-----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, MkDSFh9DjUyG1X0bxk0a4JA/Z64sD7hj7syQ+kp6GIvOXWiTu8vbhRqblIEvgALG BQpv7v2UkjM06Anoc/MgsQ== 0000932440-04-000093.txt : 20040315 0000932440-04-000093.hdr.sgml : 20040315 20040315170534 ACCESSION NUMBER: 0000932440-04-000093 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAFTECH INTERNATIONAL LTD 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13888 FILM NUMBER: 04670303 BUSINESS ADDRESS: STREET 1: 1521 CONCORD PIKE STREET 2: SUITE 301 CITY: WILMINGTON STATE: DE ZIP: 19803 BUSINESS PHONE: 3027788227 MAIL ADDRESS: STREET 1: 1521 CONCORD PIKE STREET 2: SUITE 301 CITY: WILMINGTON STATE: DE ZIP: 19803 FORMER COMPANY: FORMER CONFORMED NAME: UCAR INTERNATIONAL INC DATE OF NAME CHANGE: 19941011 10-K 1 gti_mar04-10k.htm FORM 10-K gti_kcoversht-toc.htm

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, 2003

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
_________________

GRAFTECH INTERNATIONAL LTD
(Exact name of registrant as specified in its charter)


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

_________________


1521 Concord Pike Brandywine West, Suite 301 Wilmington, Delaware (Address of principal executive offices)		19803 (Zip Code)

Registrant’s telephone number, including area code: (302) 778-8227
_________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
Common stock, par value $.01 per share		New York Stock Exchange
Preferred Share Purchase Rights		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. |_|

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes |X| No |_|

The aggregate market value of our outstanding common stock held by non-affiliates, computed by reference to the closing price of our common stock on June 30, 2003, was approximately $332 million. On February 27, 2004, 93,735,669 shares of our common stock were outstanding.
_________________

DOCUMENTS INCORPORATED BY REFERENCE

The information required under Part III is incorporated by reference from the GrafTech International Ltd. Proxy Statement for the Annual Meeting of Stockholders to be held on May 26, 2004, which will be filed on or about April 14, 2004.

	Page
PART I	1
Preliminary Notes	1
Item 1. Business	5
Introduction	5
Business Strategies	8
Our Lines of Business	11
Synthetic Graphite Line of Business	11
Natural Graphite Line of Business	17
Advanced Carbon Materials Line of Business	20
Production Planning, Product Manufacturing and Distribution	21
Production Planning	22
Manufacturing	22
Distribution	26
Sales and Customer Service	26
Technology	27
Strategic Alliances	30
Competition	31
Environmental Matters	32
Insurance	34
Employees	34
Corporate History	35
Risk Factors and Forward Looking Statements	36
Risks Relating to Us	36
Risks Relating to our Securities and Pledges of Our Assets	48
Forward Looking Statements	58
Item 2. Properties	61
Item 3. Legal Proceedings	62
Item 4. Submission of Matters to a Vote of Security Holders	62
PART II	63

-i-

TABLE OF CONTENTS
(continued)

	Page
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters	63
Market Information	63
Dividend Policies and Restrictions	63
Equity Compensation Plan Information	65
Item 6. Selected Financial Data	66
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	72
Repositioning Our Global Manufacturing Network and Other Initiatives	72
Recent Strategic Alliance Developments	76
Global Economic Conditions and Outlook	77
Financing Transactions	81
Litigation Against Our Former Parent Companies Initiated by Us	82
Antitrust Litigation Against Us	83
Customer Base	86
Results of Operations	86
Effects of Inflation	91
Currency Translation and Transactions	92
Effects of Changes in Currency Exchange Rates	92
Liquidity and Capital Resources	94
Restrictions on Dividends and Stock Repurchases	101
Costs Relating to Protection of the Environment	101
Critical Accounting Policies	102
Recent Accounting Pronouncements	104
Description of Our Financing Structure	104
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	106
Item 8. Financial Statements and Supplementary Data	110
Independent Auditors' Report	111
CONSOLIDATED BALANCE SHEETS	112
CONSOLIDATED STATEMENTS OF OPERATIONS	113

-ii-

TABLE OF CONTENTS
(continued)

	Page
CONSOLIDATED STATEMENTS OF CASH FLOWS	114
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT	115
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	116
(1) Discussion of Business and Structure	116
(2) Summary of Significant Accounting Policies	117
(3) Financial Instruments	127
(4) Segment Reporting	130
(5) Long-Term Debt and Liquidity	132
(6) Income Taxes	141
(7) Other Expense (Income), Net	144
(8) Interest Expense	145
(9) Supplementary Balance Sheet Detail	145
(10) Leases and Other Long Term Obligations	146
(11) Benefit Plans	147
(12) Restructuring and Impairment Charges	151
(13) Management Compensation and Incentive Plans	154
(14) Contingencies	158
(15) Earnings Per Share	164
(16) Stockholder Rights Plan	165
(17) Financial Information About the Parent, the Issuer, the Guarantors and the Subsidiaries Whose Securities Secure the Senior Notes and Related Guarantees	165
(18) Discontinued Operations	173
(19) Subsequent Events	174
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	184
Item 9A. Controls and Procedures	184
PART III	185
Items 10 to 14 (inclusive)	185
Executive Officers and Directors	185

-iii-

TABLE OF CONTENTS
(continued)

	Page
Executive Officers	185
Directors	186
NYSE Certification	188
PART IV	188
Item 15 Exhibits, Financial Statement Schedules, and Reports on Form 8-K	188
SIGNATURES	196
EXHIBIT INDEX	198

-iv-

PART I

Preliminary Notes

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

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

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

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

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

“GrafTech Finance” refers to GrafTech Finance Inc. only. GrafTech Finance is a direct wholly owned, special purpose finance subsidiary of GTI and the borrower under our principal senior secured bank credit facilities (as amended, the “Senior Facilities”), which includes our principal revolving credit facility (the “Revolving Facility”). GrafTech Finance is the issuer of the Senior Notes and a guarantor of the Debentures. Prior to June 7, 2002, GrafTech Finance was named UCAR Finance Inc.

