loan Document in respect of such Claim to the extent of such proceeds; PROVIDED that such right of subrogation shall not be effective until, and shall be subordinated to, payment in full of all Claims. SECTION 1.07. AMENDMENTS TO SECURITY DOCUMENTS. Each Security Document is hereby amended to redefine the "U.S. Credit Agreement" as being the Credit Agreement, dated as of October 19, 1995, as amended and restated as of March 19, 1997, and as further amended and restated as of November 10, 1998 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "U.S. Credit Agreement"), among UCAR International Inc., a Delaware corporation ("UCAR"), UCAR Global Enterprises Inc. ("UCAR Global"), the Subsidiary Borrowers (as defined therein) party thereto, the Lenders (as defined therein) party thereto, the Fronting Banks (as defined therein), and certain other parties. SECTION 1.08. AMENDMENT TO SECTION 9.20. The reference to "Section 2.10(b)" in Section 9.20 of the Credit Agreement is hereby replaced with a reference to "Section 2.11(b)". SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on the date of the satisfaction in full of the following conditions precedent (the "AMENDMENT EFFECTIVE DATE"): (a) The Administrative Agent shall have received duly executed counterparts hereof which, when taken together, bear the authorized signatures of the Borrower, the Lenders and the Administrative Agent. (b) The Administrative Agent shall have received favorable written opinion by Blake, Cassels & Graydon, substantially similar to the opinion given by such person on March 19, 1997 in connection with execution of the Credit Agreement, in form and substance satisfactory to the Administrative Agent and its counsel. (c) The (i) amendment and restatement of the Existing U.S. Credit Agreement and(ii) Tranche C 5 Facility Credit Agreement shall have become effective in accordance with its respective terms. SECTION 3. CREDIT AGREEMENT. Except as specifically stated herein, the Credit Agreement shall continue in full force and effect in accordance with the provisions thereof. As used therein, the terms "Agreement", "herein", "hereunder", "hereto", "hereof" and words of similar import shall, unless the context otherwise requires, refer to the Credit Agreement as modified hereby. SECTION 4. APPLICABLE LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE PROVINCE OF ONTARIO. SECTION 5. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which shall be an original but all of which, when taken together, shall constitute but one instrument. Delivery of an executed counterpart of a signature page of this Amendment by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 6. EXPENSES. The Borrower agrees to reimburse the Administrative Agent for its out-of-pocket expenses in connection with this Amendment, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent and of Blake, Cassels and Graydon, special Canadian counsel for the Administrative Agent. 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written. UCAR INC., by /S/ MICHELLE F. RIDER --------------------------------- Name:Michelle F. Rider Title:Attorney-in-Fact by /S/ PETER B. MANCINO ---------------------------------- Name:Peter B. Mancino Title:Attorney-in-Fact THE CHASE MANHATTAN BANK OF CANADA, individually and as Administrative Agent, by /S/ CHRISTINE CHAN --------------------------------- Name:Christine Chan Title:Vice President 1 SCHEDULE 1.01 to the Local Facility Credit Agreement for Canada SECURITY DOCUMENTS 1. Pledge Agreement by UCAR International Inc., UCAR Global Enterprises Inc. and certain U.S. Subsidiaries, dated October 19, 1995, as amended and restated on November 10, 1998. 2. Pledge Agreement (35%) by certain U.S. Subsidiaries, dated November 10, 1998. 3. Parent Guarantee Agreement made by UCAR International Inc. and UCAR Global Enterprises Inc., dated October 19, 1995, as amended and restated on November 10, 1998. 4. Subsidiary Guarantee Agreement by each U.S. Subsidiary, dated October 19, 1995, as amended and restated on November 10, 1998. 5. Security Agreement by UCAR International Inc., UCAR Global Enterprises Inc. and the U.S. Subsidiaries, dated April 22, 1998, as amended and restated on November 10, 1998. 6. Intellectual Property Security Agreement by UCAR Global Enterprises Inc. and the U.S. Subsidiaries, dated April 22, 1998, as amended and restated on November 10, 1998. 7. Subsidiary Guarantee by UCAR S.p.A., dated March 19, 1997, as amended on November 10, 1998. 8. Mexican Subsidiaries Guarantee by Servicios Administrativos Carmex S.A. de C.V. and Servicios DYC S.A. de C.V., dated November 10, 1998. 9. Mexican Subsidiaries Guarantee by UCAR Carbon Mexicana S.A. de C.V. and UCAR Mexicana S.A. de C.V., dated November 10, 1998. 10. Pledge by UCAR Holdings Inc., UCAR Mexicana S.A. de C.V. and UCAR Carbon Mexicana S.A. de C.V. of 35% of the shares of UCAR Mexicana S.A. de C.V., 99.94% of the shares of UCAR Carbon Mexicana and 100% of the shares of Servicios Administrativos Carmex S.A. de C.V. and Servicios DYC S.A. de C.V., respectively, dated November 10, 1998. 11. Mexican Mortgage dated November 10, 1998. 12. Pledge by UCAR Holdings Inc. of 65% of the shares of UCAR S.p.A., dated November 10, 1998. 2 13. Pledge by UCAR Holdings Inc. of 65% of the shares of UCAR Mexicana S.A. de C.V., dated November 10, 1998. 14. Pledge by UCAR Holdings II Inc. of 65% of the shares of UCAR Holdings S.A., dated May 7, 1998, as amended on November 10, 1998. 15. Pledge by UCAR Holdings II Inc. of 65% of the shares of UCAR Electrodos, S.L., dated October 19, 1995, as amended on March 19, 1997 and November 10, 1998. 16. Pledge by UCAR Carbon Company Inc. of 65% of the shares of EMSA (Property) Ltd. and Carbographite Limited, dated November 10, 1998. 17. Pledge by UCAR Carbon Company Inc. of 65% of the shares of UCAR Limited, dated November 10, 1998. 18. Canadian Security Agreement made by UCAR Inc. dated May 7, 1998. 19. Moveable Hypothec (Province of Quebec) made by UCAR Inc. dated May 7, 1998. 20. Mortgage made by UCAR Inc. dated May 7, 1998 for property in Welland, Ontario. 21. General Assignment of Accounts Receivable (Province of New Foundland) made by UCAR Inc. on May 8, 1998. EX-10.22 19 EXHIBIT 10.22 THE UCAR INTERNATIONAL INC. MANAGEMENT STOCK OPTION PLAN This Management Stock Option Plan was originally adopted by the Board of Directors of UCAR International Inc. as of January 26, 1995. It was subsequently amended. This document restates in one document this Management Stock Option Plan as amended through September 29, 1998. ARTICLE I PURPOSE OF PLAN The Plan has been adopted by the Board to provide for the grant of stock options to certain management employees of the Company and its Subsidiaries and non-employee directors of the Company as a part of the compensation and incentive arrangements for such employees and directors. The Plan is intended to advance the best interests of the Company by allowing such persons to acquire an ownership interest in the Company, thereby motivating them to contribute to the success of the Company and to remain in the employ or service of the Company and its Subsidiaries. It is anticipated that the availability of stock options under the Plan will also enhance the Company's and its Subsidiaries' ability to attract and retain individuals of exceptional talent to contribute to the sustained progress, growth and profitability of the Company. ARTICLE II DEFINITIONS For purposes of the Plan, except where the context clearly indicates otherwise, the following terms shall have the meanings set forth below: "ACCELERATION EVENT" shall mean an event with respect to which the Plan provides for the acceleration of the exercisability of Options, as provided in Section 5.3. "AFFILIATE" shall mean, with respect to any Person, (i) any other Person that directly or indirectly Controls, is Controlled by or is under common Control with such Person, or (ii) any director, officer, partner or employee of such Person or any Person specified in clause (i) above. "BOARD" shall mean the Board of Directors of the Company. "CAUSE," if relevant to a particular Participant, shall have the meaning of "Cause" set forth in such Participant's Option Agreement. "CEO" shall mean the Chief Executive Officer of the Company. "CHANGE OF CONTROL" shall mean the occurrence of any of the following events: (i) any "person" or "group", within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act, becomes the "beneficial owner", as defined in Rule 13d-3 under the Exchange Act, of more than 22.5% of either the then outstanding Common Stock or the combined voting power of the then outstanding voting securities of the Company; (ii) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act acquires by proxy or otherwise the right to vote for the election of directors, on any merger or consolidation of the Company or for any other matter or question with respect to more than 22.5% of either the then outstanding Common Stock or the combined voting power of the then outstanding voting securities of the Company; (iii) Present Directors and New Directors cease for any reason to constitute a majority of the Board (and, for these purposes, "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 as directors by the Board or whose nomination for election as directors by the Company'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 Company approve a plan of complete liquidation or dissolution of the Company; or (v) consummation of: (x) a reorganization, merger or consolidation of the Company (a "Business Combination"), unless, following such Business Combination, (a) all or substantially all of the "beneficial owners," as defined in Rule 13d-3 under the Exchange Act, of the outstanding Common Stock and the combined voting power of the outstanding voting securities of the Company, respectively, immediately prior to such Business Combination "beneficially own," as so defined, directly or indirectly, more than 50% of the outstanding common equity securities and the combined voting power of the outstanding voting securities of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such Business Combination owns the Company or all or substantially all of the Company's assets either directly or indirectly through one or more subsidiaries), respectively, in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding Common Stock of the Company and the combined voting power of the outstanding voting securities of the Company, respectively, (b) no "person" or "group," within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act (excluding any entity resulting from such Business Combination and any employee benefit plan (and related trust)of the Company, its subsidiaries or such entity), is the "beneficial owner," as defined in Rule 13d-3 under the Exchange Act, of more than 22.5% of either the then outstanding common equity securities of the entity resulting from such Business Combination or the combined voting power of the outstanding voting securities of such entity except to the extent that such beneficial ownership existed immediately prior to such Business Combination with respect to the Common Stock and combined voting power of outstanding voting securities of the Company and (c) at least a majority of the members of the board of directors (or similar governing body) of the 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 the time of the action of the Board approving of 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 Company, whether held directly or indirectly through one or more subsidiaries (excluding any grant of any pledge, mortgage or security interest or any sale-leaseback or any similar transaction, but including any foreclosure sale); provided, that, in the case of both clause (x) and (y) above, the divestiture of less than substantially all of the assets of the Company in one transaction or a series of related transactions, whether effected by sale, lease, exchange, transfer, spin-off, sale of the stock of or merger or consolidation of a subsidiary or otherwise, shall not constitute a Change in Control of the Company. Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur: (A) pursuant to clauses (i) and (ii) above, solely because more than 22.5% of the then outstanding Common Stock or the combined voting power of the then outstanding voting securities of the Company is held or acquired by one or more employee benefit plans (or related trusts) maintained by the Company or its subsidiaries; or (B) pursuant to clause (v)(y) above, if the Board determines that any sale, lease, exchange or transfer does not involve substantially all of the assets of the Company. "CODE" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute. "COMMITTEE" shall mean the Organization and Compensation Committee of the Board. "COMMON STOCK" shall mean the common stock of the Company, par value $.01. "COMPANY" shall mean UCAR International Inc., a Delaware corporation. "CONTROL" (including, with correlative meaning, all conjugations thereof) shall mean with respect to any Person, the ability of another Person to control or direct the actions or policies of such first Person, whether by ownership of voting securities, by contract or otherwise. "CUMULATIVE EBITDA" shall mean with respect to any Performance Option, the sum of the EBITDA for the period ending on the last day of the Plan Year preceding the Determination Date. "CUMULATIVE EBITDA TARGETS" shall mean with respect to any Performance Option, the sum of the EBITDA Targets for the period ending on the last day of the Plan Year preceding the Determination Date. "DETERMINATION DATE" shall mean the last day of the Plan Year. "DIRECTOR" shall mean any individual who is a member of the Board and who is not an employee of the Company or a Subsidiary. "DISABILITY" shall mean the inability of a Participant to perform in all material respects his duties and responsibilities to the Company, or any Subsidiary of the Company, by reason of a physical or mental disability or infirmity which inability is reasonably expected to be permanent and has continued (i) for a period of six consecutive months or (ii) such shorter period as the Company may determine. A Participant (or his representative) shall furnish the Company with satisfactory medical evidence documenting the Participant's disability or infirmity. "EBITDA" shall mean, with respect to the Company and its Subsidiaries on a consolidated basis for any period, the consolidated net income of the Company and its Subsidiaries for such period, as determined in accordance with generally accepted accounting principles consistently applied, PLUS, to the extent deducted in computing such consolidated net income, without duplication, the sum of (a) income tax expenses and withholding tax expenses incurred in connection with cross-border transactions involving non-domestic Subsidiaries, (b) interest expense, (c) depreciation expense and amortization expense, (d) any special charges and any extraordinary or non-recurring losses, (e) monitoring and management fees paid to Blackstone Capital Partners II Merchant Banking Fund L.P. or its affiliates, (f) other noncash items reducing consolidated net income, and of noncash exchange, translation on performance losses relating to any foreign currency hedging transactions or currency fluctuations, MINUS, to the extent added in computing such consolidated net income, without duplication, (i) interest income, (ii) extraordinary or non-recurring gains, (iii) other noncash items increasing consolidated net income, (iv) noncash exchange, translation or performance gains relating to any foreign currency hedging transactions or currency fluctuations, and (v) all non-cash pension accruals related to FAS `87; PROVIDED that all effects of the Recapitalization shall be eliminated in computing EBITDA. "EBITDA TARGET" shall mean with respect to each Plan Year, the amount set forth in the following table opposite such Plan Year: PLAN YEAR ENDING EBITDA TARGET December 31, 1995 $ 216,900,000 December 31, 1996 $ 223,400,000 December 31, 1997 $ 256,600,000* December 31, 1998 $ 271,700,000* December 31, 1999 $ 287,800,000* and such other targets as are established by the Committee after consultation with the CEO with respect to subsequent Plan Years. Asterisked EBITDA Targets shall not be more than the stated amount but may be adjusted downward by the Committee, in its sole discretion and shall otherwise be subject to the provisions of Section 10.3. "EFFECTIVE DATE" shall mean the Recapitalization Closing Date. "EMPLOYEE" shall mean any employee of the Company or any of its Subsidiaries and, unless otherwise indicated, any Director. "EMPLOYEE LOAN" shall mean any loan made to a Participant on the Recapitalization Closing Date to assist the Participant in paying certain income tax liability. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "EXERCISABLE PERCENTAGE" shall mean, with respect to any Option, the cumulative percentage of the total number of Option Shares subject to such Option (measured as of the Grant Date) which a Participant has the right to receive upon exercising such Option. "EXERCISE PRICE" shall mean the amount that a Participant must pay to exercise an Option with respect to one share of Common Stock subject to such Option, as determined in Section 4.2. "FAIR MARKET VALUE" shall mean (i) with respect to any Option granted prior to September 29, 1998, the average of the high and low trading prices of the Common Stock for the 20 business days immediately preceding the day of the valuation, (ii) with respect to any Option granted after September 29, 1998, the closing sale price (or, if there is none, the average of the closing bid and asked prices) of the Common Stock on the last trading day preceding the day of the valuation and (iii) with respect to any Option granted on September 29, 1998 after the close of trading, the closing sale price of the Common Stock on that day (i.e., $17.06). "GOOD REASON," if relevant to a particular Participant, shall have the meaning of "Good Reason" set forth in such Participant's Option Agreement. "GRANT DATE" shall mean, with respect to the initial grant of Options hereunder, the Recapitalization Closing Date and, thereafter, shall mean the date the relevant Options are granted pursuant to this Plan. "OPTION" shall mean, with respect to any Participant, (a) any Time Option, Performance Option or Standard Option and (b) any option, warrant or right to acquire shares of the capital stock of the Company issued in respect of an option referred to in clause (a) above, by way of distribution or in connection with a merger, consolidation, reorganization or other recapitalization. "OPTION AGREEMENT" shall mean the relevant Option Agreement between a Participant and the Company. "OPTION SHARES" shall mean, with respect to any Participant, (a) any shares of Common Stock (or other shares of capital stock of the Company) issuable or issued by the Company upon exercise of any Option by such Participant and (b) any shares of the capital stock of the Company issuable or issued in respect of any of the securities described in clause (a) above, by way of stock dividend, stock split, merger, consolidation, reorganization or other recapitalization. "PARTICIPANT" shall mean any individual who holds an outstanding Option granted under this Plan. "PERFORMANCE OPTIONS" shall mean the options described in Section 5.2. "PERSON" shall mean an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "PLAN" shall mean this Management Stock Option Plan, as amended from time to time. "PLAN YEAR" shall mean initially the short plan year beginning January 26, 1995 and ending on December 31, 1995, and thereafter each of the calendar years from 1996 through 2007. "PUBLIC OFFERING" shall mean the sale of shares of Common Stock pursuant to an effective registration statement under the Securities Act, which results in an active trading market in Common Stock. If the Common Stock is listed on a national securities exchange or is quoted on the NASDAQ National Market, it shall be deemed to be actively traded. "RECAPITALIZATION" shall mean the recapitalization of the Company pursuant to the Recapitalization Agreement. "RECAPITALIZATION AGREEMENT" shall mean the agreement dated as of November 14, 1994 among Union Carbide Corporation, a New York corporation, Mitsubishi Corporation, a Japanese corporation, the Company, and UCAR International Acquisition Inc., a Delaware corporation. "RECAPITALIZATION CLOSING DATE" shall mean the closing date of the Recapitalization (i.e., January 26, 1995). "RECAPITALIZATION PRICE" shall mean the per share price paid in the Recapitalization (i.e., $7.60). "RETIREMENT," if relevant to a particular Participant, shall have the meaning of "Retirement" set forth in such Participant's Option Agreement. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "STANDARD OPTIONS" shall mean the options described in Section 5.2A. "SUBSIDIARY" shall mean any corporation of which the Company owns, directly or through one or more Subsidiaries, a fifty percent (50%) or more equity interest in such corporation or has the right to nominate fifty percent (50%) or more of the members of the board of directors or other governing body of the corporation. "TIME OPTIONS" shall mean the options described in Section 5.1. "TRANSFER" shall mean, with respect to any Option, the gift, sale, assignment, transfer, pledge, hypothecation or other disposition (whether for or without consideration and whether voluntary, involuntary or by operation of law) of such Option or any interest therein. ARTICLE III LIMITATION ON AVAILABLE OPTION SHARES 3.1 OPTION SHARES. The aggregate number of shares of Common Stock with respect to which Options may be granted under the Plan shall not exceed 4,886,828 shares; PROVIDED, HOWEVER, that the aggregate number of shares of Common Stock with respect to which Options may be granted shall be subject to adjustment in accordance with the provisions of Section 10.2. 3.2 STATUS OF OPTION SHARES. The shares of Common Stock for which Options may be granted under the Plan (i) may be either authorized and unissued shares, treasury shares or a combination thereof, as the Committee or the Board shall determine and (ii) shall be reserved by the Committee or the Board for issuance under this Plan; provided, however, that any shares of Common Stock delivered or deliverable upon exercise of Options granted to officers of the Company (within the meaning of the rules of the New York Stock Exchange) or directors of the Company on or after March 31, 1998 shall consist of treasury shares which shall have been previously listed on the New York Stock Exchange. To the extent any Options are forfeited, expire or are terminated prior to exercise, the Option Shares in respect of which such Options were issued shall become available for stock options granted pursuant to this Plan or any other plan or agreement approved by the Committee. ARTICLE IV GRANT OF OPTIONS 4.1 OPTIONS. Options may be granted to Employees. Initially, Options shall be granted by the Board. Thereafter, the Committee or the Board shall grant Options to Employees (other than Directors) after consultation with the CEO and the Board shall grant Options to Directors. Except as otherwise provided herein, the Committee or the Board shall establish the terms and conditions applicable to Options granted by it at the time of grant, which terms and conditions shall be set forth in the relevant Option Agreements. 4.2 EXERCISE PRICE. The Exercise Price of Time Options and Performance Options granted hereunder shall be not less than the Fair Market Value of the Option Shares subject to such Options, determined as of the relevant Grant Date. For purposes of the initial grant of Time Options and Performance Options hereunder, the Exercise Price of such Options shall be the Recapitalization Price. The Exercise Price of Standard Options granted hereunder shall be specified by the Committee or the Board at the time of grant and set forth in the relevant Option Agreements, but in no event shall the Exercise Price of a Standard Option be less than the Fair Market Value of a share of Common Stock on the relevant Grant Date. 4.3 FORM OF OPTION. Options granted under this Plan shall be non-qualified stock options and are not intended to be "incentive stock options" within the meaning of Section 422 of the Code or any successor provisions. Options shall be exercisable with respect to the number of Option Shares covered by the Option to the extent they become exercisable and shall thereafter be exercisable until they expire or are terminated. 4.4 AVAILABLE OPTIONS All Options granted under this Plan prior to September 29, 1998 have been Time Options or Performance Options. Notwithstanding anything to the contrary contained herein, only Standard Options shall be granted to Employees (other than Directors) and only Time Options or Standard Options shall be granted to Directors under this Plan on or after September 29, 1998. ARTICLE V EXERCISABILITY OF OPTIONS 5.1 TIME OPTIONS. Except as otherwise provided in the relevant Option Agreement or Section 5.3, all Time Options shall become exercisable in accordance with the following schedule: EXERCISABLE PERCENTAGES ----------------------- Prior to December 31, 1995 0% On or after December 31, 1995 20% On or after December 31, 1996 40% On or after December 31, 1997 60% On or after December 31, 1998 80% On or after December 31, 1999 100% 5.2 PERFORMANCE OPTIONS. Except as otherwise provided in the relevant Option Agreement or Section 5.3: (a) Performance Options shall become exercisable with respect to 20% of the Option Shares subject to such Options, as of each Determination Date that the Company's EBITDA for a Plan Year equals or exceeds the EBITDA Target for that Plan Year (and with respect to the first Plan Year, EBITDA for the entire calendar year). (b) If, after the Grant Date of a Performance Option, the Company's EBITDA for a Plan Year is less than 100% of the EBITDA Target for such Plan Year ( a "Missed Year"), no such Performance Option shall become exercisable with respect to any additional Option Shares (the "Missed Shares") on the Determination Date for such Plan Year. If, in any Plan Year subsequent to a Missed Year, EBITDA exceeds the EBITDA Target for such Plan Year AND Cumulative EBITDA exceeds the Cumulative EBITDA Targets, then Performance Options shall become exercisable with respect to the Missed Shares attributable to such Missed Year (but only to the extent such Option has not otherwise terminated). 5.2A STANDARD OPTIONS. Except as otherwise provided in this Plan, Standard Options shall be subject to such terms and conditions as are established by the Committee or the Board at the time of grant and set forth in the relevant Option Agreements. Except as otherwise provided in the relevant Option Agreement or Section 5.3, a Standard Option shall become exercisable at such time or under such circumstances as the Committee or the Board shall determine and specify in the relevant Option Agreement. 5.3 ACCELERATION EVENTS. (a) Notwithstanding anything contained in this Article V to the contrary: Time Options granted to Employees (other than Directors) shall become exercisable upon the first to occur of the following events: (i) a Participant's termination of employment on account of death or Disability, (ii) a Change of Control and (iii) to the extent provided in a Participant's Option Agreement, a Participant's termination by the Company without Cause or a Participant's resignation for Good Reason; and Time Options granted to Directors shall become exercisable upon the first to occur of the following events: (i) a Director ceases to be a Director on account of death or Disability or (ii) a Change of Control. The Committee or the Board may, but are not required to, provide for the accelerated vesting and exercisability of Standard Options at the time of grant and any such provisions shall be set forth in the relevant Option Agreements. The Committee or the Board may, in its discretion, accelerate the exercisability of any or all Options at any time and for any reason. (b) Notwithstanding anything contained in this Article V to the contrary, all outstanding Time Options and Performance Options (other than Performance Options for the 1999 Plan Year) granted on or before March 17, 1998 have become vested and exercisable. ARTICLE VI EXERCISE OF OPTIONS 6.1 RIGHT TO EXERCISE. During the lifetime of a Participant, Options may be exercised only by such Participant (except that, in the event of his Disability, Options may be exercised by his or her legal guardian or legal representative). In the event of the death of a Participant, exercise of Options shall be made only by the executor or administrator of the deceased Participant's estate or the Person or Persons to whom the deceased Participant's rights under Options shall pass by will or the laws of descent and distribution. 6.2 PROCEDURE FOR EXERCISE. Vested Options may be exercised in whole or in part with respect to any portion that is exercisable. To exercise an Option, a Participant (or such other Person who shall be permitted to exercise the Option as set forth in Section 6.1) must complete, sign and deliver to the Company a notice of exercise in such form as the Company may from time to time adopt and provide to a Participant (the "EXERCISE NOTICE"), together with payment in full of the Exercise Price multiplied by the number of shares of Common Stock with respect to which the Option is exercised. Payment of the Exercise Price shall be made in cash (including check, bank draft or money order). The right to exercise the Option shall be subject to the satisfaction of all conditions set forth in the Exercise Notice. In lieu of paying the Exercise Price, on or after an initial Public Offering, upon a Participant's (or such other Person's) request, with the Committee's or the Board's consent, the Company shall give the Participant a number of shares of Common Stock equal to (A) divided by (B) where (A) is the excess of the (i) the Fair Market Value of a share of Common Stock on the date of exercise, over (ii) the Exercise Price, multiplied by (iii) the number of shares for which the Option is being exercised, and (B) is the Fair Market Value of a share of Common Stock on the date of exercise. 6.3 [Omitted] 6.4 CONDITIONAL EXERCISE IN CONTEMPLATION OF AN ACCELERATION EVENT. In contemplation of an Acceleration Event, a Participant may conditionally exercise at least 15 days prior to the Acceleration Event all or a portion of his Options which are exercisable and which will become exercisable upon the occurrence of the Acceleration Event. Such conditional exercise shall become null and void if the anticipated Acceleration Event does not occur within six (6) months following the date of such conditional exercise. A conditional exercise shall become binding upon a Participant (and such Participant shall become obligated to pay the Exercise Price therefor) upon the occurrence of the Acceleration Event. 6.5 WITHHOLDING OF TAXES. The Company shall withhold from any Participant from any amounts due and payable by the Company to such Participant (or secure payment from such Participant in lieu of withholding) the amount of any withholding or other tax due from the Company with respect to any Option Shares issuable under the Plan, and the Company may defer such issuance unless indemnified to its satisfaction. ARTICLE VII EXPIRATION OF OPTIONS 7.1 EXPIRATION DATE. Time Options and Performance Options shall expire at 5:00 p.m. Eastern Standard Time on the day prior to the twelfth anniversary of the Grant Date or upon such earlier time as provided in the relevant Option Agreements (the "Expiration Date"). Standard Options shall expire at 5:00 p.m. Eastern Standard Time on such date as shall be specified by the Committee or the Board at the time of grant and set forth in the relevant Option Agreements. 7.2 LIMITED STOCK APPRECIATION RIGHT. Upon a Participant's request, the Company may, in its sole discretion, cancel any vested Option (in whole or in part) granted hereunder and pay the affected Participant the excess of the (i) the Fair Market Value of a share of Common Stock, over (ii) the Exercise Price, multiplied by (iii) the number of shares for which the Option is being cancelled (the "CANCELLATION AMOUNT"); PROVIDED, HOWEVER, that coincident with any transaction which is reasonably likely to result in a Change of Control the Company may in its sole discretion, without a Participant's consent, cancel any Option (in whole or in part) granted hereunder and pay the affected Participant the Cancellation Amount. ARTICLE VIII RIGHTS AND LIMITATIONS 8.1 DIVIDEND EQUIVALENTS. The following Sections 8.1(a), 8.1(b) and 8.1(c) shall apply to Options granted prior to September 29, 1998. The following Section 8.1(d) shall apply to Options granted on or after September 29, 1998. (a) If the Board declares a special or extraordinary dividend in connection with a recapitalization, reorganization, restructuring or other nonrecurring corporate event to the holders of Common Stock, the Company shall pay to an escrow account on behalf of each Participant an amount (the "Dividend Equivalent") equal to the dividend they would have received had they directly owned each Option Share subject to Time Options and each Option Share with respect to which Performance Options are vested. (b) Upon a Participant's exercise of a Time Option or Performance Option, the Company shall offset the Exercise Price of each Option Share subject to such Option in respect of which a Dividend Equivalent was paid by the Dividend Equivalent set aside with respect to such Option Share. Any Dividend Equivalent in excess of the Exercise Price shall be paid in cash at the time the dividend is paid. (c) If the Time Options or Performance Options of a Participant with respect to which a Dividend Equivalent is set aside are terminated or cancelled prior to the date such Options are exercised, the Participant shall forfeit the right to the Dividend Equivalent and any amounts set aside in the Participant's escrow account in respect of such Dividend Equivalent shall revert to the Company. (d) If the Board declares a special or extraordinary dividend payable on the Common Stock in connection with a recapitalization, reorganization, restructuring or other nonrecurring corporate event, the Company shall notify each Participant who (on the record date for determination of stockholders entitled to receive such dividend) holds vested Standard Options or vested Time Options granted on or after September 29, 1998 of the amount of the dividend (the "Dividend Adjustment") which such Participant would have received if such Participant had owned the Option Shares subject to such Options. Upon such Participant's exercise of any of such Options, (i) the Company shall reduce the Exercise Price of such Options (but not below $.01) by the amount of the Dividend Adjustment with respect to the Option Shares issuable upon such exercise and (ii) to the extent that such Dividend Adjustment exceeds the amount of such reduction, such excess shall be promptly paid in cash to such Participant. If any of such Options expire or are terminated or cancelled prior to exercise thereof, the Participant shall forfeit all rights to all Dividend Adjustments. 8.2 REGISTRATION OF OPTION SHARES. The Company shall file, at its own expense, a registration statement on Form S-8 to register the Option Shares. 8.3 TRANSFER OF OPTIONS. Options may not be Transferred (other than by will or descent), except that Options may be pledged, assigned or otherwise Transferred to the Company to secure indebtedness on any Employee Loan. ARTICLE IX ADMINISTRATION 9.1 PLAN ADMINISTRATOR. This Plan shall be administered by the Committee; provided, however, that the Committee may delegate to the CEO responsibility for the routine administration of the Plan. 9.2 OPTION GRANTS. The Committee and the Board shall have authority to select Employees (other than Directors) to receive Options and to grant Options (except for the initial grant of Options, which shall be granted by the Board) to Employees (other than Directors) in such amounts as it shall determine, in its full discretion, after consultation with the CEO; provided, however, that the Board or the Committee may delegate to the CEO responsibility to designate Employees (other than Directors) to participate in a pool of Standard Options, the terms and conditions of which (including the aggregate number of shares subject to Options within the pool) shall have been specified by the Board or the Committee. 9.3 ADDITIONAL AUTHORITY. As between a Participant and the Company: the Committee and the Board shall have the sole and complete responsibility and authority to (a) interpret and construe the terms of the Plan, (b) correct any defect, error or omission or reconcile any inconsistency in the Plan or in any Option granted hereunder and (c) make all other determinations and take all other actions necessary or advisable for the implementation and administration of the Plan; and the Committee's or the Board's determination on matters within its authority shall be conclusive and binding upon the Participants, the Company and all other Persons. The authority of the Committee and the Board granted under this Article IX shall be additive to the authority granted to them under Section 4.1. ARTICLE X MISCELLANEOUS 10.1 AMENDMENT, SUSPENSION AND TERMINATION OF PLAN. The Board may amend or terminate the Plan at any time. No suspension, termination or amendment of or to the Plan shall affect adversely the rights of any Participant with respect to Options issued hereunder prior to the date of such suspension, termination or amendment without the consent of such Participant. 10.2 ADJUSTMENTS. (A) PERFORMANCE TARGETS. The Committee, in consultation with the CEO, shall adjust the performance targets for Plan Years following the Plan Year in which an initial Public Offering occurs so that the Performance Options continue to represent equivalent value for equivalent performance. (B) CHANGES IN COMMON STOCK. In the event of a stock dividend, stock split, or share combination, the Committee or the Board shall make such adjustments in the number and type of options authorized by and shares subject to the Plan and the number and type of shares covered by outstanding Options and the Exercise Prices specified therein and such other amendments to the Plan as the Board or the Committee, in good faith, determines to be appropriate and equitable. 10.3 FUTURE ACQUISITIONS OR DISPOSITIONS. The EBITDA Targets are based upon certain revenue and expense assumptions about the future business of the Company and its Subsidiaries as of the Effective Date. Accordingly, if the Company or any Subsidiary acquires, by purchase or otherwise, or disposes of, by sale of stock or assets, the business, property, or fixed assets, of another Person, which acquisition or disposition, either singly or together with one or more other such transactions, will, in the Board's good faith determination, affect the Company's EBITDA, the Committee shall, in good faith, adjust the EBITDA Targets to reflect the projected effect of such transaction or transactions. 10.4 NO RIGHT TO PARTICIPATE. Except as otherwise agreed by the Company, no Employee shall have a right to be selected as a Participant or, having been so selected, to be selected again to receive a grant of Options. 10.5 NO EMPLOYMENT CONTRACT. Nothing in this Plan shall interfere with or limit in any way the right of the Company or any of its Subsidiaries to terminate any Participant's employment at any time (with or without Cause), nor confer upon any Participant any right to continued employment by the Company or any of its Subsidiaries for any period of time or to continue such employee's present (or any other) rate of compensation. 