“GrafTech Global” refers to GrafTech Global Enterprises Inc. only. GrafTech Global is a direct wholly owned subsidiary of GTI and the direct or indirect holding company for all of our operating subsidiaries. GrafTech Global is a guarantor of the Senior Notes, the Debentures and the Senior Facilities. Prior to June 7, 2002, GrafTech Global Enterprises Inc. was named UCAR Global Enterprises Inc.

“GTI”refers to GrafTech International Ltd. only. GTI is our public parent company and the issuer of the Debentures and our publicly traded common stock and the related preferred share purchase rights registered under the Exchange Act and listed on the NYSE. GTI is a guarantor of the Senior Notes and the Senior Facilities. Prior to our Annual Meeting of Stockholders for 2002, GTI was named UCAR International Inc.

“Subsidiaries”refers to those companies that, at the relevant time, are or were majority owned or wholly owned directly or indirectly by GTI or its predecessors to the extent that those predecessors’ activities related to the graphite and carbon business. All of GTI’s subsidiaries have been wholly owned (with de minimis exceptions in the case of certain foreign subsidiaries) from at least January 1, 2000 through December 31, 2003, except for:

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

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

Our 100% owned Brazilian cathode manufacturing operations were contributed to Carbone Savoie and, as a result, became 70% owned on March 31, 2001.

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

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

Presentation of Financial, Market and Legal Data. We present our financial information on a consolidated basis. This means that we consolidate financial information for all subsidiaries where our ownership is greater than 50%. As a result, the financial information for Carbone Savoie and AET is consolidated on each line of the Consolidated Financial Statements and the equity of the other owners in those subsidiaries is reflected on the lines entitled “minority stockholders’ equity in consolidated entities” and “minority stockholders’ share of income.” We use the equity method to account for 50% or less owned interests, including our 25% owned joint venture in China with Jilin Carbon Co. Ltd. (together with its affiliates, “Jilin”).

All financial information at and for periods ended on or before December 31, 2002 has been restated to reflect changes in accounting for reportable segments (as required by Statement of Financial Accounting Standards (“SFAS”) No. 131 to reflect changes in the organization of our businesses effective January 2003), accounting for discontinued operations (as required by SFAS No. 144 to reflect the sale of our non-strategic composite tooling business in June 2003) and reclassification of extraordinary items and corresponding adjustments to provisions for income taxes (as required by SFAS No. 145, which we adopted effective January 2003). All financial information at and for periods ended on subsequent dates was originally and is currently being reported on the same basis as the restated financial information. The restatement does not change previously reported consolidated net income, basic or diluted earnings per share, consolidated total assets or liabilities, or consolidated cash flows from operating activities, investment activities or financial activities.

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

The legal and tax restructuring and global realignment mentioned in this Report are part of the corporate realignment of our subsidiaries. The tax benefits from the realignment have been recorded separately from expenses to implement the realignment (which are included in other (income) expense, net, on the Consolidated Statements of Operations).

Unless otherwise noted, when we refer to dollars, we mean U.S. dollars.

All cost savings and reductions relating to our 1998 enhanced global restructuring and rationalization plan are estimates based on a comparison, with respect to provision for income taxes, to costs in 1998 or, for all other costs, to costs in the 1998 fourth quarter (annualized). Calculation of cost savings under the 1998 plan includes the effects of changes in currency exchange rates and production levels. All cost savings and reductions relating to our 2002 major cost savings plan are estimates or targets based on a comparison to costs in 2001. For purposes of calculating the cost savings related to the 2002 plan, savings relating to graphite electrode production cost per metric ton are determined based on annual graphite electrode production volume of about 180,000 metric tons and certain other savings are determined based on annual overhead costs (which includes research and development expense, but excludes variable compensation expense) of $90 million, annual interest expense of $60 million and an effective income tax rate of 45% (before taking into account the corporate realignment of our subsidiaries). These amounts approximate actual amounts in 2001. Calculation of cost savings under the 2002 plan excludes the effects of the changes in currency exchange rates between the euro and the dollar, but includes the effects of changes in currency exchange rates between other currencies and includes the effects of changes in production levels.

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

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

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

Unless otherwise noted, references to “market shares” are based on sales volumes in 2003, to “major product lines” mean graphite electrodes, cathodes and natural graphite products, and to “natural graphite products” does not include mined natural graphite flake.

Unless otherwise noted, references to “capacity utilization rates” for the graphite electrode industry refer to actual or effective annual manufacturing capacity as opposed to theoretical or rated annual manufacturing capacity and references to capacity utilization rates in excess of 95% mean maximum or virtually maximum operating levels or utilization rates. In determining capacity utilization rates, we have used an average of available capacity during the course of the relevant year.

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

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

Item 1. Business

Introduction

We are one of the world’s largest manufacturers and providers of high quality synthetic and natural graphite and carbon products and related technical and research and development services. We manufacture graphite electrodes and cathodes, products essential to the production of electric arc furnace steel and aluminum. We also manufacture thermal management, fuel cell and other specialty graphite and carbon products for, and provide services to, the electronics, power generation, semiconductor, transportation, petrochemical and other metals markets. We have 13 state-of-the-art manufacturing facilities strategically located on four continents, in more diverse locations than the facilities of any of our competitors. We have customers in about 60 countries, including industry leaders such as Arcelor, Nucor and Bao Steel in steel, Alcoa, Pechiney and Alcan in aluminum, Cisco, IBM and Intel in electronics, MEMC Electronic Materials in semiconductors and Ballard Power Systems in fuel cells.

We have the largest share of the worldwide market for electrodes and cathodes. We have a uniquely positioned global manufacturing network, which we believe cannot be replicated by any of our competitors due to the capital investment, technology and process know-how required to do so. We believe that our network has the largest manufacturing capacity, has one of the lowest manufacturing cost structures of all of our major competitors and delivers the highest level quality products. Over the last few years, we have rationalized our graphite electrode and cathode facilities and redeployed capacity to larger facilities in lower cost countries. This allows us to achieve significant increases in productivity and output from our existing assets, including economies of scale and other cost savings that we believe will increase as we grow our sales. We believe that our network provides us with the operational flexibility to source customer orders from the facility that optimizes our profitability and, with the continuing consolidation in the steel and aluminum industries, provides us a significant growth opportunity in serving larger multi-plant global customers.

We believe that we are the industry leader in graphite and carbon materials science and high temperature processing know-how, and that we operate the premier research, development and testing facilities in our industry. We have over 100 years of experience in the research and development of these technologies, and our intellectual property portfolio is extensive.

We believe that our technological capabilities for developing products with superior thermal, electrical and physical characteristics provide a differentiating advantage. These capabilities have enabled us to accelerate development and commercialization of our technologies to exploit markets with high growth potential for us, including products for electronic thermal management and fuel cell applications.

We have developed, over the past two years, natural graphite electronic thermal management products and secured product approvals and purchase commitments from a wide range of industry leaders, such as Cisco, IBM and Intel, based on superior thermal performance, weight, adaptability and cost characteristics as compared to alternative products. Thermal management products are designed to dissipate heat generated by electronic devices. We expect demand for our products to grow as industry trends continue toward smaller, more powerful electronic devices that generate more heat and require more advanced thermal management solutions.

We are the leading manufacturer of natural graphite products for proton exchange membrane (“PEM”) fuel cells and fuel cell systems. Fuel cells provide environmentally friendly electrical power generation. We expect continued commercialization of fuel cells, encouraged by current governmental programs and driven by concerns relating to the U.S. electrical power grid, environmental protection, foreign oil dependency and other factors. We estimate that the market for our fuel cell products in 2012 will exceed $500 million. About 85% of the 175 fuel cell vehicles that were operational worldwide in 2003 and are expected to be operational in 2004 were or will be powered by Ballard Power Systems fuel cells. Our products are essential components of those fuel cells. Ballard Power Systems, the world leader in PEM fuel cells, is our strategic partner under an exclusive product supply agreement that continues through 2016 and an exclusive collaboration agreement that continues through 2011.

Lines of Business. We have three lines of business: synthetic graphite; natural graphite; and advanced carbon materials. Synthetic graphite constitutes its own reportable segment, and natural graphite and advanced carbon materials together constitute our other reportable segment. See Note 4 to the Consolidated Financial Statements for certain financial information regarding our reportable segments.

Synthetic Graphite. Our synthetic graphite line of business manufactures and delivers high quality graphite electrodes, cathodes and advanced synthetic graphite products as well as related services. Electrodes and cathodes are key components of the conductive power systems used to produce steel, aluminum and other non-ferrous metals. Advanced synthetic graphite products include primary and specialty products for transportation, semiconductor and other markets. We believe there is currently no commercially viable substitute for graphite electrodes in electric arc furnace steel production or for cathodes in aluminum smelting.

Graphite electrodes are consumed primarily in electric arc furnace steel production, the steel making technology used by all “mini-mills,” typically at a rate of one graphite electrode every eight to ten operating hours (“a stick a shift”). Mini-mills constitute the higher long term growth sector of the steel industry.

Cathodes are used in aluminum smelting furnaces, and demand for cathodes is driven by construction of new smelters and relines and upgrades of existing smelters. We operate our cathode business through a 70% owned joint venture with Pechiney, the world’s recognized leader in aluminum smelting technology. In late 2003, Pechiney was acquired by Alcan, one of the world’s largest aluminum producers.

Natural Graphite. We invented natural graphite products, consisting of advanced flexible graphite and flexible graphite. Advanced flexible graphite products include highly engineered thermal interface products, heat spreaders and heat sinks for electronic device applications. We also manufacture highly engineered flow field plates, gas diffusion layers and other advanced flexible graphite products for PEM fuel cells and fuel cell systems for use in the power generation and transportation markets. Flexible graphite products include gasket and sealing material for high temperature and corrosive environments in automotive, petrochemical and other applications. We are one of the world’s largest manufacturers of natural graphite products for all of these uses and applications.

Advanced Carbon Materials. Our advanced carbon materials line of business includes carbon electrodes and refractories as well as related services. Carbon electrodes are used in the production of ferro-alloys and silicon metal, a raw material primarily used in the manufacture of aluminum. Refractories are used primarily as submerged arc and other furnace hearth walls and bottoms.