10.6 CONSTRUCTION OF PLAN. This terms of this Plan shall be administered in accordance with the laws (excluding conflict of interest laws) of the State of New York. EX-10.22(A) 20 EXHIBIT 10.22(a) THE UCAR INTERNATIONAL INC. MANAGEMENT STOCK OPTION PLAN (SENIOR MANAGEMENT VERSION) This Management Stock Option Plan was originally adopted by the Board of Directors of UCAR International Inc. as of January 26, 1995. It was subsequently amended. This document restates in one document this Management Stock Option Plan as amended through September 29, 1998. ARTICLE I PURPOSE OF PLAN The Plan has been adopted by the Board to provide for the grant of stock options to certain management employees of the Company and its Subsidiaries and non-employee directors of the Company as a part of the compensation and incentive arrangements for such employees and directors. The Plan is intended to advance the best interests of the Company by allowing such persons to acquire an ownership interest in the Company, thereby motivating them to contribute to the success of the Company and to remain in the employ or service of the Company and its Subsidiaries. It is anticipated that the availability of stock options under the Plan will also enhance the Company's and its Subsidiaries' ability to attract and retain individuals of exceptional talent to contribute to the sustained progress, growth and profitability of the Company. ARTICLE II DEFINITIONS For purposes of the Plan, except where the context clearly indicates otherwise, the following terms shall have the meanings set forth below: "ACCELERATION EVENT" shall mean an event with respect to which the Plan provides for the acceleration of the exercisability of Options, as provided in Section 5.3. "AFFILIATE" shall mean, with respect to any Person, (i) any other Person that directly or indirectly Controls, is Controlled by or is under common Control with such Person, or (ii) any director, officer, partner or employee of such Person or any Person specified in clause (i) above. "BOARD" shall mean the Board of Directors of the Company. "CAUSE," if relevant to a particular Participant, shall have the meaning of "Cause" set forth in such Participant's Option Agreement. "CEO" shall mean the Chief Executive Officer of the Company. "CHANGE OF CONTROL" shall mean the occurrence of any of the following events: (i) any "person" or "group", within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act, becomes the "beneficial owner", as defined in Rule 13d-3 under the Exchange Act, of more than 22.5% of either the then outstanding Common Stock or the combined voting power of the then outstanding voting securities of the Company; (ii) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act acquires by proxy or otherwise the right to vote for the election of directors, on any merger or consolidation of the Company or for any other matter or question with respect to more than 22.5% of either the then outstanding Common Stock or the combined voting power of the then outstanding voting securities of the Company; (iii) Present Directors and New Directors cease for any reason to constitute a majority of the Board (and, for these purposes, "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 as directors by the Board or whose nomination for election as directors by the Company'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 Company approve a plan of complete liquidation or dissolution of the Company; or (v) consummation of: (x) a reorganization, merger or consolidation of the Company (a "Business Combination"), unless, following such Business Combination, (a) all or substantially all of the "beneficial owners," as defined in Rule 13d-3 under the Exchange Act, of the outstanding Common Stock and the combined voting power of the outstanding voting securities of the Company, respectively, immediately prior to such Business Combination "beneficially own," as so defined, directly or indirectly, more than 50% of the outstanding common equity securities and the combined voting power of the outstanding voting securities of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such Business Combination owns the Company or all or substantially all of the Company's assets either directly or indirectly through one or more subsidiaries), respectively, in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding Common Stock of the Company and the combined voting power of the outstanding voting securities of the Company, respectively, (b) no "person" or "group," within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act (excluding any entity resulting from such Business 2 Combination and any employee benefit plan (and related trust) of the Company, its subsidiaries or such entity), is the "beneficial owner," as defined in Rule 13d-3 under the Exchange Act, of more than 22.5% of either the then outstanding common equity securities of the entity resulting from such Business Combination or the combined voting power of the outstanding voting securities of such entity except to the extent that such beneficial ownership existed immediately prior to such Business Combination with respect to the Common Stock and combined voting power of outstanding voting securities of the Company and (c) at least a majority of the members of the board of directors (or similar governing body) of the 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 the time of the action of the Board approving of 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 Company, whether held directly or indirectly through one or more subsidiaries (excluding any grant of any pledge, mortgage or security interest or any sale-leaseback or any similar transaction, but including any foreclosure sale); provided, that, in the case of both clause (x) and (y) above, the divestiture of less than substantially all of the assets of the Company in one transaction or a series of related transactions, whether effected by sale, lease, exchange, transfer, spin-off, sale of the stock of or merger or consolidation of a subsidiary or otherwise, shall not constitute a Change in Control of the Company. Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur: (A) pursuant to clauses (i) and (ii) above, solely because more than 22.5% of the then outstanding Common Stock or the combined voting power of the then outstanding voting securities of the Company is held or acquired by one or more employee benefit plans (or related trusts) maintained by the Company or its subsidiaries; or (B) pursuant to clause (v)(y) above, if the Board determines that any sale, lease, exchange or transfer does not involve substantially all of the assets of the Company. "CODE" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute. "COMMITTEE" shall mean the Organization and Compensation Committee of the Board. "COMMON STOCK" shall mean the common stock of the Company, par value $.01. 3 "COMPANY" shall mean UCAR International Inc., a Delaware corporation. "CONTROL" (including, with correlative meaning, all conjugations thereof) shall mean with respect to any Person, the ability of another Person to control or direct the actions or policies of such first Person, whether by ownership of voting securities, by contract or otherwise. "CUMULATIVE EBITDA" shall mean with respect to any Performance Option, the sum of the EBITDA for the period ending on the last day of the Plan Year preceding the Determination Date. "CUMULATIVE EBITDA TARGETS" shall mean with respect to any Performance Option, the sum of the EBITDA Targets for the period ending on the last day of the Plan Year preceding the Determination Date. "DETERMINATION DATE" shall mean the last day of the Plan Year. "DIRECTOR" shall mean any individual who is a member of the Board and who is not an employee of the Company or a Subsidiary. "DISABILITY" shall mean the inability of a Participant to perform in all material respects his duties and responsibilities to the Company, or any Subsidiary of the Company, by reason of a physical or mental disability or infirmity which inability is reasonably expected to be permanent and has continued (i) for a period of six consecutive months or (ii) such shorter period as the Company may determine. A Participant (or his representative) shall furnish the Company with satisfactory medical evidence documenting the Participant's disability or infirmity. "EBITDA" shall mean, with respect to the Company and its Subsidiaries on a consolidated basis for any period, the consolidated net income of the Company and its Subsidiaries for such period, as determined in accordance with generally accepted accounting principles consistently applied, PLUS, to the extent deducted in computing such consolidated net income, without duplication, the sum of (a) income tax expenses and withholding tax expenses incurred in connection with cross-border transactions involving non-domestic Subsidiaries, (b) interest expense, (c) depreciation expense and amortization expense, (d) any special charges and any extraordinary or non-recurring losses, (e) monitoring and management fees paid to Blackstone Capital Partners II Merchant Banking Fund L.P. or its affiliates, (f) other noncash items reducing consolidated net income, and of noncash exchange, translation on performance losses relating to any foreign currency hedging transactions or currency fluctuations, MINUS, to the extent added in computing such consolidated net income, without duplication, (i) interest income, (ii) extraordinary or non-recurring gains, (iii) other noncash items increasing consolidated net income, (iv) noncash exchange, translation or performance gains relating to any foreign currency hedging transactions or currency fluctuations, and (v) all non-cash pension accruals related to FAS `87; PROVIDED that all effects of the Recapitalization shall be eliminated in computing EBITDA. "EBITDA TARGET" shall mean with respect to each Plan Year, the amount set forth in the following table opposite such Plan Year: 4 PLAN YEAR ENDING EBITDA TARGET December 31, 1995 $ 216,900,000 December 31, 1996 $ 223,400,000 December 31, 1997 $ 256,600,000* December 31, 1998 $ 271,700,000* December 31, 1999 $ 287,800,000* and such other targets as are established by the Committee after consultation with the CEO with respect to subsequent Plan Years. Asterisked EBITDA Targets shall not be more than the stated amount but may be adjusted downward by the Committee, in its sole discretion and shall otherwise be subject to the provisions of Section 10.3. "EFFECTIVE DATE" shall mean the Recapitalization Closing Date. "EMPLOYEE" shall mean any employee of the Company or any of its Subsidiaries and, unless otherwise indicated, any Director. "EMPLOYEE LOAN" shall mean any loan made to a Participant on the Recapitalization Closing Date to assist the Participant in paying certain income tax liability. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. "EXERCISABLE PERCENTAGE" shall mean, with respect to any Option, the cumulative percentage of the total number of Option Shares subject to such Option (measured as of the Grant Date) which a Participant has the right to receive upon exercising such Option. "EXERCISE PRICE" shall mean the amount that a Participant must pay to exercise an Option with respect to one share of Common Stock subject to such Option, as determined in Section 4.2. "FAIR MARKET VALUE" shall mean (i) with respect to any Option granted prior to September 29, 1998, the average of the high and low trading prices of the Common Stock for the 20 business days immediately preceding the day of the valuation, (ii) with respect to any Option granted after September 29, 1998, the closing sale price (or, if there is none, the average of the closing bid and asked prices) of the Common Stock on the last trading day preceding the day of the valuation and (iii) with respect to any Option granted on September 29, 1998 after the close of trading, the closing sale price of the Common Stock on that day (i.e., $17.06). "GOOD REASON," if relevant to a particular Participant, shall have the meaning of "Good Reason" set forth in such Participant's Option Agreement. "GRANT DATE" shall mean, with respect to the initial grant of Options hereunder, the Recapitalization Closing Date and, thereafter, shall mean the date the relevant Options are granted pursuant to this Plan. 5 "OPTION" shall mean, with respect to any Participant, (a) any Time Option, Performance Option or Standard Option and (b) any option, warrant or right to acquire shares of the capital stock of the Company issued in respect of an option referred to in clause (a) above, by way of distribution or in connection with a merger, consolidation, reorganization or other recapitalization. "OPTION AGREEMENT" shall mean the relevant Option Agreement between a Participant and the Company. "OPTION SHARES" shall mean, with respect to any Participant, (a) any shares of Common Stock (or other shares of capital stock of the Company) issuable or issued by the Company upon exercise of any Option by such Participant and (b) any shares of the capital stock of the Company issuable or issued in respect of any of the securities described in clause (a) above, by way of stock dividend, stock split, merger, consolidation, reorganization or other recapitalization. "PARTICIPANT" shall mean any individual who holds an outstanding Option granted under this Plan. "PERFORMANCE OPTIONS" shall mean the options described in Section 5.2. "PERSON" shall mean an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "PLAN" shall mean this Management Stock Option Plan, as amended from time to time. "PLAN YEAR" shall mean initially the short plan year beginning January 26, 1995 and ending on December 31, 1995, and thereafter each of the calendar years from 1996 through 2007. "PUBLIC OFFERING" shall mean the sale of shares of Common Stock pursuant to an effective registration statement under the Securities Act, which results in an active trading market in Common Stock. If the Common Stock is listed on a national securities exchange or is quoted on the NASDAQ National Market, it shall be deemed to be actively traded. "RECAPITALIZATION" shall mean the recapitalization of the Company pursuant to the Recapitalization Agreement. "RECAPITALIZATION AGREEMENT" shall mean the agreement dated as of November 14, 1994 among Union Carbide Corporation, a New York corporation, Mitsubishi Corporation, a Japanese corporation, the Company, and UCAR International Acquisition Inc., a Delaware corporation. 6 "RECAPITALIZATION CLOSING DATE" shall mean the closing date of the Recapitalization (i.e., January 26, 1995). "RECAPITALIZATION PRICE" shall mean the per share price paid in the Recapitalization (i.e., $7.60). "RETIREMENT," if relevant to a particular Participant, shall have the meaning of "Retirement" set forth in such Participant's Option Agreement. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "STANDARD OPTIONS" shall mean the options described in Section 5.2A. "SUBSIDIARY" shall mean any corporation of which the Company owns, directly or through one or more Subsidiaries, a fifty percent (50%) or more equity interest in such corporation or has the right to nominate fifty percent (50%) or more of the members of the board of directors or other governing body of the corporation. "TIME OPTIONS" shall mean the options described in Section 5.1. "TRANSFER" shall mean, with respect to any Option, the gift, sale, assignment, transfer, pledge, hypothecation or other disposition (whether for or without consideration and whether voluntary, involuntary or by operation of law) of such Option or any interest therein. ARTICLE III LIMITATION ON AVAILABLE OPTION SHARES 3.1 OPTION SHARES. The aggregate number of shares of Common Stock with respect to which Options may be granted under the Plan shall not exceed 1,953,172 shares, all of which shall be treasury shares; PROVIDED, HOWEVER, that the aggregate number of shares of Common Stock with respect to which Options may be granted shall be subject to adjustment in accordance with the provisions of Section 10.2. 3.2 STATUS OF OPTION SHARES. The shares of Common Stock for which Options may be granted under the Plan (i) may be either authorized and unissued shares, treasury shares or a combination thereof, as the Committee or the Board shall determine and (ii) shall be reserved by the Committee or the Board for issuance under this Plan; provided, however, that any shares of Common Stock delivered or deliverable upon exercise of Options granted to officers of the Company (within the meaning of the rules of the New York Stock Exchange) or directors of the Company on or after March 31, 1998 shall consist of treasury shares which shall have been previously listed on the New York Stock Exchange. To the extent any Options are forfeited, expire or are terminated prior to exercise, the Option Shares in respect of which such Options were issued shall become available for stock options granted pursuant to this Plan or any other plan or agreement approved by the Committee. 7 ARTICLE IV GRANT OF OPTIONS 4.1 OPTIONS. Options may be granted to Employees. Initially, Options shall be granted by the Board. Thereafter, the Committee or the Board shall grant Options to Employees (other than Directors) after consultation with the CEO and the Board shall grant Options to Directors. Except as otherwise provided herein, the Committee or the Board shall establish the terms and conditions applicable to Options granted by it at the time of grant, which terms and conditions shall be set forth in the relevant Option Agreements. 4.2 EXERCISE PRICE. The Exercise Price of Time Options and Performance Options granted hereunder shall be not less than the Fair Market Value of the Option Shares subject to such Options, determined as of the relevant Grant Date. For purposes of the initial grant of Time Options and Performance Options hereunder, the Exercise Price of such Options shall be the Recapitalization Price. The Exercise Price of Standard Options granted hereunder shall be specified by the Committee or the Board at the time of grant and set forth in the relevant Option Agreements, but in no event shall the Exercise Price of a Standard Option be less than the Fair Market Value of a share of Common Stock on the relevant Grant Date. 4.3 FORM OF OPTION. Options granted under this Plan shall be non-qualified stock options and are not intended to be "incentive stock options" within the meaning of Section 422 of the Code or any successor provisions. Options shall be exercisable with respect to the number of Option Shares covered by the Option to the extent they become exercisable and shall thereafter be exercisable until they expire or are terminated. 4.4 AVAILABLE OPTIONS All Options granted under this Plan prior to September 29, 1998 have been Time Options or Performance Options. Notwithstanding anything to the contrary contained herein, only Standard Options shall be granted to Employees (other than Directors) and only Time Options or Standard Options shall be granted to Directors under this Plan on or after September 29, 1998. ARTICLE V EXERCISABILITY OF OPTIONS 5.1 TIME OPTIONS. Except as otherwise provided in the relevant Option Agreement or Section 5.3, all Time Options shall become exercisable in accordance with the following schedule: EXERCISABLE PERCENTAGES Prior to December 31, 1995 0% On or after December 31, 1995 20% On or after December 31, 1996 40% 8 EXERCISABLE PERCENTAGES On or after December 31, 1997 60% On or after December 31, 1998 80% On or after December 31, 1999 100% 5.2 PERFORMANCE OPTIONS. Except as otherwise provided in the relevant Option Agreement or Section 5.3: (a) Performance Options shall become exercisable with respect to 20% of the Option Shares subject to such Options, as of each Determination Date that the Company's EBITDA for a Plan Year equals or exceeds the EBITDA Target for that Plan Year (and with respect to the first Plan Year, EBITDA for the entire calendar year). (b) If, after the Grant Date of a Performance Option, the Company's EBITDA for a Plan Year is less than 100% of the EBITDA Target for such Plan Year ( a "Missed Year"), no such Performance Option shall become exercisable with respect to any additional Option Shares (the "Missed Shares") on the Determination Date for such Plan Year. If, in any Plan Year subsequent to a Missed Year, EBITDA exceeds the EBITDA Target for such Plan Year AND Cumulative EBITDA exceeds the Cumulative EBITDA Targets, then Performance Options shall become exercisable with respect to the Missed Shares attributable to such Missed Year (but only to the extent such Option has not otherwise terminated). 5.2A STANDARD OPTIONS. Except as otherwise provided in this Plan, Standard Options shall be subject to such terms and conditions as are established by the Committee or the Board at the time of grant and set forth in the relevant Option Agreements. Except as otherwise provided in the relevant Option Agreement or Section 5.3, a Standard Option shall become exercisable at such time or under such circumstances as the Committee or the Board shall determine and specify in the relevant Option Agreement. 5.3 ACCELERATION EVENTS. (a) Notwithstanding anything contained in this Article V to the contrary: Time Options granted to Employees (other than Directors) shall become exercisable upon the first to occur of the following events: (i) a Participant's termination of employment on account of death or Disability, (ii) a Change of Control and (iii) to the extent provided in a Participant's Option Agreement, a Participant's termination by the Company without Cause or a Participant's resignation for Good Reason; and Time Options granted to Directors shall become exercisable upon the first to occur of the following events: (i) a Director ceases to be a Director on account of death or Disability or (ii) a Change of Control. The Committee or the Board may, but are not required to, provide for the accelerated vesting and exercisability of Standard Options at the time of grant and any such provisions shall be set forth in the relevant Option Agreements. The Committee or the Board may, in its discretion, accelerate the exercisability of any or all Options at any time and for any reason. (b) Notwithstanding anything contained in this Article V to the contrary, all outstanding Time Options and Performance Options (other than Performance Options for the 1999 Plan Year) granted on or before March 17, 1998 have become vested and exercisable. 9 ARTICLE VI EXERCISE OF OPTIONS 6.1 RIGHT TO EXERCISE. During the lifetime of a Participant, Options may be exercised only by such Participant (except that, in the event of his Disability, Options may be exercised by his or her legal guardian or legal representative). In the event of the death of a Participant, exercise of Options shall be made only by the executor or administrator of the deceased Participant's estate or the Person or Persons to whom the deceased Participant's rights under Options shall pass by will or the laws of descent and distribution. 6.2 PROCEDURE FOR EXERCISE. Vested Options may be exercised in whole or in part with respect to any portion that is exercisable. To exercise an Option, a Participant (or such other Person who shall be permitted to exercise the Option as set forth in Section 6.1) must complete, sign and deliver to the Company a notice of exercise in such form as the Company may from time to time adopt and provide to a Participant (the "EXERCISE NOTICE"), together with payment in full of the Exercise Price multiplied by the number of shares of Common Stock with respect to which the Option is exercised. Payment of the Exercise Price shall be made in cash (including check, bank draft or money order). The right to exercise the Option shall be subject to the satisfaction of all conditions set forth in the Exercise Notice. In lieu of paying the Exercise Price, on or after an initial Public Offering, upon a Participant's (or such other Person's) request, with the Committee's or the Board's consent, the Company shall give the Participant a number of shares of Common Stock equal to (A) divided by (B) where (A) is the excess of the (i) the Fair Market Value of a share of Common Stock on the date of exercise, over (ii) the Exercise Price, multiplied by (iii) the number of shares for which the Option is being exercised, and (B) is the Fair Market Value of a share of Common Stock on the date of exercise. 