Building Sustainable Competitive Advantages. Over the past few years through late 2002, adverse global and regional economic conditions negatively impacted many of our markets. Our management team responded to these challenges and transformed our operations, building sustainable competitive advantages that enable us to compete successfully in our major product lines regardless of changes in economic conditions, to realize enhanced performance as economic conditions improve and to exploit growth opportunities from our intellectual property portfolio. During this period, we successfully implemented the following initiatives:

Repositioned Global Manufacturing Network. We repositioned our global manufacturing network by, among other things, shutting down four of our higher cost graphite electrode manufacturing facilities and redeploying capacity to our six remaining larger, lower cost, strategically located facilities. The repositioning of our network allows us to deliver the same graphite electrode sales volume that we delivered over the past few years with a significantly lower fixed cost base. With these actions and our proprietary process and technological improvements, we now have the capability, depending on product demand and mix, to manufacture more than 220,000 metric tons of graphite electrodes from our existing assets. We also shutdown cathode and advanced synthetic graphite products manufacturing capacity and redeployed it to lower cost facilities and expanded our advanced flexible graphite manufacturing capacity. Together, since 1998, these repositioning actions resulted in a headcount reduction of over 30% and contributed a majority of the achieved cost savings described in this Report.

Redesigned Global Manufacturing, Marketing and Sales Processes. We have evaluated virtually every aspect of our global supply chain, and we have redesigned and implemented changes to our global manufacturing, marketing and sales processes to leverage the strengths of our repositioned network. Among other things, we have eliminated manufacturing bottlenecks, improved product and service quality and delivery reliability, expanded our range of products, and improved our global sourcing and product mix for our customers. Since 1999, we have reduced annual customer compensation for graphite electrode quality claims from $3 million to less than $1 million. We also redirected marketing and sales activities to better service the needs of both existing and new customers. We estimate that we have increased our share of the worldwide market for graphite electrodes by more than 10%, from 19% in 2001 to about 21% in 2003.

Accelerated Technology Development. We analyzed our intellectual property portfolio to identify new product opportunities in markets with high growth potential for us, redirected research to enhance and exploit our portfolio and accelerated development of products for those markets. Among other things, we developed patented advanced pin technology for graphite electrodes, patented processing technology for high performance graphite cathodes, products for PEM fuel cells that are enabling fuel cell commercialization, and new electronic thermal management technologies with over 140 product approvals from industry leading strategic partners, customers and others.

In September 2003, we received R&D Magazine’s prestigious R&D 100 Award, granted to identify the 100 most technologically significant products and advancements each year, for our achievements in electronic thermal management heat sink products.

Achieved Cost Savings. From 1998 through December 2001, we achieved recurring annual pretax cost savings of $132 million. From January 2002 through December 31, 2003, we achieved additional recurring pretax cost savings of $33 million. In addition to the rationalization of our facilities, we have, among other things, redesigned benefit plans, completed information technology outsourcing, and consolidated and streamlined administration and other activities. We believe that our cost savings programs have also enabled us to achieve one of the lowest manufacturing cost structure of all of our major competitors.

Business Strategies

Our goal is to create stockholder value by maximizing cash flow from operations, and our business strategies are designed to expand upon the competitive advantages that our initiatives have created.

Leveraging Our Unique Global Manufacturing Network. We believe that our unique global manufacturing network provides us with significant competitive advantages in costs and product quality, proximity to customers, timely and reliable delivery and operational flexibility to adjust product mix to meet the diverse needs of a wide range of customers. We believe we can further exploit this advantaged manufacturing network by redirecting our marketing and sales efforts toward and focusing our superior technical and customer service capabilities on:

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

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

Our activities have a customer driven focus, and we continually seek to identify customer needs and adjust our products and services to better service those needs. We believe that, in many cases, the growing larger global customer created by the continuing consolidation trend within the steel and aluminum industries are more creditworthy than other customers and that we are able to better manage our exposure to trade credit risk as we increase the percentage of our total net sales sold to these customers.

We believe that our graphite electrode and cathode businesses have the leading market shares in the world and that, in 2003, our worldwide market share was:

about 21% in graphite electrodes;

about 25% in carbon electrodes; and

about 14% in cathodes.

We sell these products in every major geographic market. Sales of these products outside the U.S. accounted for about 67% of net sales in 2001, 69% of net sales in 2002 and 67% of net sales in 2003. No single customer or group of affiliated customers accounted for more than 5% of our total net sales in 2001, 2002 and 2003.

We have a strategic alliance with Pechiney, the world’s recognized leader in aluminum smelting technology. In late 2003, Pechiney was acquired by Alcan, one of the world’s largest aluminum producers. We believe that this alliance strengthens our position as the quality leader in the low cost production of high quality graphite cathodes. We believe that our advanced graphite cathode technology is enabling us to increase our market share of graphite cathodes sold upon the commencement of operation of the new, more efficient aluminum smelting furnaces that are being built as well as in substitution for carbon cathodes in relines and upgrades of existing smelting furnaces.

We believe that we are the manufacturer best positioned to supply natural graphite products to the electronic thermal management and fuel cell markets. We are one of the world’s largest manufacturers of natural graphite for these markets as well as for automotive and petrochemical applications. We believe that, in 2003, our worldwide market share for natural graphite products was about 23%. We believe that we operate the most technologically sophisticated advanced natural graphite production line in the world. We have strategic alliances with leading chip makers and others in the electronics industry and with Ballard Power Systems, the world leader in PEM fuel cell technology.

Delivering Exceptional and Consistent Quality. We believe that our products are among the highest quality products available in our industry. We have been awarded preferred or certified supplier status by many major steel and aluminum companies and have received numerous technological innovation and other awards by industry groups, customers and others. Using our technological capabilities, we continually seek to improve the consistent overall quality of our products and services, including the performance characteristics of each product, the uniformity of the same product manufactured at different facilities and the expansion of the range of our products. We believe that improvements in overall quality create significant efficiencies for us, provide us the opportunity to increase sales volumes and market share, and create market opportunities for us and production efficiencies for our customers.

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

Accelerating Commercialization of Advantaged Technologies. We believe that our leading technological and manufacturing capabilities and strengths provide us with a significant growth opportunity as well as a competitive advantage. We seek to exploit these capabilities across all of our businesses, to improve existing products, such as supersize graphite electrodes used in the most demanding electric arc furnace steel production furnaces and high performance graphite cathodes that have become the preferred technology in the industry, and to develop and commercialize new products for markets with high growth potential for us. We analyzed our intellectual property portfolio to identify new product opportunities in markets with high growth potential for us, redirected research to enhance and exploit our portfolio and accelerated development of products for those markets. Among other things, we developed patented advanced pin technology for graphite electrodes, patented processing technology for high performance graphite cathodes, products for PEM fuel cells that are enabling fuel cell commercialization, and new electronic thermal management technologies with over 140 product approvals from industry leading strategic partners, customers and others.

We also believe that our strategic partners have entered into alliances with us due to, among other things, the strength of our technology and our research and development capabilities.

Pursuing Cost Savings. In January 2002, we announced a major cost savings plan that we believe is one of the most aggressive cost reduction plan being implemented in our industry. We are targeting cumulative recurring annual pretax cost savings of $60 million in 2004 and $80 million in 2005. Savings achieved under the 2002 plan are additive to those which we achieved by the end of 2001 under our 1998 global restructuring and rationalization plan. We achieved recurring pretax cost savings of $19 million in 2003, for total cumulative savings of $33 million since January 2002.

As part of the 2002 plan, we are continuing to implement global business and work process rationalization and transformation initiatives, including:

the streamlining of our organizational structure within our three major lines of business;

the consolidation and streamlining of order fulfillment, purchasing, finance and accounting, and human resource processes;

the identification and implementation of outsourcing opportunities;

the improvement in performance through realignment and enterprise-wide standardization of supply chain processes and systems; and

the improvement of interfaces and information technology infrastructures with trading partners.

These activities are targeted for completion by the end of 2005.

Under the 2002 plan, we have sold and intend to sell real estate, non-strategic businesses and certain other non-strategic assets. Through December 31, 2003, we have completed sales generating net proceeds aggregating $24 million. We anticipate that the aggregate estimated pretax cash proceeds from these sales will total about $50 million by the end of 2004. We believe that these cost savings and asset sales will further enhance our performance.

Our Lines of Business

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

Synthetic Graphite Line of Business

Our synthetic graphite line of business, which had net sales of $559 million in 2001, $538 million in 2002 and $639 million in 2003, manufactures and delivers high quality graphite electrodes, cathodes and advanced synthetic graphite products as well as related services. Graphite electrodes accounted for about 75% of the net sales of this line of business in 2003. Cathodes are manufactured by our subsidiary, Carbone Savoie, and accounted for about 15% of the net sales of this line of business in 2003.

We estimate that, in 2003, the worldwide market for graphite electrodes and cathodes was about $2.6 billion. Customers for these products are located in all major geographic markets.

Graphite Electrodes.

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

basic oxygen furnace steel production (sometimes called "integrated steel production"); and

electric arc furnace steel production.

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

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

Electric arc furnaces that produce steel typically range in size from those that produce about 25 metric tons of steel per production cycle to those that produce about 150 metric tons per production cycle. Electric arc furnaces operate using either alternating 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 depends primarily on the efficiency and productivity of the furnace. Therefore, demand for graphite electrodes is directly related to the amount and efficiency of electric arc furnace steel production.

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

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

Electric arc furnace steel production has, for many years, been the higher long term growth sector of the steel industry, at an estimated average annual growth rate of about 3%. There are currently in excess of 2,000 electric arc steel production furnaces operating worldwide. Worldwide electric arc furnace steel production grew from about 90 million metric tons in 1970 to 279 million metric tons in 2001, 299 million metric tons in 2002 and 305 million metric tons in 2003. As a percentage of total steel production, worldwide electric arc furnace steel production grew from about 14% of total steel production in 1970 to about 33% of total steel production in 2001, about 33% of total steel production in 2002 and about 32% of total steel production in 2003. We estimate that steel makers worldwide added net new electric arc furnace steel production capacity of about 11 million metric tons in 2001, about 15 million metric tons in 2002 and about 10 million metric tons in 2003. We believe that a portion of the new capacity added in the past three years has not yet become operational. We are aware of about 28 million metric tons of announced new electric arc furnace steel production capacity that is scheduled to be added in 2004 through 2006.

An electric arc furnace used for steel production provides significant operational flexibility. It can be shutdown and restarted relatively quickly compared to a basic oxygen furnace in response to changing market dynamics. As a result, electric arc furnace steel producers are better able to adjust production to respond to changes in demand and prices for steel on a regional and global basis. The following table illustrates the growth in electric arc steel production since 1970.

Worldwide steel production
(Millions of metric tons)

Sources: International Iron and Steel Institute and GTI estimates

We believe that, as global economic conditions improve, electric arc furnace steel production will continue to grow at an average annual long term growth rate of about 3% to 4%.

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 the significantly lower capital requirements to construct a mini-mill as compared to an integrated steel production plant and to improvements in the cost effectiveness and operating efficiency of electric arc furnace steel making. We believe that growth has also been due to the fact that, as a result of technical advances, electric arc furnace steel makers are capable of producing some of the higher quality steel grades used in flat products that have historically been produced by basic oxygen furnace steel makers.