6.3 [Omitted] 6.4 CONDITIONAL EXERCISE IN CONTEMPLATION OF AN ACCELERATION EVENT. In contemplation of an Acceleration Event, a Participant may conditionally exercise at least 15 days prior to the Acceleration Event all or a portion of his Options which are exercisable and which will become exercisable upon the occurrence of the Acceleration Event. Such conditional exercise shall become null and void if the anticipated Acceleration Event does not occur within six (6) months following the date of such conditional exercise. A conditional exercise shall become binding upon a Participant (and such Participant shall become obligated to pay the Exercise Price therefor) upon the occurrence of the Acceleration Event. 6.5 WITHHOLDING OF TAXES. The Company shall withhold from any Participant from any amounts due and payable by the Company to such Participant (or secure payment from such Participant in lieu of withholding) the amount of any withholding or other tax due from the Company with respect to any Option Shares issuable under the Plan, and the Company may defer such issuance unless indemnified to its satisfaction. 10 ARTICLE VII EXPIRATION OF OPTIONS 7.1 EXPIRATION DATE. Time Options and Performance Options shall expire at 5:00 p.m. Eastern Standard Time on the day prior to the twelfth anniversary of the Grant Date or upon such earlier time as provided in the relevant Option Agreements (the "Expiration Date"). Standard Options shall expire at 5:00 p.m. Eastern Standard Time on such date as shall be specified by the Committee or the Board at the time of grant and set forth in the relevant Option Agreements. 7.2 LIMITED STOCK APPRECIATION RIGHT. Upon a Participant's request, the Company may, in its sole discretion, cancel any vested Option (in whole or in part) granted hereunder and pay the affected Participant the excess of the (i) the Fair Market Value of a share of Common Stock, over (ii) the Exercise Price, multiplied by (iii) the number of shares for which the Option is being cancelled (the "CANCELLATION AMOUNT"); PROVIDED, HOWEVER, that coincident with any transaction which is reasonably likely to result in a Change of Control the Company may in its sole discretion, without a Participant's consent, cancel any Option (in whole or in part) granted hereunder and pay the affected Participant the Cancellation Amount. ARTICLE VIII RIGHTS AND LIMITATIONS 8.1 DIVIDEND EQUIVALENTS. The following Sections 8.1(a), 8.1(b) and 8.1(c) shall apply to Options granted prior to September 29, 1998. The following Section 8.1(d) shall apply to Options granted on or after September 29, 1998. (a) If the Board declares a special or extraordinary dividend in connection with a recapitalization, reorganization, restructuring or other nonrecurring corporate event to the holders of Common Stock, the Company shall pay to an escrow account on behalf of each Participant an amount (the "Dividend Equivalent") equal to the dividend they would have received had they directly owned each Option Share subject to Time Options and each Option Share with respect to which Performance Options are vested. (b) Upon a Participant's exercise of a Time Option or Performance Option, the Company shall offset the Exercise Price of each Option Share subject to such Option in respect of which a Dividend Equivalent was paid by the Dividend Equivalent set aside with respect to such Option Share. Any Dividend Equivalent in excess of the Exercise Price shall be paid in cash at the time the dividend is paid. (c) If the Time Options or Performance Options of a Participant with respect to which a Dividend Equivalent is set aside are terminated or cancelled prior to the date such Options are exercised, the 11 Participant shall forfeit the right to the Dividend Equivalent and any amounts set aside in the Participant's escrow account in respect of such Dividend Equivalent shall revert to the Company. (d) If the Board declares a special or extraordinary dividend payable on the Common Stock in connection with a recapitalization, reorganization, restructuring or other nonrecurring corporate event, the Company shall notify each Participant who (on the record date for determination of stockholders entitled to receive such dividend) holds vested Standard Options or vested Time Options granted on or after September 29, 1998 of the amount of the dividend (the "Dividend Adjustment") which such Participant would have received if such Participant had owned the Option Shares subject to such Options. Upon such Participant's exercise of any of such Options, (i) the Company shall reduce the Exercise Price of such Options (but not below $.01) by the amount of the Dividend Adjustment with respect to the Option Shares issuable upon such exercise and (ii) to the extent that such Dividend Adjustment exceeds the amount of such reduction, such excess shall be promptly paid in cash to such Participant. If any of such Options expire or are terminated or cancelled prior to exercise thereof, the Participant shall forfeit all rights to all Dividend Adjustments. 8.2 REGISTRATION OF OPTION SHARES. The Company shall file, at its own expense, a registration statement on Form S-8 to register the Option Shares. 8.3 TRANSFER OF OPTIONS. Options may not be Transferred (other than by will or descent), except that Options may be pledged, assigned or otherwise Transferred to the Company to secure indebtedness on any Employee Loan. ARTICLE IX ADMINISTRATION 9.1 PLAN ADMINISTRATOR. This Plan shall be administered by the Committee; provided, however, that the Committee may delegate to the CEO responsibility for the routine administration of the Plan. 9.2 OPTION GRANTS. The Committee and the Board shall have authority to select Employees (other than Directors) to receive Options and to grant Options (except for the initial grant of Options, which shall be granted by the Board) to Employees (other than Directors) in such amounts as it shall determine, in its full discretion, after consultation with the CEO; provided, however, that the Board or the Committee may delegate to the CEO responsibility to designate Employees (other than Directors) to participate in a pool of Standard Options, the terms and conditions of which (including the aggregate number of shares subject to Options within the pool) shall have been specified by the Board or the Committee. 9.3 ADDITIONAL AUTHORITY. As between a Participant and the Company: the Committee and the Board shall have the sole and complete responsibility and authority to (a) interpret and construe the terms of the Plan, (b) correct any defect, error or omission or reconcile any inconsistency in the Plan or in any Option granted hereunder and (c) make all other 12 determinations and take all other actions necessary or advisable for the implementation and administration of the Plan; and the Committee's or the Board's determination on matters within its authority shall be conclusive and binding upon the Participants, the Company and all other Persons. The authority of the Committee and the Board granted under this Article IX shall be additive to the authority granted to them under Section 4.1. ARTICLE X MISCELLANEOUS 10.1 AMENDMENT, SUSPENSION AND TERMINATION OF PLAN. The Board may amend or terminate the Plan at any time. No suspension, termination or amendment of or to the Plan shall affect adversely the rights of any Participant with respect to Options issued hereunder prior to the date of such suspension, termination or amendment without the consent of such Participant. 10.2 ADJUSTMENTS. (A) PERFORMANCE TARGETS. The Committee, in consultation with the CEO, shall adjust the performance targets for Plan Years following the Plan Year in which an initial Public Offering occurs so that the Performance Options continue to represent equivalent value for equivalent performance. (B) CHANGES IN COMMON STOCK. In the event of a stock dividend, stock split, or share combination, the Committee or the Board shall make such adjustments in the number and type of options authorized by and shares subject to the Plan and the number and type of shares covered by outstanding Options and the Exercise Prices specified therein and such other amendments to the Plan as the Board or the Committee, in good faith, determines to be appropriate and equitable. 10.3 FUTURE ACQUISITIONS OR DISPOSITIONS. The EBITDA Targets are based upon certain revenue and expense assumptions about the future business of the Company and its Subsidiaries as of the Effective Date. Accordingly, if the Company or any Subsidiary acquires, by purchase or otherwise, or disposes of, by sale of stock or assets, the business, property, or fixed assets, of another Person, which acquisition or disposition, either singly or together with one or more other such transactions, will, in the Board's good faith determination, affect the Company's EBITDA, the Committee shall, in good faith, adjust the EBITDA Targets to reflect the projected effect of such transaction or transactions. 10.4 NO RIGHT TO PARTICIPATE. Except as otherwise agreed by the Company, no Employee shall have a right to be selected as a Participant or, having been so selected, to be selected again to receive a grant of Options. 10.5 NO EMPLOYMENT CONTRACT. Nothing in this Plan shall interfere with or limit in any way the right of the Company or any of its Subsidiaries to terminate any Participant's employment at any time (with or 13 without Cause), nor confer upon any Participant any right to continued employment by the Company or any of its Subsidiaries for any period of time or to continue such employee's present (or any other) rate of compensation. 10.6 CONSTRUCTION OF PLAN. This terms of this Plan shall be administered in accordance with the laws (excluding conflict of interest laws) of the State of New York. 14 EX-10.24 21 EXHIBIT 10.24 NON-QUALIFIED STOCK OPTION AGREEMENT (Standard Option Version) Non-Qualified Stock Option Agreement (this "Option Agreement"), dated as of September 29, 1998 (i.e., the Grant Date), between UCAR International Inc. (the "Company") and ____________________________________ (the "Participant"). Pursuant to the UCAR International Inc. Management Stock Option Plan as amended through the date hereof (the "Plan"), a copy of which has been furnished to the Participant and the terms of which are incorporated herein by reference, the Company intends to provide incentives to certain management employees of the Company and its subsidiaries by providing them with opportunities to purchase shares of Common Stock. The Board of Directors of the Company or a duly constituted committee thereof has determined that it would be in the best interest of the Company and its stockholders to grant the options provided herein 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 Unless otherwise indicated, whenever capitalized terms are used in this Option Agreement, they shall have the meanings set forth in the Plan or, if not defined in the Plan, as set forth in the written employment agreement between the Participant and the Company or a Subsidiary or, if not defined in the Plan or such an agreement or if there is no such agreement, as set forth below. "CAUSE" shall mean (i) gross neglect or willful and continuing refusal by the Participant to substantially perform his duties (other than due to Disability), (ii) breach by the Participant of confidentiality obligations owed to the Company or any Subsidiary, (iii) willful engagement by the Participant in conduct which is demonstrably injurious to the Company or any Subsidiary (including, without limitation, a breach by the Participant of non-competition or non-solicitation obligations owed to the Company or any Subsidiary) or (iv) conviction or plea of NOLO CONTENDERE by the Participant to a felony or a misdemeanor involving moral turpitude. "RETIREMENT" means the Participant's retirement from employment by the Company and its Subsidiaries (i) with the right to receive a non-actuarially reduced pension benefit under the UCAR Carbon Retirement Plan or (ii) if not eligible to participate therein or if such plan is not then in effect or shall have been changed in a manner which makes it materially more onerous to become eligible to receive such a benefit than it is on the Grant Date, at any time after attaining age 62 with at least 10 years of employment with the Company and its Subsidiaries or after attaining age 65 or after attaining that age where the sum of the Participant's age and years of employment with the Company and its Subsidiaries equals or exceeds 85. ARTICLE II GRANT OF OPTIONS 2.1 GRANT OF OPTIONS. The Participant is hereby granted Options representing the right to acquire ________ shares of Common Stock. Such Options are Standard Options. Unless otherwise indicated herein, references herein to "Options" means the Options granted hereby. 2.2 EXERCISE PRICE. The Exercise Price of the Options shall be $17.06 per share (i.e., the Fair Market Value of the Common Stock on the Grant Date or the last trading day prior to the Grant Date, whichever is provided in the Plan). ARTICLE III EXERCISABILITY OF OPTIONS Options shall vest upon the earliest to occur of the events described in Sections 3.1, 3.2, 3.3 or 3.4, but subject to the limitations set forth in Section 3.6, and shall become exercisable as described in Section 3.5: 3.1 TIME VESTING. If not sooner vested, all Options shall vest on September 29, 2005 (i.e., the seventh anniversary of the Grant Date). 3.2 VESTING UPON CHANGE IN CONTROL. If not sooner vested, all Options shall vest upon the occurrence of a Change in Control. 3.3 ACCELERATED VESTING. (a) One-third (_____) of the Options shall vest on September 29, 1999 (i.e., the first anniversary of the Grant Date) or the Participant's termination of employment by the Company or its Subsidiaries without Cause or lay-off prior to September 29, 1999; (b) Regardless of whether Options shall have vested under Section 3.3(a): one-third (_____) of the Options shall vest on the date when the Fair Market Value of the Common Stock shall have exceeded, for 20 consecutive trading days, $20.50 per share (i.e., approximately 120% of the Fair Market Value of the Common Stock on the Grant Date); and one-third (_____) of the Options shall vest on the date when the Fair Market Value of the Common Stock shall have exceeded, for 20 consecutive trading days, $24.00 per share (i.e., approximately 140% of the Fair Market Value of the Common Stock on the Grant Date). 3.4 DISCRETIONARY VESTING. The Committee or the Board may, in its sole discretion, accelerate the vesting of any or all Options at any time and for any reason. 3.5 EXERCISE; RESTRICTION ON EXERCISE. No unvested Options shall be exerciseable. All vested Options shall become exercisable at the time they first vest and shall cease to be exercisable at the time they expire as provided in Section 3.6 or Article V; provided, however, that no vested Options shall be exercisable until the first anniversary of the Grant Date (i.e., September 29, 1999) unless such Options shall be vested under Section 3.2 or 3.4. 3.6 EFFECT OF TERMINATION OF EMPLOYMENT AND OTHER EVENTS ON VESTING; EXPIRATION OF UNVESTED OPTIONS. Unless otherwise determined by the Board or the Committee, unvested Options (excluding, for purposes of clause (ii) below, Options which vest pursuant to Section 3.3(a)) shall cease to vest and shall expire upon (i) the Participant's Retirement, death or Disability, (ii) the Participant's termination of employment by the Company or its Subsidiaries without Cause or lay-off, (iii) the Participant's termination of employment by the Company or its Subsidiaries for Cause, (iv) the Participant's resignation from employment with the Company or its Subsidiaries or (v) expiration as provided in Article V. ARTICLE IV EXERCISE OF OPTIONS 4.1 PERSON WHO CAN EXERCISE. Options may only be exercised by the Participant, except that, in the event of Disability, Options may be exercised by the Participant's legal guardian or legal representative and, in the event of death, Options may be exercised by the executor or administrator of the Participant's estate or the Person or Persons to whom the Participant's rights under the Options pass by will or the laws of descent and distribution. 4.2 PROCEDURE FOR EXERCISE. Vested Options may be exercised in whole or in part with respect to any portion thereof that is exercisable. To exercise an Option, the Participant (or such other Person who shall be permitted to exercise the Option as set forth in Section 4.1) must complete, sign and deliver to the Company an Exercise Notice together with payment in full of the Exercise Price multiplied by the number of shares of Common Stock with respect to which the Option is exercised. Payment of the Exercise Price shall be made in cash (including check, bank draft or money order). The right to exercise the Option shall be subject to the satisfaction of all conditions set forth in the Exercise Notice. In lieu of paying the Exercise Price, upon the Participant's (or such other Person's) request, with the Committee's or the Board's consent (which may or may not be given in its sole discretion), the Company shall deliver to the Participant a number of shares of Common Stock equal to (A) divided by (B) where (A) is the excess of (i) the Fair Market Value of a share of Common Stock on the date on which the Exercise Notice is received by the Company (i.e., the exercise date), over (ii) the Exercise Price, multiplied by (iii) the number of shares for which the Option is being exercised, and (B) is the Fair Market Value of a share of Common Stock on the exercise date. 4.3 CONDITIONAL EXERCISE IN CONTEMPLATION OF ACCELERATED VESTING. In contemplation of accelerated vesting, the Participant (or such other Person who shall be permitted to exercise Options as set forth in Section 4.1) may conditionally exercise, at least 15 days prior to such accelerated vesting, all or a portion of the Options which are exercisable and which will become exercisable upon such accelerated vesting. Such conditional exercise shall become null and void if such accelerated vesting does not occur within six (6) months following the date of such conditional exercise. A conditional exercise shall become binding upon the Participant (or such other Person) and such Participant (or such other Person) shall become obligated to pay the Exercise Price therefor upon the occurrence of such accelerated vesting. 4.4 LIMITED STOCK APPRECIATION RIGHT. Upon the written request of the Participant (or such other Person who shall be permitted to exercise Options as set forth in Section 4.1), the Company may, in its sole discretion, cancel any vested Option (in whole or in part) and pay the Participant the excess of the (i) the Fair Market Value of a share of Common Stock on the date on which the request is received by the Company, over (ii) the Exercise Price, multiplied by (iii) the number of Option Shares subject to the Option which is being cancelled (the "Cancellation Amount"); PROVIDED, HOWEVER, that, coincident with any transaction which is reasonably likely to result in a Change in Control, the Company may, in its sole discretion, without a Participant's consent, cancel any Option (in whole or in part) and pay the Participant the Cancellation Amount. 4.5 WITHHOLDING OF TAXES. The Company and its Subsidiaries shall withhold from any amounts due and payable by the Company and its Subsidiaries to the Participant (or secure payment from the Participant in lieu of withholding) the amount of any withholding or other tax due from the Company with respect to any Option Shares issuable under this Option Agreement, and the Company may defer such issuance until such withholding or payment is made unless otherwise indemnified to its satisfaction with respect thereto. ARTICLE V EXPIRATION OF OPTIONS 5.1 EXPIRATION. Vested and unvested Options shall expire at 5:00 p.m. Eastern Standard Time on September 29, 2008 (i.e., the tenth anniversary of the Grant Date). 5.2 EARLIER EXPIRATION. Options shall expire sooner than provided in Section 5.1 as follows: (a) all unvested Options shall expire as provided in Section 3.6; (b) upon the Participant's termination of employment by the Company or its Subsidiaries for Cause, all vested Options shall expire immediately; (c) upon the Participant's termination of employment by the Company or its Subsidiaries in connection with a lay-off, all vested Options shall expire upon the earlier of (i) the third anniversary of such termination or (ii) the expiration of the Options under Section 5.1; (d) upon the Participant's resignation from employment with the Company or its Subsidiaries other than in connection with death, Disability or Retirement, all vested Options shall expire upon the effective date of such resignation or termination; and (e) upon the Participant's termination of employment by the Company or its Subsidiaries for any reason other than for Cause or in connection with death, Disability or a lay-off, all vested Options shall expire upon the effective date of such resignation or termination. 5.3 CANCELLATION. Vested and unvested Options which expire unexercised shall be treated as cancelled. ARTICLE VI MISCELLANEOUS 6.1 OPTIONS NOT TRANSFERABLE. Options may not be Transferred (other than by will or laws of descent and distribution). Any attempt to effect a Transfer of Options that is not permitted by the Plan or this Option Agreement shall be null and void. 6.2 NOTICES. All notices, requests and demands to or upon a party hereto must, to be effective, be in writing and shall be deemed to have been duly given or made when delivered by hand or three days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows or to such other address of which the intended receiving party hereto shall have been duly notified hereunder: (a) If to the Company, to the following address: UCAR International Inc. 39 Old Ridgebury Road Danbury, CT 06817 Attn: Corporate Secretary Telecopy: (203) 207-7770 (b) If to the Participant, to the address or telecopy number as shown on the signature page hereto. 6.3 AMENDMENT. This Option Agreement may be amended only by a writing executed by the parties hereto which specifically states that it is amending this Option Agreement. 6.4 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts made and to be performed therein without regard to the conflicts of law principles thereof. 6.5 TITLES. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Option Agreement. IN WITNESS WHEREOF, this Option Agreement has been executed and delivered by the parties hereto. PARTICIPANT UCAR INTERNATIONAL INC. ___________________ By: __________________________ Signed Name: ________________________ Title: _______________________ Name: _______________________________ Home Address: _______________________ _______________________ NON-QUALIFIED STOCK OPTION AGREEMENT (Director Version) This Non-Qualified Stock Option Agreement (the "Option Agreement"), dated as of ________________, is made by and between UCAR International Inc., a Delaware corporation (the "Company"), and _________________ (the "Participant"). Pursuant to the UCAR International Inc. Management Stock Option Plan (the "Plan") (a copy of which is attached hereto and the terms of which are hereby incorporated by reference), the Company intends to provide incentives to non-employee directors of the Company by providing them with opportunities for ownership of shares of Common Stock. The Board of Directors of the Company (the "Board") has determined that it would be in the best interests of the Company and its stockholders to grant the Options provided for herein to the Participant under the Plan. In consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS Whenever capitalized terms are used in the Option Agreement as defined terms they shall have the meaning set forth in the Plan or as set forth below, unless the context clearly indicates to the contrary. "EXERCISE PRICE" shall mean the amount that the Participant must pay to exercise an Option with respect to one share of Common Stock subject to such Option, as determined in Section 2.2. "FAIR MARKET VALUE" shall mean, with respect to any Common Stock, the average of the high and low trading prices of the 20 business days immediately preceding the day of the valuation. ARTICLE II GRANT OF OPTIONS 2.1 GRANT OF OPTIONS. The Board hereby grants to the Participant Time Options representing the right to acquire ____________ shares of Common Stock. 2.2 EXERCISE PRICE. The Exercise Price of Options granted hereunder shall be $_____ per share. ARTICLE III EXERCISABILITY OF OPTIONS 3.1 OPTIONS. All Options granted pursuant hereto shall [vest and become exercisable] on ____________. 3.2 ACCELERATION EVENTS. [Notwithstanding Section 3.1, all Options granted pursuant hereto [are fully vested at the time of grant and] shall become [fully vested and exercisable] upon the first to occur of the following Acceleration Events: (i) a Director ceases to be a Director on account of death or Disability or (ii) a Change in Control.] ARTICLE IV EXERCISE OF OPTIONS 4.1 RIGHT TO EXERCISE. The Options granted hereunder may only be exercised by the Participant (except that, in the event of his Disability, Options may be exercised by his or her legal guardian or legal representative). In the event of the Participant's death, exercise of Options shall be made only by the executor or administrator of the deceased Participant's estate or the Person or Persons to whom the deceased Participant's rights under the Option shall pass by will or the laws of descent and distribution. 4.2 PROCEDURE FOR EXERCISE. Options may be exercised in whole or in part with respect to any portion that is exercisable. To exercise any Option granted hereunder, the Participant (or such other Person who shall be permitted to exercise the Option as set forth in Section 4.1) must complete, sign and deliver to the Company (to the attention of the Company's Secretary) a notice of exercise substantially in the form of ANNEX I to the Plan (or in such other form as the Board may from time to time adopt and provide to the Participant) (the "EXERCISE NOTICE"), together with payment in full of the Exercise Price multiplied by the number of shares of Common Stock with respect to which the Option is exercised. Payment of the Exercise Price shall be made in cash (including check, bank draft or money order). The Participant's right to exercise the Option shall be subject to the satisfaction of all conditions set forth in the Exercise Notice. In lieu of paying the Exercise Price, upon the Participant's request, with the Committee's approval (which may or may not be given in its sole discretion) the Company shall deliver to the Participant a number of shares of Common Stock equal to (A) divided by (B) where (A) is the excess of (i) the Fair Market Value of a share of Common Stock, over (ii) the Exercise Price, multiplied by (iii) the number of shares for which the Option is being exercised, and (B) is the Fair Market Value of a share of Common Stock. 4.3 CONDITIONAL EXERCISE IN CONTEMPLATION OF AN ACCELERATION EVENT. In contemplation of an Acceleration Event, the Participant may conditionally exercise, at least 15 days prior to such event, all or a portion of his Options which are exercisable and which will become exercisable upon the occurrence of the Acceleration Event. Such conditional exercise shall become null and void if the anticipated Acceleration Event does not occur within six (6) months following the date of such conditional exercise. A conditional exercise shall become binding upon the Participant (and such Participant shall become obligated to pay the Exercise Price therefor) upon the occurrence of the Acceleration Event. 4.4 LIMITED STOCK APPRECIATION RIGHT. Upon the Participant's request, the Company may, cancel any Option (in whole or in part) granted hereunder and pay the affected Participant, the excess of the (i) the Fair Market Value of a share of Common Stock, over (ii) the Exercise Price, multiplied by (iii) the number of shares for which the Option is being cancelled. 4.5 WITHHOLDING OF TAXES. The Company shall withhold from the Participant from any amounts due and payable by the Company (or secure payment from such Participant in lieu of withholding) the amount of any withholding or other tax due from the Company with respect to any Option Shares issuable under the Plan, and the Company may defer such issuance unless indemnified to its satisfaction. ARTICLE V EXPIRATION OF OPTIONS 5.1 EXPIRATION DATE. Options shall expire at 5:00 p.m. Eastern Standard Time on January 25, 2007. 5.2 EARLIER EXPIRATION DATE. Notwithstanding Section 5.1, Options shall expire four (4) years following the date the Participant ceases to be a Director. ARTICLE VI MISCELLANEOUS 6.1 OPTIONS NOT TRANSFERABLE. Options may not be Transferred (other than by will or descent). Any attempt to effect a Transfer of Options that is not permitted by the Plan or this Agreement shall be null and void and of no effect. 6.2 NOTICES. All notices, requests and demands to or upon the parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows to the Company and the Participant, or to such other address as may be hereafter notified by the parties hereto: (a) If to the Company, to it at the following address: UCAR International Inc. 39 Old Ridgebury Road Danbury, CT 06817 Attn: Corporate Secretary Telecopy: (203) 207-7770 (b) If to the Participant, to him at his address or telecopy number as shown on the signature page hereto,or at such other address or telecopy number as either party shall have specified by notice in writing to the other. 6.3 AMENDMENT. This Option Agreement may be amended only by a writing executed by the parties hereto which specifically states that it is amending this Option Agreement. 6.4 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts made and to be performed therein without regard to the conflicts of law principles thereof. 6.5 TITLES. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Option Agreement. * * * IN WITNESS WHEREOF, this Option Agreement has been executed and delivered by the parties hereto. UCAR INTERNATIONAL INC. ___________________________________________ Peter B. Mancino PARTICIPANT Name: _____________________________________ __________________ Signed Home Address:_______________________________ EX-10.33 22 EXHIBIT 10.33 UCAR INTERNATIONAL INC. EXECUTIVE EMPLOYEE STOCK PURCHASE PROGRAM (Senior Management Version) To: ____________________ UCAR International Inc. is pleased to announce the adoption of an Executive Employee Stock Purchase Program in which you are invited to participate. The Program has been designed to assist employees in meeting the voluntary stock ownership guidelines adopted by the Board of Directors for the Chief Executive Officer, other Officers and members of the Company and Business Councils. You have no obligation to purchase shares under either those guidelines or the Program. Under the Program, you have the right to purchase shares of common stock in an amount up to your annual base salary. The purchase price per share is the closing price of the common stock on the NYSE on the trading day immediately preceding the exercise date. For those participants who exercised the right to purchase shares effective prior to October 15, 1998, the purchase price is $17.06 per share (the closing price of the common stock on the NYSE on the date on which the Program was adopted by the Board of Directors). If your base salary increases or the market value of the shares you purchased under the Program decreases while the Program is still in effect, you may purchase additional shares to bring the market value of the shares purchased by you under the Program up to your annual base salary then in effect. The purchase price for shares shall be due at the time of exercise. For those participants who exercised the right to purchase shares effective prior to October 15, 1998, the purchase price for their shares shall be due on or before December 31, 1998. You are responsible for any taxes incurred in connection with the sale of any shares purchased under the Program. You should consult your tax advisor as to the tax consequences of any such sale. To exercise your right to purchase shares under the Program, please complete, sign and deliver to the Human Resources Department (attention: Brian Blowes) a copy of the attached Stock Purchase Notice. You should retain a copy of the completed Purchase Notice for your records. Except for those participants who exercised their right to purchase shares prior to October 15, 1998, the date on which the Purchase Notice is delivered to the Company shall be deemed to be the exercise date. Those participants who exercised their right to purchase shares effective prior to October 15, 1998 should complete, sign and deliver a confirming Purchase Notice. These confirming Purchase Notices should be dated as of the date of original exercise of the right to purchase shares. In order to facilitate the sale of shares under the Program, all sales will be effected through accounts at BNY Brokerage. If you have not already opened an account at BNY Brokerage, please contact Brian Blowes to make arrangements to do so. The Company intends to register, under the Securities Act of 1933 and applicable state securities laws, the sale of shares under the Program and/or the resale thereof. At the time you intend to resell shares purchased under the Program, you should first confirm with the General Counsel that either the resale registration is still in effect or that such registration is not necessary or an exemption therefrom is available. The absence of a required resale registration could result in restrictions on the resale of shares purchased under the Program. Shares purchased under the Program will consist of newly issued shares (if you are not a reporting person under Section 16(a) of the Securities Exchange Act of 1934) or treasury shares (if you are such a person). The maximum number of shares which may be sold under the Program to participants who are reporting persons under Section 16(a) of the Securities Exchange Act of 1934 is limited to the number of treasury shares previously listed on the NYSE which have not been allocated for use under some other employee benefit program. Accordingly, notwithstanding anything contained herein to the contrary, no shares will be sold under the Program to such a participant if the sale would exceed this limitation. For purposes of complying with this limitation, except for sales made to participants who exercised their right to purchase shares effective prior to October 15, 1998, (i) shares will be sold under the Program to participants in the order in which Purchase Notices are received by the Company, (ii) no shares will be sold to such a participant pursuant to a Purchase Notice if the full number of shares cannot be sold to such a participant pursuant to any earlier received Purchase Notice (from the same or any other participant) due to this limitation and (iii) if the full number of shares cannot be sold to such a participant due to this limitation, the maximum number of shares which is permissible to sell in compliance with this limitation will be sold. You are reminded of your continuing obligation under securities laws not to sell shares while in possession of material, non-public information about the Company. In addition, you are also reminded of your potential liability for short swing profits under Section 16(b) of the Securities Exchange Act of 1934. Such liability may exist if you have sold any shares within six months before the date you purchase shares under the Program or if you intend to sell any shares within six months after the date you purchase shares under the Program. Likewise, such liability may exist if you have purchased or sold shares in a UCAR Stock Fund within the UCAR Carbon Savings Plan within such six month period. Accordingly, if you have any concerns regarding the applicability of these rules to you, you should consult with the General Counsel prior to purchasing any shares under the Program. The Program was adopted on September 29, 1998 and may be discontinued at any time. The Program shall be governed by and construed in accordance with the laws of the State of Connecticut without regard to the conflicts of law principles thereof. Date: October 5, 1998 UCAR INTERNATIONAL INC. EXECUTIVE EMPLOYEE STOCK PURCHASE PROGRAM STOCK PURCHASE NOTICE UCAR International Inc. 39 Old Ridgebury Road Danbury, Connecticut 06817 Attention: Brian Blowes, Human Resources Department BNY Brokerage 101 Barclay Street, 12W New York, New York 10286 Attention: Tom Meder The Bank of New York 101 Barclay Street, 12W New York, New York 10286 Attention: Diana Ajjan Reference is made to the UCAR International Inc. Executive Employee Stock Purchase Program. I hereby exercise my right to purchase shares of common stock under the Program and, accordingly, agree as follows: 1. I irrevocably and unconditionally agree to purchase ___________ shares (the "Shares") of common stock from the Company at the purchase price per share specified under the Program. 2. I have deposited (or will deposit prior to the closing of the purchase) funds in my brokerage account maintained at BNY Brokerage sufficient to pay the purchase price for the Shares. 3. I instruct BNY Brokerage to withdraw from my brokerage account (and pay to the Company or the common stock transfer agent for the account of the Company) sufficient funds to pay the purchase price for the Shares against receipt from the transfer agent of the Shares (in either certificated or uncertificated form registered in either my name or street name). Completion of these transactions shall constitute the closing of the purchase and shall take place promptly after the date hereof. 4. This Agreement is subject to the terms and conditions of the Program, which is incorporated by reference herein. This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut without regard to the conflicts of law principles thereof. Any proceeding with respect to this Agreement shall be brought in a court of competent jurisdiction in the State of Connecticut and I submit to the exclusive jurisdiction of such courts for such purpose. I irrevocably waive any objections which I may now or hereafter have to the laying of the venue of any such proceeding brought in any such court and waive any claims that any such proceeding brought in any such court has been brought in an inconvenient forum. Very truly yours, Signature:___________________________________ Name:________________________________________ Number of Shares:____________________________ Date: October 12, 1998 Accepted. Bank of New York is instructed to take such actions as may be necessary to effect the purchase described herein. UCAR INTERNATIONAL INC. By:___________________________________ Name: Title: EX-10.34 23 EXHIBIT 10.34 UCAR INTERNATIONAL INC. EXECUTIVE EMPLOYEE LOAN PROGRAM To: ________________________ UCAR International Inc. is pleased to announce the adoption of an Executive Employee Loan Program in which you are invited to participate. The Program has been designed to assist the Chief Executive Officer, other Officers and other members of the Company and Business Councils in meeting various needs during this time of transition at the Company. Under the Program, prior to the dates set forth below, you have the right to borrow up to an amount equal to your annual base salary. Loans made under the Program shall not bear interest, shall be unsecured and shall be made on a full recourse basis. Loans under the Program shall be due on the earlier of (i) the date you cease to be employed by the Company for any reason or (ii) five years from the date such loans are made. Since loans made under the Program will be non-interest bearing, borrowers will have imputed income (for tax purposes) equal to the interest that would have been paid on the loans, calculated using an interest rate designated by the Internal Revenue Service. At such time as you may be required to pay additional income taxes on the imputed interest income, the Company shall pay you an amount (a "gross-up payment") equal to the additional federal, state and local income taxes that will be incurred on the imputed interest income (as well as on the gross-up payment) so that, on a net after-tax basis, you do not owe more state, federal or local income taxes than you would have owed had no interest income been imputed. Such amount shall be determined by the Company in its reasonable discretion. No loans shall be made under the Program after December 31, 1998 to current employees who are eligible to participate in the Program on the date hereof. New and current employees who become eligible to participate in the Program after the date hereof (including employees who are promoted after the date hereof, even if they are eligible to participate in the Program on the date hereof) will have the right to obtain loans under the Program within 90 days after the date they are notified of their eligibility (or promotion). To exercise your right to borrow under the Program, please complete, sign and deliver to the Human Resources Department (Attention: Brian Blowes) a copy of each of the attached Loan Notice and the attached Promissory Note. You should retain a copy of the completed Loan Notice and Promissory Note for your records. Loans will be funded promptly after the date on which the completed Loan Notice and Promissory Note are delivered to the Company. To facilitate administration of the Program, unless you otherwise instruct, proceeds from loans will be deposited in your account at BNY Brokerage. If you have not already opened an account at BNY Brokerage and would like to do so, please contact Brian Blowes. Notwithstanding anything contained herein to the contrary, no loan shall be made under the Program if it would result in a violation of any of the agreements relating to debt of the Company. For purposes of complying with this limitation, except for loans made to participants who exercised their right to obtain loans effective prior to October 15, 1998, (i) loans shall be made to participants in the order in which Loan Notices are received by the Company, (ii) no loan shall be made pursuant to a Loan Notice if any loan pursuant to any earlier received Loan Notice (from the same or any other participant) cannot be funded in full due to this limitation and (iii) if a loan cannot be made in full due to this limitation, it shall be made to the maximum extent permissible in compliance with this limitation. The Program was adopted on September 29, 1998 and may be discontinued at any time. The Program shall be governed by and construed in accordance with the laws of the State of Connecticut without regard to the conflicts of law principles thereof. Date: October 5, 1998 UCAR INTERNATIONAL INC. EXECUTIVE EMPLOYEE LOAN PROGRAM LOAN NOTICE UCAR Global Enterprises Inc. 39 Old Ridgebury Road Danbury, Connecticut 06817 Attention: Brian Blowes, Human Resources Department Reference is made to the UCAR Employee International Inc. Executive Employee Loan Program. I hereby exercise my right to borrow $ __________ under the Program (the "Loan") and, accordingly, agree as follows: 1. Attached is a duly executed and completed Promissory Note payable to the order of UCAR Global Enterprises Inc. evidencing the Loan. 2. Please deposit the proceeds of the Loan into my account at BNY Brokerage (or such other account of which I shall have given written notice to you) promptly after the date hereof. 