The improved efficiency of electric arc furnaces has resulted in a decrease in the average rate of consumption of graphite electrodes per metric ton of steel produced in electric arc furnaces (called “specific consumption”). We estimate that specific consumption declined from about 4.3 kilograms of graphite electrodes per metric ton of steel produced in 1990 to about 2.3 kilograms per metric ton in 2003. We believe that the decline in specific consumption will continue at a more gradual pace, on average, as the costs (relative to the benefits) increase for electric arc furnace steel makers to achieve further efficiencies in specific consumption. We further believe that the rate of decline in the future will be impacted by the addition of new electric arc furnace steel making capacity. To the extent that this new capacity replaces old capacity, it has the effect of reducing industry wide specific consumption due to the efficiency of new electric arc furnaces. To the extent that this new capacity increases industry wide electric arc furnace steel production capacity and that capacity is utilized, it creates additional demand for graphite electrodes. While we believe that the rate of decline of specific consumption over the long term has become lower, we believe that there was a slightly greater decline in 2001 than would otherwise have been the case due to the shutdown of older, less efficient electric arc furnaces primarily due to industry rationalization and weak global and regional economic conditions.

The changes in electric arc furnace steel production reflected in the preceding table resulted in corresponding changes in demand for graphite electrodes. Graphite electrode demand is expected to grow over the long term at an estimated average annual growth rate of about 1% to 2% based on the anticipated growth of electric arc furnace steel production and decline in specific consumption described above. Other than in China, for which reliable information is generally not available, we believe that the graphite electrode industry manufacturing capacity utilization rate worldwide was about 84% in 2001, about 93% in 2002 and about 97% in 2003 and that, in 2003, graphite electrode manufacturing capacity worldwide was about 750,000 metric tons.

Production Capacity. Currently, there is only one other global manufacturer and about ten other notable regional or local manufacturers of graphite electrodes. There have been no entrants in the graphite electrode industry for more than 50 years.

Since 1998, we have reduced our graphite electrode manufacturing capacity by about 55,000 metric tons, net of the expansion of our facility in Mexico and incremental expansions in our other facilities. We shutdown four graphite electrode manufacturing facilities in Canada, Germany, the U.S. and Italy, and redeployed capacity to certain of our larger, lower cost, strategically located facilities in Mexico, South Africa and Spain. In addition, from 1998 through 2003, two of our competitors reduced their annual graphite electrode manufacturing capacity. Their announced net reductions totaled more than 35,000 metric tons. Two of our graphite electrode competitors, who had about 60,000 metric tons of annual graphite electrode manufacturing capacity, filed for bankruptcy protection. These competitors were liquidated, and the competitor in the U.S. sold a portion of its graphite electrode manufacturing capacity (which we estimate was approximately 19,000 metric tons) to a third party bidder in a bankruptcy auction process in April 2003. The third party has begun to produce and sell graphite electrodes.

During the 2002 second quarter, we launched the expansion of our facility in Mexico to increase its capacity from 40,000 metric tons to about 60,000 metric tons annually. We completed the expansion during the 2003 first quarter. We believe that this facility is now the largest graphite electrode manufacturing facility in the world and strengthens our ability to satisfy demand from the large NAFTA market on a low cost basis.

As a result of repositioning our global manufacturing network and other actions, as well as our proprietary process and technological improvements, we now have the capability, depending on product demand and mix, to manufacture more than 220,000 metric tons of graphite electrodes annually from our existing facilities.

We believe that, since 1998, net worldwide graphite electrode manufacturing capacity has been reduced by about 12%.

We believe that there are significant barriers to entrants to our industry, including the need for extensive product and process know-how and other intellectual property and a high initial capital investment. We are not aware of any “greenfield” construction of new graphite electrode manufacturing facilities. We believe that we can significantly expand our graphite electrode manufacturing capacity at a cost that is less than 15% of the initial investment for “greenfield” capacity.

Graphite Electrode Market Share. We estimate that about 63% of the electric arc furnace steel makers worldwide (other than in China, for which reliable information is not generally available) and about 81% of the electric arc furnace steel makers in the U.S. and the markets where we have manufacturing facilities purchased all or a portion of their graphite electrodes from us in 2003. We further estimate that we supplied about 45% of all graphite electrodes purchased in the U.S. and the markets where we have manufacturing facilities, and about 21% worldwide, in each case in 2003. We estimate that the worldwide market for graphite electrodes was about $2.2 billion in 2003.

We estimate that, in 2003, sales in the U.S. accounted for about 21% of our total net sales of graphite electrodes and that we sold graphite electrodes in about 50 countries, with no other country accounting for more than 13% of our total net sales of graphite electrodes.

Over the past several years, we estimate that we increased our share of the worldwide market for graphite electrodes by more than 10%, from 19% in 2001 to about 21% in 2003. In addition to increased volumes, this shift in our customer base enables us to further optimize efficiencies and reduce costs.

We believe that, in many cases, the growing number of larger global customers created by the continuing consolidation trend within the steel and aluminum industries are more creditworthy than smaller producers and that we are able to better manage our exposure to trade credit risk as we increase the percentage of our total net sales sold to them.

Cathodes. Cathodes consist primarily of blocks used as floor lining for, and conductors of electricity in, furnaces (called “pots”) used to smelt aluminum. Cathodes are made from either carbon or graphite. Cathodes are currently the only products available that have the high levels of electrical conductivity and the capability of surviving the highly corrosive high temperature environments in an aluminum smelting furnace. We believe that there are no current commercially viable substitutes for cathodes in aluminum smelting furnaces. In a typical aluminum smelting furnace operating at a typical rate and efficiency of production, the cathodes must be replaced every 5 to 8 years. Since cathodes are used in the construction of pots, demand for them is directly related to both the number of new aluminum smelting furnaces being built and the frequency with which existing furnaces are upgraded and relined.