3. If the Loan cannot be funded at all pursuant to the Program, this request is withdrawn and you are instructed to promptly return the Promissory Note to me. 4. If the Loan cannot be funded in full pursuant to the Program, this request is deemed modified to request the maximum amount that can be funded and you are directed to adjust the principal amount of the Promissory Note accordingly. 5. This Agreement is subject to the terms and conditions of the Program, which is incorporated by reference herein. This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut without regard to the conflicts of law principles thereof. Any proceeding with respect to this Agreement shall be brought in a court of competent jurisdiction in the State of Connecticut and I submit to the exclusive jurisdiction of such courts for such purpose. I irrevocably waive any objections which I may now or hereafter have to the laying of the venue of any such proceeding brought in any such court and waive any claims that any such proceeding brought in any such court has been brought in an inconvenient forum. Very truly yours, Signature: _________________________________ Name:_______________________________________ Date:_______________________________________ PROMISSORY NOTE FOR VALUE RECEIVED, the undersigned maker (the "Borrower') hereby unconditionally and irrevocably promises to pay to order of UCAR Global Enterprises Inc., a Delaware corporation with its principal office located at 39 Old Ridgebury Road, Danbury, Connecticut 06817 (the "Lender"), the principal amount of US$ ______________ . All sums due hereunder shall be payable at such principal office or at such other location designated by the Lender of which the Lender shall have given written notice to the Borrower at the Borrower's most recent address as shown on the payroll records of UCAR International Inc. or its subsidiaries (collectively, the "Company"). The principal sum shall be due and payable on the earlier of (i) the fifth anniversary of the date hereof or (ii) if prior thereto the Borrower ceases to be an employee of the Company for any reason, the Borrower's last day of employment with the Company. The balance of the principal sum outstanding from time to time hereunder prior to maturity shall not bear interest and after maturity shall bear interest at the rate of twelve percent (12%) per annum (or, if lower, the maximum rate permitted by applicable law). All accrued and unpaid interest, if any, shall be due and payable together with the balance of the principal sum outstanding hereunder, if any, or on demand, whichever is earlier. The Borrower shall have the right at any time and from time to time to prepay all or all or any part of any sum due hereunder without penalty or premium. Payment of all sums due hereunder shall be made in lawful money of the United States of America. If the Borrower shall be adjudicated a bankrupt or file a petition seeking protection as a debtor under any bankruptcy, insolvency or similar law, then all sums due or to become due hereunder shall become immediately due and payable. The Borrower agrees to pay to the Lender, upon demand, all costs and expenses, including, without limitation, reasonable attorneys' fees and expenses, which may be incurred by the Lender in connection with the collection of any sum due hereunder. The Lender shall be entitled to exercise any and all remedies available to it hereunder or otherwise in connection with such collection. The Borrower waives presentment for payment, notice of demand, non-payment or dishonor, protest and all other notices and rights of approval in connection with delivery, acceptance, performance and enforcement of, and default under, this Note or any extensions, modifications or forbearances that may be allowed. The Borrower also waives any right to a jury trial in connection with any enforcement or collection of this Note and all laws for the benefit of debtors to the full extent permitted by law. If any sums due hereunder is not paid when due, the Company shall have the right to set off against the sums due hereunder any amount owing by the Company in any capacity to the Borrower. No delay or omission by the Lender in exercising any remedy hereunder or otherwise shall impair such remedy or be construed to be a waiver of any default hereunder or an acquiescence therein. No waiver by the Lender of any default hereunder shall be effective unless set forth in a written instrument signed by the Lender. The Lender shall have the right, which right may be exercised at any time without notice to or the consent of the Borrower, to assign, transfer or pledge this Note and any renewals, extensions and modifications hereof. This Note may not be changed or terminated orally. This Note shall bind the heirs, legal representatives, successors and assigns of the Borrower and shall inure to the benefit of the Lender and its successors and assigns. This Note shall be governed by and construed in accordance with the laws of the State of Connecticut without regard to the conflicts of law principles thereof. Any proceeding with respect to this Agreement shall be brought in a court of competent jurisdiction in the State of Connecticut and the Borrower hereby submits to the exclusive jurisdiction of such courts for such purpose. The Borrower hereby irrevocably waives any objections which the Borrower may now or hereafter have to the laying of the venue of any such proceeding brought in any such court and waives any claims that any such proceeding brought in any such court has been brought in an inconvenient forum. IN WITNESS WHEREOF, the Borrower has executed and delivered the Promissory Note as of the day and year below written. Signature:__________________________________ Name:_______________________________________ Address:____________________________________ Date:_______________________________________ EX-10.36 24 EXHIBIT 10.36 UCAR CARBON COMPANY INC. EQUALIZATION BENEFIT PLAN (Amended and Restated as of January 1, 1997) EQUALIZATION BENEFIT PLAN GENERAL This is an excess benefit plan for participants in the Retirement Plan who receive a benefit from the Retirement Plan which is limited by Code Section 415. This Plan has been established primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. Specifically, the purpose of this Plan is to provide a retirement benefit, equal to the excess of : (1) the retirement benefit which would be provided by the Retirement Plan determined without regard to Code Section 415, OVER (2) the retirement benefit actually provided by the Retirement Plan. This Plan is completely separate from the Retirement Plan, the Enhanced Retirement Income Plan and the Supplemental Retirement Income Plan, is unfunded for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended and is not qualified for special tax treatment under the Code. ARTICLE I ELIGIBILITY SECTION 1. A Participant, or survivor of a Participant who has not declined the coverage of a survivor's benefit under the Retirement Plan shall be eligible to participate in this Plan if such Participant receives a retirement benefit from the Retirement Plan which is limited by Code Section 415. ARTICLE II ADMINISTRATION SECTION 1. (a) The Compensation Committee shall have the authority to administer this Plan. The Compensation Committee may adopt such rules as it may deem necessary for the proper administration of this Plan and its decision in all matters involving the interpretation and application of the Plan shall be final, conclusive, and binding on all parties. (b) The Compensation Committee may, in its sole discretion, designate any persons(s) or committee to administer this Plan. To the extent provided by the Compensation Committee, such person(s) or committee designated to administer this Plan shall have the same powers and responsibilities as the Compensation Committee. ARTICLE III AMOUNT OF BENEFIT SECTION 1. (a) The monthly amount of Equalization Retirement Income payable to a Participant shall be the excess, if any, of: (i) the Participant's monthly retirement benefit, computed by using the applicable benefit formula provided in Article V of the Retirement Plan and determined without regard to the limitations of Code Sections 415, OVER (ii) the monthly amount of such Participant's or surviving spouse's retirement benefit payable under the Retirement Plan. (b) Any benefits either payable under, or which have been satisfied through, the purchase of non-qualified annuities in connection with this Plan shall be deducted from the amounts payable pursuant to subparagraph (a) above. SECTION 2. For purposes of calculating the amount of a Participant's Equalization Retirement Income pursuant to Section 1 of this Article III, the amount of a Participant's monthly retirement benefit under the Retirement Plan shall be determined without any adjustment on account of (i) a survivor's benefit or (ii) an election to receive level retirement income. SECTION 3. If a Participant does not decline the coverage of a survivor's benefit, the monthly amount of Equalization Retirement Income which such Participant would otherwise have received shall be reduced by applying the same factors used in the Retirement Plan in connection with calculating a survivor's benefit. SECTION 4. The monthly amount of Equalization Retirement Income payable to the survivor of a Participant shall be calculated in the same manner that such survivor's benefit is calculated under the Retirement Plan. ARTICLE IV VESTING SECTION 1. A Participant shall be vested in such Participant's right to receive Equalization Retirement Income under this Plan in the same manner and to the same extent as provided under the Retirement Plan . ARTICLE V PAYMENTS SECTION 1. Equalization Retirement Income shall be paid monthly to a Participant or such Participant's survivor commencing with the month that such Participant or survivor commences benefits under the Retirement Plan, and shall cease or be suspended at the same time the Participant or survivor ceases or suspends benefits under the Retirement Plan. However, Equalization Retirement Income shall in no event be payable after the death of a Participant who has declined the coverage of a survivor's benefit. SECTION 2. Unless otherwise elected, Equalization Retirement Income payable under this Plan shall include the coverage of a survivor's benefit. A survivor's benefit payable from this Plan shall be paid to that person designated to receive a survivor's benefit under the Retirement Plan. SECTION 3. Equalization Retirement Income shall be distributed to the Participant in the same form, and with the same actuarial adjustments, as such Participant's distributions from the Retirement Plan. SECTION 4. Notwithstanding the provisions of Section 1 of this Article V, Participants may elect at any time immediately preceding retirement (i) a lump sum during the calendar year following the year such election is made, or (ii) substantially equal installments over a period of at least 2 but not more than 10 years commencing as of the January 1 of the calendar year following such election. If a Participant elects a lump sum or a series of payments over a period from 2 to 10 years, this election is irrevocable. This election shall be the same as that made pursuant to the Enhanced Retirement Income Plan and the Supplemental Retirement Income Plan. If a Participant elects a monthly annuity as in the Retirement Plan, he or she may again elect a lump sum or series of payments over a period of from 2 to 10 years when the calculation of the lump sum benefit changes. The calculation of the benefit may change (i) because of profit sharing or awards paid in the year following the last year worked or (ii) because the interest rate used to calculate the lump sum is not available until the November after the monthly annuity benefit is recalculated. The lump sum payment or installment payments described above shall be calculated using (A) a discount rate equal to the average of the Moody's Municipal 10 year Aaa Bond Yield Averages and the Moody's Municipal Long Term Aaa Bond Yield Averages, and (B) the UP-94G Mortality Table. The Compensation Committee or its designee shall determine the procedures for such elections and the time and method of payment for payments in accordance with this Section 4. For Participants who make the election described in this Section 4, the provisions of Sections 1, 2 and 3 of this Article V shall not apply. ARTICLE VI MISCELLANEOUS SECTION 1. Unless otherwise defined in this Plan, all defined terms shall have the same meaning as set forth in the Retirement Plan. (a) "Code" means the Internal Revenue Code of 1986, as amended. (b) "Compensation Committee" means the Organization and Compensation Committee of the Board of Directors of the Corporation. (c) "Corporation" means UCAR Carbon Company Inc. (d) "Enhanced Retirement Income Plan" means the UCAR Carbon Company Inc. Enhanced Retirement Income Plan. (e) "Equalization Retirement Income" means the benefit payable to a Participant pursuant to Article III of this Plan. (f) "Participant" means an employee of the Corporation who is eligible to participate in the Plan pursuant to Article I. (g) "Plan" means this UCAR Carbon Company Inc. Equalization Benefit Plan, as amended and restated as of January 1, 1997. (h) "Retirement Plan" as used in this Plan means the UCAR Carbon Retirement Plan. (i) "Supplemental Retirement Income Plan" means the UCAR Carbon Company Inc. Supplemental Retirement Income Plan. SECTION 2. The Corporation may amend or terminate this Plan at any time, but any such amendment or termination shall not adversely affect the rights of any Participant or survivor of any Participant then receiving benefits under this Plan, or the vested rights of any Participant or survivor. SECTION 3. Except to the extent required by law, no assignment of the rights and interests of a Participant or survivor of a Participant under this Plan shall be permitted nor shall such rights be subject to attachment or other legal processes for debts. SECTION 4. This Plan is intended to be unfunded for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended and the rights of a Participant and survivor of a Participant shall be no greater than the right of an unsecured general creditor of the Corporation. SECTION 5. For purposes of this Plan, a Participant will be considered retired on the first day of the month following the last month in which such Participant is employed. SECTION 6. The Corporation may satisfy all or any part of its obligation to provide benefits under this Plan by purchasing, and distributing to a Participant or survivor of a Participant, an annuity from an insurance carrier to provide such benefits. SECTION 7. Neither selection as a Participant nor participation in this Plan shall affect the Corporation's right to discharge any Participant. UCAR CARBON COMPANY INC. By: /s/ Fred C. Wolf ---------------------------------- EX-10.37 25 EXHIBIT 10.37 Amendment to UCAR Carbon Company Inc. Equalization Benefit Plan: RESOLVED, that the UCAR Carbon Company Inc. Equalization Benefit Plan (the "Plan") is hereby amended to provide for the forfeiture of a participant's benefit under the Plan if the participant engages in actions which are detrimental to the interests of the Corporation as set forth in Exhibit A (with such changes therein as the officers of the Corporation, or any of them acting individually, may deem necessary or appropriate to carry out the purposes and intent of this resolution). Dated: September 16, 1998 EX-10.38 26 EXHIBIT 10.38 UCAR CARBON COMPANY INC. SUPPLEMENTAL RETIREMENT INCOME PLAN (Amended and Restated as of January 1, 1997) SUPPLEMENTAL RETIREMENT INCOME PLAN General This is a supplemental retirement income plan for participants in the Retirement Plan who receive compensation in excess of the compensation which may be considered by the Retirement Plan under Code Section 401(a)(17). This Plan has been established primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. Specifically, the purpose of this Plan is to provide a retirement benefit, equal to the excess of: (1) the retirement benefit which would be provided by the Retirement Plan determined without regard to Code Section 415 or Code Section 401(a)(17), over (2) the retirement benefit actually provided by the Retirement Plan and the Equalization Benefit Plan. This Plan is completely separate from the Retirement Plan, the Enhanced Retirement Income Plan and the Equalization Benefit Plan, is unfunded for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended and is not qualified for special tax treatment under the Code. ARTICLE I Eligibility Section 1. A Participant, or the survivor of a Participant who has not declined the coverage of a survivor's benefit, shall be eligible to participate in this Plan if such Participant (i) participates in the Retirement Plan and (ii) receives compensation in excess of the compensation which may be considered by the Retirement Plan under Code Section 401(a)(17). ARTICLE II Administration Section 1. (a) The Compensation Committee shall have the authority to administer this Plan. The Compensation Committee may adopt such rules as it may deem necessary for the proper administration of this Plan and its decision in all matters involving the interpretation and application of the Plan shall be final, conclusive, and binding on all parties. (b) The Compensation Committee may, in its sole discretion, designate any persons(s) or committee to administer this Plan. To the extent provided by the Compensation Committee, such person(s) or committee designated to administer this Plan shall have the same powers and responsibilities as the Compensation Committee. ARTICLE III Amount of Supplemental Retirement Income Section 1 (a) A Participant's monthly amount of Supplemental Retirement Income shall be the excess, if any, of: (i) the Participant's monthly retirement benefit, computed by using the applicable benefit formula provided in Article V of the Retirement Plan and determined without regard to the limitations of Code Sections 401(a)(17) and 415, over ---- (ii) the monthly amount of such Participant's retirement benefit actually payable under the Retirement Plan and the Equalization Benefit Plan. (b) Any benefits either payable under, or which have been satisfied through the purchase of, non-qualified annuities in connection with this Supplemental Retirement Income Plan and/or the Equalization Benefit Plan shall be deducted from the amounts payable pursuant to subparagraph (a) above. Section 2. For purposes of calculating the amount of a Participant's Supplemental Retirement Income pursuant to Section 1 of this Article III, the amount of a Participant's monthly retirement benefit under the Retirement Plan and the Equalization Benefit Plan shall be determined without any adjustment on account of (i) a survivor's benefit or (ii) an election to receive level retirement income. Section 3. If a Participant does not decline the coverage of a survivor's benefit, the monthly amount of Supplemental Retirement Income which such Participant would otherwise have received shall be reduced by applying the same factors used in the Retirement Plan in connection with calculating a survivor's benefit. Section 4. The monthly amount of Supplemental Retirement Income payable to the survivor of a Participant shall be calculated in the same manner that such survivor's benefit is calculated under the Retirement Plan. ARTICLE IV Vesting Section 1. A Participant shall be vested in such Participant's right to receive Supplemental Retirement Income under this Plan in the same manner and to the same extent as provided under the Retirement Plan. ARTICLE V Payments Section 1. Supplemental Retirement Income shall be paid monthly to a Participant or such Participant's survivor commencing with the month that such Participant or survivor commences benefits under the Retirement Plan, and shall cease or be suspended at the same time the Participant or survivor