We operate our cathode business through a 70% owned joint venture with Pechiney, the world’s recognized leader in aluminum smelting technology. In late 2003, Pechiney was acquired by Alcan, one of the world’s largest aluminum producers. We have developed high performance graphite cathodes that we believe have become the preferred technology in the industry. We are benefiting from Pechiney’s smelting technology expertise and our graphite technology and expertise in high temperature industrial applications to develop further improvements in graphite cathodes. We believe that use of graphite cathodes (instead of carbon cathodes) allows a substantial improvement in process efficiency.

We believe that worldwide demand for aluminum will continue to grow over the long term at an average annual rate of about 3% to 4%, primarily because of greater use of aluminum by the transportation industry and higher growth in demand in China. We also believe that, over the long term, new aluminum smelting furnaces will need to be built to meet the growth in demand. We believe, therefore, that demand for graphite cathodes will continue to grow, both for new smelting furnaces as well as for substitution for carbon cathodes in relines and upgrades of existing smelting furnaces.

We believe that we are the largest manufacturer of cathodes in the world. In 2002, we expanded the manufacturing capacity of our Brazilian facility, the only non-captive manufacturer of cathodes in the Americas. We estimate that we sold about 14% of all cathodes sold in the world in 2003. There are seven notable producers of cathodes in the world. We estimate that the worldwide market for cathodes was about $410 million in 2003.

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

Our isomolded products are used in applications including continuous casting and hot press manufacturing processes and resistance heating elements. Our molded products are used in applications including high temperature furnaces and crucibles, chemical processing equipment and pressure and centrifugal casting equipment. Our extruded products are used in applications including fused refractories, diamond drill molds and semiconductor components as well as in applications in aluminum smelting.

We manufacture our advanced synthetic graphite products using raw materials, processes and technologies similar to those we use to make graphite electrodes and cathodes. We estimate the worldwide market for advanced synthetic graphite products was about $450 million in 2003.

Natural Graphite Line of Business

Our natural graphite line of business manufactures advanced flexible graphite products and flexible graphite products and provides related services and technologies for both established markets and new markets with high growth potential for us. We currently sell our products primarily to the electronics, fuel cell power generation, sealing and industrial thermal management markets. We provide cost effective engineering and other technical services and license our proprietary technology in markets where we do not anticipate engaging in manufacturing ourselves. Our natural graphite products are developed and manufactured by our subsidiary, AET.

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

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

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

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

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

excellent ability to conduct heat;

mechanical and thermal stability;

lightweight, compressible and conformable nature;

cost competitiveness; and

ease of handling.

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

During 2002, we began commercializing our line of eGRAF® thermal management products. Since then, we have obtained orders for eGRAF® products from industry leading electronic companies such as Agilent, Cisco, Hitachi, IBM, Intel, Lucent, Maxtor and Nortel. We have over 140 product approvals from strategic partners and customers. Throughout 2003, we obtained new approvals and orders from industry leading electronics companies such as Sony, NEC and Sharp for a wide range of eGRAF® products. In addition, we obtained approval from Intel for eGRAF® Hi-Therm™ thermal interface materials for applications in several Intel processors, including the Pentium® 4 processor.

We estimate that the market for our current products is about $300 million and expect it to grow at an annual rate in excess of 20% over the next three years. Sales of our products are growing, from about $500,000 in 2002 to $2.2 million in 2003 and an estimated $8 million in 2004.

We believe that the thermal management component market for computers, servers, televisions, digital video devices, cell phones and other communications, industrial, military, office and automotive equipment was about $3 billion in 2001.

Fuel Cell Products. We are the leading manufacturer of natural graphite products for PEM fuel cells and fuel cell systems. We manufacture highly engineered flow field plates, gas diffusion layers and other advanced flexible graphite products for PEM fuel cells and fuel cell systems for use in transportation and power generation applications.

Fuel cells were invented in 1839 and were first used in practical applications in the 1960s in NASA’s Gemini and Apollo space programs to provide electricity aboard spacecrafts. Fuel cells provide environmentally friendly electrical power generation by combining hydrogen (which can be obtained from a variety of sources such as methanol, natural gas and other fuels) with oxygen (from air, not necessarily pure) to produce electricity through an electrochemical process without combustion. The only material by-products from this process are water and heat. We believe that PEM fuel cells have emerged as the leading fuel cell technology because they offer higher power density, lower weight and lower costs relative to alternative fuel cell technologies. PEM fuel cells have the potential for use as replacements for existing power generators in the following markets:

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

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

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

We expect significant growth from this opportunity in the second half of this decade.

Ballard Power Systems, the world leader in PEM fuel cells, is our strategic partner under an exclusive product supply agreement that continues through 2016 and an exclusive collaboration agreement that continues through 2011. Our products are essential components of its fuel cells.

In October 2003, we were awarded two cash grants totaling $1.4 million from the State of Ohio to support the commercialization of our fuel cell technologies. We will use the grants to develop high volume manufacturing processes for flow field plates utilizing our GRAFCELL® advanced flexible graphite products.

Transportation Market. We believe that manufacturers of automobiles, buses and other vehicles are searching for a viable alternative to the internal combustion engine. We also believe that PEM fuel cells have the potential to provide the power of an internal combustion engine, to reduce or eliminate polluting emissions, and to lower vehicle operating costs through higher fuel efficiency and lower maintenance costs. Advanced flexible graphite products are used in PEM fuel cells and fuel cell systems. We market our advanced flexible graphite products for fuel cell applications under the GRAFCELL® name. According to an Allied Business Intelligence report published in 2003, the use of fuel cell systems in the global transportation market is projected to reach 1.5 million units by 2013.