ceases or suspends benefits under the Retirement Plan. However, Supplemental Retirement Income shall in no event be payable after the death of a Participant who has declined the coverage of a survivor's benefit. Section 2. Unless otherwise elected, Supplemental Retirement Income payable under this Plan shall include the coverage of a survivor's benefit. A survivor's benefit payable from this Plan shall be paid to that person designated to receive a survivor's benefit under the Retirement Plan. Section 3. Supplemental Retirement Income shall be distributed to the Participant in the same form, and with the same actuarial adjustments, as such Participant's distributions from the Retirement Plan. Section 4. Notwithstanding the provisions of Section 1 of this Article V, Participants may elect at any time immediately preceding retirement (i) a lump sum during the calendar year following the year such election is made, or (ii) substantially equal installments over a period of at least 2 but not more than 10 years commencing as of the January 1 of the calendar year following such election. If a Participant elects a lump sum or a series of payments over a period from 2 to 10 years, this election is irrevocable. This election shall be the same as that made pursuant to the Equalization Benefit Plan and the Enhanced Retirement Income Plan. If a Participant elects a monthly annuity as in the Retirement Plan, he or she may again elect a lump sum or series of payments over a period of from 2 to 10 years when the calculation of the lump sum benefit changes. The calculation of the benefit may change: (i) because of profit sharing or awards paid in the year following the last year worked or (ii) because the interest rate used to calculate the lump sum is not available until the November after the monthly annuity benefit is recalculated. The lump sum payment or installment payments described above shall be calculated using (A) a discount rate equal to the average of the Moody's Municipal 10 year Aaa Bond Yield Averages and the Moody's Municipal Long Term Aaa Bond Yield Averages, and (B) the UP-94G Mortality Table. The Compensation Committee or its designee shall determine the procedures for such elections and the time and method of payment for payments in accordance with this Section 4. For Participants who make the election described in this Section 4, the provisions of Sections 1, 2 and 3 of this Article V shall not apply. Section 5. If the Board of Directors determines, after a hearing, that a Participant who is eligible to receive or is receiving Supplemental Retirement Income has engaged in any activities which, in the opinion of the Board, are detrimental to the interests of, or are in competition with the Corporation or any of its subsidiaries, such Supplemental Retirement Income shall thereupon be terminated. ARTICLE VI Miscellaneous Section 1. Unless otherwise defined in this Plan, all defined terms shall have the same meaning as set forth in the Retirement Plan. (a) "Code" means the Internal Revenue Code of 1986, as amended. (b) "Compensation Committee" means the Organization and Compensation Committee of the Board of Directors of the Corporation. (c) "Corporation" means UCAR Carbon Company Inc. (d) "Enhanced Retirement Income Plan" means the UCAR Carbon Company Inc. Enhanced Retirement Income Plan. (e) "Equalization Benefit Plan" means the UCAR Carbon Company Inc. Equalization Benefit Plan. (f) "Participant" means an employee of the Corporation who is eligible to participate in the Plan pursuant to Article I. (g) "Plan" means the UCAR Carbon Company Inc. Supplemental Retirement Income Plan, as amended and restated as of January 1, 1997. (h) "Retirement Plan" means the UCAR Carbon Retirement Plan. (i) "Supplemental Retirement Income" as used in this Plan means the benefit payable to a Participant pursuant to Article III of this Plan. Section 2. The Corporation may amend or terminate this Plan at any time, but any such amendment or termination shall not adversely affect the rights of any Participant or survivor, of any Participant then receiving benefits under this Plan, or the vested rights of any Participant or survivor. Section 3. Except to the extent required by law, no assignment of the rights and interests of a Participant or survivor of a Participant under this Plan shall be permitted nor shall such rights be subject to attachment or other legal processes for debts. Section 4. This Plan is intended to be unfunded for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended and the rights of a Participant and a survivor of a Participant shall be no greater than the right of an unsecured general creditor of the Corporation. Section 5. For purposes of this Plan, a Participant will be considered retired on the first day of the month following the last month in which such Participant is employed. Section 6. The Corporation may satisfy all or any part of its obligation to provide benefits under this Plan by purchasing, and distributing to a Participant or survivor of a Participant, an annuity from an insurance carrier to provide such benefits. Section 7. Neither selection as a Participant nor participation in this Plan shall affect the Corporation's right to discharge any Participant. UCAR CARBON COMPANY INC. By: /s/ Fred C. Wolf ___________________________ EX-10.39 27 EXHIBIT 10.39 UCAR CARBON COMPANY INC. ENHANCED RETIREMENT INCOME PLAN (Effective as of January 1, 1997) ENHANCED RETIREMENT INCOME PLAN GENERAL This is an enhanced retirement income plan for participants in the Retirement Plan who receive a retirement benefit under the Retirement Plan which is limited by Code Section 415 or Code Section 401(a)(17). This Plan has been established primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. Specifically, the purpose of this Plan is to provide a retirement benefit equal to the excess of: (1) the retirement benefit which would be provided by the Retirement Plan, determined without regard to Code Section 415 or Code Section 401(a)(17), if (a) average monthly Compensation included Awards and base salary deferred pursuant to the terms of the Compensation Deferral Program or any succesor or predecessor program, and/or (b) all Awards, whether deferred or not, were averaged separately from Base Compensation (as defined in the Retirement Plan); OVER (2) the retirement benefit actually provided by the Retirement Plan, the Equalization Benefit Plan and the Supplemental Retirement Income Plan. This Plan is completely separate from the Retirement Plan, the Supplemental Retirement Income Plan and the Equalization Benefit Plan, is unfunded for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended, and is not qualified for special tax treatment under the Code. ARTICLE I ELIGIBILITY SECTION 1. A Participant, or the survivor of a Participant who has not declined the coverage of a survivor's benefit, shall be eligible to participate in this Plan if such Participant receives a retirement benefit from the Retirement Plan which is limited by Code Section 401(a)(17) or Code Section 415, or is a participant in the Compensation Deferral Program. ARTICLE II ADMINISTRATION SECTION 1. (a) The Compensation Committee shall have the authority to administer this Plan. The Compensation Committee may adopt such rules as it may deem necessary for the proper administration of this Plan and its decision in all matters involving the interpretation and application of the Plan shall be final, conclusive, and binding on all parties. (b) The Compensation Committee may, in its sole discretion, designate any person(s) or committee to administer this Plan. To the extent provided by the Compensation Committee, such person(s) or committee designated to administer this Plan shall have the same powers and responsibilities as the Compensation Committee. ARTICLE III AMOUNT OF ENHANCED RETIREMENT INCOME SECTION 1. (a) A Participant's monthly Enhanced Retirement Income shall be computed by using the applicable formula provided in Article V of the Retirement Plan; provided, however, that average monthly Compensation shall be determined without regard to Code Section 415 and Code Section 401(a)(17) and shall be computed by determining the sum of the following amounts: (i) the larger of: (I) 1/36 of a Participant's Base Salary related to the three full calendar years in which such Base Salary was largest during the ten full calendar years next preceding the date of death or retirement, or (II) 1/36 of a Participant's Base Salary for the thirty-six (36) full calendar months next preceding the date of death or retirement; and (ii) 1/36 of the Participant's Awards related to the three full calendar years in which such Awards were the largest during the ten full calendar years next preceding the date of death or retirement; provided, that the calendar years in which the Participant was hired or terminated employment shall each be considered a full calendar year for the purposes of this clause (ii); REDUCED BY (iii) the monthly amount of such Participant's retirement benefit actually payable under the Retirement Plan, the Equalization Benefit Plan and the Supplemental Retirement Income Plan. (b) For purposes of this Section 1, an "Award" will be related to the calendar year in which a Participant performed the services for which the Award was paid. (c) For purposes of this Section 1, the amount of "Base Salary" received in any calendar month shall be calculated in the same manner in which average monthly Compensation used to compute pension benefits under the Retirement Plan is calculated (determined without regard to Incentive Compensation, as defined therein); provided, however, that Base Salary shall also include any base salary deferred by a Participant pursuant to the terms of the Compensation Deferral Program, in the calendar year in which it would otherwise have been paid. (d) Any benefits either payable under, or which have been satisfied through the purchase of, non-qualified annuities in connection with this Enhanced Retirement Income Plan, the Supplemental Retirement Income Plan and/or the Equalization Benefit Plan shall be deducted from the amounts payable pursuant to subparagraph (a) above. SECTION 2. If the Enhanced Retirement Income payable to a Participant under this Plan commences before the grant to such Participant of an Award (whether or not deferred) which may be used to determine average monthly Compensation under Section 1 of this Article III, the monthly amount of Enhanced Retirement Income payable hereunder shall be recalculated after such Award is granted (whether or not deferred). SECTION 3. For purposes of calculating the amount of a Participant's Enhanced Retirement Income pursuant to Section 1 of this Article III, the amount of a Participant's monthly retirement income and monthly pension under the Retirement Plan, the Equalization Benefit Plan and the Supplemental Retirement Income shall be determined without any adjustment on account of (i) a survivor's benefit or (ii) an election to receive level retirement income. SECTION 4. If a Participant does not decline the coverage of a survivor's benefit, the monthly amount of Enhanced Retirement Income which such Participant would otherwise have received shall be reduced by applying the same factors used in the Retirement Plan in connection with calculating a survivor's benefits. SECTION 5. The monthly amount of Enhanced Retirement Income payable to the eligible survivor of a Participant shall be calculated in the same manner that such survivor's benefit is calculated under the Retirement Plan. ARTICLE IV VESTING SECTION 1. A Participant will be vested in such Participant's right to receive Enhanced Retirement Income under the Plan in the same manner and to the same extent as provided under the Retirement Plan. ARTICLE V PAYMENTS SECTION 1. Enhanced Retirement Income shall be paid monthly to a Participant or such Participant's survivor commencing with the month such Participant or such survivor commence benefits under the Retirement Plan, and shall cease or be suspended at the same time the Participant or such survivor ceases or suspends benefits under the Retirement Plan. Enhanced Retirement Income shall in no event be payable after the death of a Participant who has declined the coverage of a survivor's benefit. SECTION 2. Unless otherwise elected, Enhanced Retirement Income payable under this Plan shall include the coverage of a survivor's benefit. A survivor's benefit payable from this Plan shall be paid to that person designated to receive a survivor's benefit under the Retirement Plan. SECTION 3. Enhanced Retirement Income shall be received in the same form, and with the same actuarial adjustments, as the Participant is receiving distributions from the Retirement Plan. SECTION 4. Notwithstanding the provisions of Section 1 of this Article V, Participants may elect at any time immediately preceding retirement (i) a lump sum during the calendar year following the year such election is made, or (ii) substantially equal installments over a period of at least 2 but not more than 10 years commencing as of the January 1 of the calendar year following such election. If a Participant elects a lump sum or a series of payments over a period from 2 to 10 years, this election is irrevocable. This election shall be the same as that made pursuant to the Equalization Benefit Plan and the Supplemental Retirement Income Plan. If a Participant elects a monthly annuity as in the Retirement Plan, he or she may again elect a lump sum or series of payments over a period of from 2 to 10 years when the calculation of the lump sum benefit changes. The calculation of the benefit may change (i) because of profit sharing or awards paid in the year following the last year worked or (ii) because the interest rate used to calculate the lump sum is not available until the November after the monthly annuity benefit is recalculated. The lump sum payment or installment payments described above shall be calculated using (A) a discount rate equal to the average of the Moody's Municipal 10 year Aaa Bond Yield Averages and the Moody's Municipal Long Term Aaa Bond Yield Averages, and (B) the UP-94G Mortality Table. The Compensation Committee or its designee shall determine the procedures for such elections and the time and method of payment for payments in accordance with this Section 4. For Participants who make the election described in this Section 4, the provisions of Sections 1, 2 and 3 of this Article V shall not apply. SECTION 5. If the Board of Directors determines, after a hearing, that a Participant who is eligible to receive or is receiving Enhanced Retirement Income has engaged in any activities which, in the opinion of the Board, are detrimental to the interests of, or are in competition with the Corporation or any of its subsidiaries, such Enhanced Retirement Income shall thereupon be terminated. ARTICLE VI MISCELLANEOUS SECTION 1. Unless otherwise defined in this Plan, all defined terms shall have the same meaning as set forth in the Retirement Plan. (a) "Award" means those awards which are made: (i) under any cash award plan and (ii) under any other variable compensation plans (whether or not deferred) designated by the Board of Directors. (b) "Code" means the Internal Revenue Code of 1986, as amended. (c) "Compensation Committee" means the Organization and Compensation Committee of the Board of Directors of the Corporation. (d) "Compensation Deferral Program" as used in this Plan means the UCAR International Inc. Compensation Deferral Program. (e) "Corporation" means UCAR Carbon Company Inc. (f) "Enhanced Retirement Income" means the benefit payable to a Participant pursuant to Article III of this Plan. (g) "Equalization Benefit Plan" means the UCAR Carbon Company Inc. Equalization Benefit Plan. (h) "Participant" means an employee who is eligible to participate in this Plan pursuant to Article I. (i) "Plan" means this UCAR Carbon Company Inc. Enhanced Retirement Income Plan, as amended and restated January 1, 1997. (j) "Retirement Plan" means the UCAR Carbon Retirement Plan. (k) "Supplemental Retirement Income Plan" means the UCAR Carbon Company Inc. Supplemental Retirement Income Plan. SECTION 2. The Corporation may amend or terminate this Plan at any time, but any such amendment or termination shall not adversely affect the rights of any Participant or survivor of any Participant then receiving benefits under this Plan, or the vested rights of any Participant or survivor. SECTION 3. Except to the extent required by law, no assignment of the rights and interests of a Participant or survivor under this Plan will be permitted nor shall such rights be subject to attachment or other legal processes for debts. SECTION 4. This Plan is intended to be unfunded for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended and the right of a Participant and a survivor of a Participant shall be no greater than the right of an unsecured general creditor of the Corporation. SECTION 5. For purposes of this Plan, a Participant will be considered retired on the first day of the month following the last month in which such Participant is employed. SECTION 6. The Corporation may satisfy all or any part of its obligation to provide benefits hereunder by purchasing, and distributing to a Participant, or survivor, an annuity from an insurance carrier to provide such benefits. SECTION 7. Neither selection as a Participant or participation in this Plan shall affect the Corporation's right to discharge any Participant. UCAR CARBON COMPANY INC. By: /s/ Fred C. Wolf ______________________________ EX-10.40 28 EXHIBIT 10.40 [U.S. Version] [Date] - ------------------------- - ------------------------- Dear _____________________: The Board of Directors (the "Board") of UCAR International Inc. (the "Corporation") authorized your participation in the arrangements set forth between UCAR Carbon Company (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. 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 Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 ("Act") becomes the "beneficial owner" as defined in Rule 13d-3 under the Act of more than 22.5% of the then outstanding voting securities of the Corporation; (ii) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act acquires by proxy or otherwise the right to vote for the election of directors, on any merger or consolidation of the Corporation or for any other matter or question with respect to more than 22.5% of either the then outstanding Common Stock or 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 these purposes, "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 as directors 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, merger or consolidation of the Corporation (a "Business Combination"), unless, following such Business Combination, (a) all or substantially all of the "beneficial owners", as defined in Rule 13d-3 under the Exchange Act, of the outstanding Common Stock and the combined voting power of the outstanding voting securities of the Corporation, respectively, immediately prior to such Business Combination "beneficially own", as so defined, directly or indirectly, more than 50% of the outstanding common equity securities and the combined voting power of the outstanding voting securities of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such Business Combination owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries), respectively, in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding Common Stock of the Corporation and the combined voting power of the outstanding voting securities of the Corporation, respectively, (b) no "person" or "group", within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act (excluding any entity resulting from such Business Combination and any employee benefit plan (and related trust) of the Corporation, its subsidiaries or such entity) is the "beneficial owner", as defined in Rule 13 d-3 under the Exchange Act of more than 22.5% of either the then outstanding common equity securities of the entity resulting from such Business Combination or the combined voting power of the outstanding voting securities of such entity except to the extent that such beneficial ownership existed immediately prior to such Business Combination with respect to the Common Stock and combined voting power of outstanding 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 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 the time of the action of the Board approving of 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, whether held directly or indirectly through one or more subsidiaries (excluding any grant of any pledge, mortgage or security interest or any sale - leaseback or any similar transaction, but including any foreclosure sale); Provided, that, in the case of both clause (x) and (y) above, the divestiture of less than substantially all of the assets of the Corporation in one transaction or a series of related transactions, whether effected by sale, lease, exchange, transfer, spin-off, sale of the stock of or merger or consolidation of a subsidiary or otherwise, shall not constitute a Change in Control of the Corporation. Notwithstanding the foregoing, a Change in Control of the Corporation shall not be deemed to occur: (A) pursuant to clauses (i) and (ii) above, solely because more than 22.5% of the then outstanding Common Stock or the combined voting power of the then outstanding voting securities of the Corporation is held or acquired by one or more employee benefit plans (or releated trusts) maintained by the Corporation or its subsidiaries; or (B) pursuant to Subparagraph (v)(y) above, if the Board determines that any sale, lease, exchange or transfer does not involve substantially all of the assets 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 (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 and selected by you (or, if you are unable to make such selection, it shall be 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, without your express written consent, 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 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. Within three (3) days after your request, the Company shall notify you of the average percentage increase in base salary for all such employees of the Company 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 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 of any material fringe benefit enjoyed by you 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. 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: (i) 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 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 or the Corporation. 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 vacation pay accrued through the Date of Termination (including any banked vacation, 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 or a subsidiary of 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 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 payment or the value of any benefit received or to be received by you pursuant to any termination or layoff pay policy or plan of 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 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, 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 of 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 of 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, (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. (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 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 pay you your full base salary and accrued vacation pay (including any banked vacation, 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, 1999; provided, however, that commencing on January 1, 2000 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 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 first (1st) 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 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 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 the 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. 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). 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 CARBON COMPANY INC. By:------------------------------------------ Title: Vice President Agreed to this day of , 1999 - -------------------------- UCAR International Inc. agrees to be jointly and severally liable for the benefits required to be paid by the Company pursuant to the terms of this Agreement. Agreed and Accepted UCAR INTERNATIONAL INC. By:----------------------------------------- Title: Vice President Agreed to this day of , 1999 - -------------------------- [International Version] [Date] - -------------------------------- - -------------------------------- Dear --------------------: The Board of Directors (the "Board") of UCAR International Inc. (the "Corporation") authorized your participation in the arrangements set forth between (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. 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 Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 ("Act") becomes the "beneficial owner" as defined in Rule 13d-3 under the Act of more than 22.5% of the then outstanding voting securities of the Corporation; (ii) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act acquires by proxy or otherwise the right to vote for the election of directors, on any merger or consolidation of the Corporation or for any other matter or question with respect to more than 22.5% of either the then outstanding Common Stock or 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 these purposes, "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 as directors 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, merger or consolidation of the Corporation (a "Business Combination"), unless, following such Business Combination, (a) all or substantially all of the "beneficial owners", as defined in Rule 13d-3 under the Exchange Act, of the outstanding Common Stock and the combined voting power of the outstanding voting securities of the Corporation, respectively, immediately prior to such Business Combination "beneficially own", as so defined, directly or indirectly, more than 50% of the outstanding common equity securities and the combined voting power of the outstanding voting securities of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such Business Combination owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries), respectively, in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding Common Stock of the Corporation and the combined voting power of the outstanding voting securities of the Corporation, respectively, (b) no "person" or "group", within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act (excluding any entity resulting from such Business Combination and any employee benefit plan (and related trust) of the Corporation, its subsidiaries or such entity) is the "beneficial owner", as defined in Rule 13 d-3 under the Exchange Act of more than 22.5% of either the then outstanding common equity securities of the entity resulting from such Business Combination or the combined voting power of the outstanding voting securities of such entity except to the extent that such beneficial ownership existed immediately prior to such Business Combination with respect to the Common Stock and combined voting power of outstanding 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 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 the time of the action of the Board approving of 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, whether held directly or indirectly through one or more subsidiaries (excluding any grant of any pledge, mortgage or security interest or any sale - leaseback or any similar transaction, but including any foreclosure sale); Provided, that, in the case of both clause (x) and (y) above, the divestiture of less than substantially all of the assets of the Corporation in one transaction or a series of related transactions, whether effected by sale, lease, exchange, transfer, spin-off, sale of the stock of or merger or consolidation of a subsidiary or otherwise, shall not constitute a Change in Control of the Corporation. Notwithstanding the foregoing, a Change in Control of the Corporation shall not be deemed to occur: (A) pursuant to clauses (i) and (ii) above, solely because more than 22.5% of the then outstanding Common Stock or the combined voting power of the then outstanding voting securities of the Corporation is held or acquired by one or more employee benefit plans (or releated trusts) maintained by the Corporation or its subsidiaries; or (B) pursuant to Subparagraph (v)(y) above, if the Board determines that any sale, lease, exchange or transfer does not involve substantially all of the assets 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 and selected by you (or, if you are unable to make such selection, it shall be 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, without your express written consent, 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 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. Within three (3) days after your request, the Company shall notify you of the average percentage increase in base salary for all such employees of the Company 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 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 of any material fringe benefit enjoyed by you 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. 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 awaded 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: (i) 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 l, 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 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, 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 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), less the amount set forth in 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 payment or the value of any benefit received or to be received by you pursuant to any termination or layoff pay policy or plan of 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 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 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, 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, 1999; provided, however, that commencing on January 1, 2000 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 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 first (1st) 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 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 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 the 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. 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). 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, --------------------------------------------- By: ------------------------------------------ Title: --------------------------------------- Agreed to this day of , 1999 - -------------------------------- UCAR International Inc. agrees to be jointly and severally liable for the benefits required to be paid by the Company pursuant to the terms of this Agreement; provided, however, that UCAR International Inc. shall not be liable for any severance payments required to be made by the Company under the laws of the country in which you are employed. Agreed and Accepted UCAR INTERNATIONAL INC. By: ----------------------------------------- Title: Vice President Agreed to this day of , 1999 - ----------------------------- Each of the undersigned parties 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 against UCAR International Inc. arising out of or relating to this Agreement, and each of the undersigned parties hereby irrevocably agree that all claims in respect of such action or proceeding shall only be heard and determined in such State or Federal court sitting in the state of Delaware. UCAR INTERNATIONAL INC. By: ----------------------------------------- Title: Vice President Agreed to this day of , 1999 - --------------------------------- EX-18.1 29 KPMG EXHIBIT 18.1 Stamford Square 3001 Summer Street Stamford, CT 06905 February 26, 1999 UCAR International Inc. 39 Old Ridgebury Road Danbury, CT Gentlemen: We have audited the consolidated balance sheets of UCAR International Inc. and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 1998, and have reported thereon under date of February 26, 1999. The aforementioned consolidated financial statements and our audit report thereon are included in the Company's annual report on Form 10-K for the year ended December 31, 1998. As stated in Note 2 to those financial statements, the Company changed its method of accounting for the cost of certain U.S. inventories from the last-in first-out (LIFO) method to the first-in first-out (FIFO) method and states that the newly adopted accounting principle is preferable in the circumstances because it provides improved consistency in accounting for worldwide inventories and avoids potential distortions of future profits from anticipated decrements. In accordance with your request, we have reviewed and discussed with Company officials the circumstances and business judgment and planning upon which the decision to make this change in the method of accounting was based. With regard to the aforementioned accounting change, authoritative criteria have not been established for evaluating the preferability of one acceptable method of accounting over another acceptable method. However, for purposes of the Company's compliance with the requirements of the Securities and Exchange Commission, we are furnishing this letter. Based on our review and discussion, with reliance on management's business judgment and planning, we concur that the newly adopted method of accounting is preferable in the Company's circumstances. Very truly yours, /s/ KPMG LLP EX-21.1 30 EXHIBIT 21.1 Subsidiaries of UCAR International Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION INTERNATIONAL INC. - -------------------------------------------------------------------------------- 1. UCAR Global Delaware 100% Enterprises Inc. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION GLOBAL ENTERPRISES INC. - -------------------------------------------------------------------------------- 2. UCAR Carbon Company Inc. Delaware 100% - -------------------------------------------------------------------------------- 3. UCAR Holdings II Inc. Delaware 100% - -------------------------------------------------------------------------------- 4. UCAR Carbon S.A. Brazil 95.3%(a) - -------------------------------------------------------------------------------- 5. UCAR S.A. Switzerland 100%(b) - -------------------------------------------------------------------------------- 6. UCAR Holding S.A. Austria 67% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION CARBON COMPANY INC. - -------------------------------------------------------------------------------- 7. UCAR Holdings Inc. Delaware 100% - -------------------------------------------------------------------------------- 8. UCAR Limited United Kingdom 100%(c) - -------------------------------------------------------------------------------- 9. EMSA (Pty.) Ltd. South Africa 100% - -------------------------------------------------------------------------------- 10. Carbographite Limited South Africa 100% - -------------------------------------------------------------------------------- 11. UCAR International Trading Inc. Delaware 100% - -------------------------------------------------------------------------------- 12. UCAR Carbon Technology Corporation Delaware 100% - -------------------------------------------------------------------------------- 13. UCAR Carbon Foreign Sales Corporation Virgin Islands 100% - -------------------------------------------------------------------------------- 14. UCAR Composites Inc. California 100% - -------------------------------------------------------------------------------- 15. Union Carbide Grafito, Inc. New York 100% - -------------------------------------------------------------------------------- 16. Unicarbon Comercial Brazil 100% Ltda. - -------------------------------------------------------------------------------- 17. UCAR Carbon (Malaysia) Sdn. Bhd. Malaysia 100% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS II INC. - -------------------------------------------------------------------------------- 18. UCAR Holdings III Delaware 100% Inc. - -------------------------------------------------------------------------------- 19. UCAR Electrodos, S.L. Spain 100%(d) - -------------------------------------------------------------------------------- 20. UCAR Inc. Canada 100% - -------------------------------------------------------------------------------- 21. UCAR Elektroden GmbH Germany 70% - -------------------------------------------------------------------------------- 22. UCAR Holdings Limited United Kingdom 100% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS GMBH - -------------------------------------------------------------------------------- 23. UCAR Grafit OAO Russia 96.27% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 24. UCAR Mexicana, S.A. de C.V. Mexico 100%(e) - -------------------------------------------------------------------------------- 25. UCAR S.p.A. Italy 100%(f) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS S.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 26. UCAR S.N.C. France 100%(g) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 27. Carbone Savoie France 70% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION MEXICANA, S.A. DE C.V. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 28. UCAR Carbon Mexicana, S.A. de C.V. Mexico 100%(h) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR CARBON NAME OF SUBSIDIARY INCORPORATION MEXICANA, S.A. DE C.V. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 29. Servicios Administratoes Mexico 100%(i) Carmex, S.A. de C.V. - -------------------------------------------------------------------------------- 30. Servicios DYC, S.A. de C.V. Mexico 100%(j) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OWNERSHIP BY UCAR S.P.A. NAME OF SUBSIDIARY INCORPORATION OWNERSHIP BY UCAR S.P.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 31. UCAR Energia S.r.l. Italy 100% - -------------------------------------------------------------------------------- 32. UCAR Specialties S.r.l. Italy 100% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR CARBON NAME OF SUBSIDIARY INCORPORATION S.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 33. UCAR Produtos de Carbono S.A. Brazil 99.9%(k) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UNICARBON NAME OF SUBSIDIARY INCORPORATION COMERCIAL LTDA. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 34. UCAR Carbon S.A. Brazil 2.33%(l) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF NAME OF SUBSIDIARY INCORPORATION OWNERSHIP BY UCAR S.A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 35. UCAR Holding GmbH Austria 33% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- JURISDICTION OF OWNERSHIP BY UCAR NAME OF SUBSIDIARY INCORPORATION HOLDINGS LIMITED - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 36. UCAR Holdings S.A. France 100%(m) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (a) 95.3% owned by UCAR Global Enterprises Inc. 2.33% owned by Unicarbon Comercial Ltda. Third parties own the other shares of UCAR Carbon S.A. (b) 99.9% owned by UCAR Global Enterprises Inc. Nominees own the other three shares of UCAR S.A. (c) 99.9% owned by UCAR Carbon Company Inc. A nominee owns the other share of UCAR Limited. (d) 99.9% owned by UCAR Holdings II Inc. UCAR Carbon Company Inc. owns the other 0.1% of UCAR Electrodos S.L. (e) 99.9% owned by UCAR Holdings Inc. UCAR Carbon Company Inc. owns the other share of UCAR Mexicana, S.A. de C.V. (f) 99.9% owned by UCAR Holdings Inc. UCAR Carbon Company Inc. owns the other 0.1% of UCAR S.p.A. (g) 99.9% owned by UCAR Holdings S.A. UCAR Holdings III Inc. owns the other share of UCAR S.N.C. (h) 99.9% owned by UCAR Mexicana, S.A. de C.V. UCAR Carbon Company Inc. owns the other 0.1% of UCAR Carbon Mexicana, S.A. de C.V. (i) 99.9% owned by UCAR Carbon Mexicana, S.A. de C.V. A nominee owns the other shares of Servicios Administratoes Carmex, S.A. de C.V. (j) 99.9% owned by UCAR Carbon Mexicana, S.A. de C.V. A nominee owns the other shares of Servicios DYC, S.A. de C.V. (k) 99.9% owned by UCAR Carbon S.A. Third parties own the other shares of UCAR Productos de Carbono S.A. (l) See note (a). (m) 99.4% owned by UCAR Holdings Limited. UCAR International Inc., UCAR Global Enterprises Inc., UCAR Carbon Company Inc. and three nominees own the other shares of UCAR Holdings S.A. EX-23.1 31 KPMG EXHIBIT 23.1 Stamford Square 3001 Summer Street Stamford, CT 06905 Consent of Independent Auditors The Board of Directors UCAR International Inc. We consent to the incorporation by reference in each of the Registration Statements of UCAR International Inc. on Form S-3 (No. 333-26097), and on Form S-8 (Nos. 33-95546, 33-95548, 33-95550, 333-02560, 333-02598, and 333-36653) of our report dated February 26, 1999, relating to the consolidated balance sheets of UCAR International Inc. and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of income, Stockholders' equity and cash flows and related schedule for each of the years in the three-year period ended December 31, 1998, appearing and incorporated by reference in the Annual Report on Form 10-K of UCAR International Inc for the year ended December 31, 1998. /s/ KPMG LLP March 26, 1999 EX-27.1 32
5 THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF UCAR INTERNATIONAL INC.,INCLUDED IN ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1998 DEC-31-1998 58 11 203 5 264 578 1,220 752 1,137 375 722 0 0 0 (287) 1,137 947 947 604 604 155 1 73 4 32 (28) 0 (7) 0 (37) (0.83) (0.83)
EX-27.2 33
5 RESTATED FINANCIAL DATA SCHEDULE FOR THE FISCAL YEARS ENDED DECEMBER 31, 1997 AND 1996 1,000,000 12-MOS 12-MOS DEC-31-1997 DEC-31-1996 DEC-31-1997 DEC-31-1996 58 95 20 0 248 191 6 6 235 205 595 512 1,289 1,087 724 653 1,262 1,017 501 249 604 581 0 0 0 0 0 0 (227) 17 1,262 1,017 1,097 948 1,097 948 686 583 686 583 349 8 0 0 64 61 (122) 207 39 68 (161) 139 0 0 0 0 0 0 (160) 145 (3.49) 3.15 (3.49) 3.00 Restated for change in accounting for the cost of certain U.S. inventories from the last-in first-out method (LIFO) to the first-in first-out (FIFO) method.
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