We believe, based on actual revenues and statements by Ballard Power Systems customers and other automobile manufacturers, that commercial sales of PEM fuel cells for use in automobiles began in late 2002, increased in 2003 and will continue to increase in 2004. Ballard Power Systems has announced that about 85% of the 175 fuel cell vehicles that were operational worldwide in 2003 and are expected to be operational worldwide in 2004 were or will be powered by its PEM fuel cells that contain GRAFCELL® advanced flexible graphite products.

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

In 2003, our sales to the fuel cell industry were approximately $1.5 million. We estimate that the market for our fuel cell products in 2012 will exceed $500 million.

Stationary Power Market. Fuel cells have the potential to provide electric power for residential, commercial and industrial stationary applications. Long-term increases in electric power demand for these applications are expected, driven by continued growth of digital communications systems and infrastructures and industrialization of developing nations as well as continued population and personal income growth. We believe that demand for technologies such as fuel cells will be driven by requirements for uninterruptible electric power with a high degree of reliability and distributed power generation capability as well as environmental concerns. During 2003, stationary power products were sold and delivered to customers in the residential, telecommunications, industrial, research and government sectors. In 2003, Allied Business Intelligence estimated that the North American market for stationary fuel cells will be about $5 billion in 2013.

Portable Power Market. Fuel cells have the potential to provide electric power currently provided by rechargeable and nonrechargeable batteries in many portable electronic devices used in consumer, construction, marine and industrial applications. The fastest growing market opportunity is expected to be laptop computers, cell phones and personal digital assistants and other handheld devices. According to an Allied Business Intelligence report published in 2003, the estimated North American market for portable devices will be 700 million units by 2013, with an estimated value of $5.2 billion. Commercial sales are expected to begin with small portable device applications in 2004.

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

Industrial Thermal Management Products. Advanced flexible graphite products provide superior heat management solutions for insulation packages, induction furnaces, high temperature vacuum furnaces and direct solidification furnaces and other industrial thermal management applications. We market our advanced flexible graphite products for these applications under the GRAFSHIELD® name.

Advanced Carbon Materials Line of Business

Our advanced carbon materials line of business includes carbon electrodes and refractories as well as related services.

Carbon Electrodes. Carbon electrodes are used in the production of silicon metal, a raw material primarily used in the manufacture of aluminum. Carbon electrodes are also used in the production of ferro-alloys and thermal phosphorous. 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 believe that demand for carbon electrodes fluctuates based primarily on changes in production of silicon metal. We also believe that the silicon metal industry is directly impacted by changes in global and regional economic conditions. We estimate that demand for carbon electrodes was about 69,000 metric tons in each of 2001 and 2002 and 81,000 metric tons in 2003.

We estimate that we sold about 25% of the carbon electrodes sold in the world in 2003. We estimate that the worldwide market for carbon electrodes was about $130 million in 2003. There are two significant manufacturers of carbon electrodes in the world. We are the only manufacturer of carbon electrodes in the Western Hemisphere.

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

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

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

Production Planning, Product Manufacturing and Distribution

Over the last few years, we have rationalized our facilities and redeployed capacity to larger facilities in lower cost countries. The repositioning of our network allows us to achieve significant increases in productivity and output from our existing assets, including economies of scale and other cost savings that we believe will increase as we grow our sales. For example, we are able to deliver the same graphite electrode sales volume that we delivered over the past few years with a significantly lower fixed cost base. In addition, we believe that our network provides us with the operational flexibility to source customer orders from the facility that optimizes our profitability and, with the continuing consolidation in the steel and aluminum industries, provides us a significant growth opportunity in serving larger multi-plant global customers. We believe that our unique network provides us with significant competitive advantages in costs and product quality, proximity to customers, timely and reliable delivery and operational flexibility to adjust product mix to meet the diverse needs of a wide range of customers. We also believe that our products are among the highest quality products available in our industry.

Production Planning

We plan and source our graphite electrode and cathode production globally. We have evaluated virtually every aspect of our global supply chain, and we have redesigned and implemented changes to our global manufacturing, marketing and sales processes to leverage the strengths of our repositioned manufacturing network. Among other things, we have eliminated manufacturing bottlenecks, improved product and service quality and delivery reliability, expanded our range of products, and improved our global sourcing and product mix for our customers. We continue to implement global business and work process rationalization and transformation initiatives, including improvements in performance through realignment and enterprisewide standardization of supply chain processes and systems and consolidation and streamlining of our order processes. These activities are targeted for completion by the end of 2005.

We deploy synchronous work processes at most of our manufacturing facilities. We have also installed and continue to install and upgrade proprietary process technologies at our synthetic graphite manufacturing facilities and use statistical process controls in our manufacturing processes.

We have developed, and begun installing, a global information system using J.D. Edwards One World information systems for both enterprise resource planning and advanced production planning for managing our supply chains. The advanced planning capabilities that we have developed for our global synthetic graphite manufacturing capacity allow us to use our modularized capacity to seek to optimize, under then current conditions, timely product delivery to customers and changes in variables affecting profitability, including variable production costs, changes in currency exchange rates and changes in product mix. These capabilities also enable us to seek to maximize capacity utilization at as many of our facilities as possible as well as minimize our average fixed production cost per unit produced. Our global manufacturing network also helps us to minimize risks associated with dependence on any single economic region.

Manufacturing

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

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

Forming:

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

Baking:

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

Impregnation:

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

Rebaking:

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

Graphitizing:

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

Machining:

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

Cathodes range in size from 5 feet to 12 feet and weigh between 800 pounds and 3,700 pounds. Graphite cathodes are manufactured by a comparable process. Carbon electrodes (which can be up to 55 inches in diameter) and carbon cathodes are manufactured by a comparable process (excluding impregnation and graphitization). Refractories are manufactured using a process comparable to that for carbon electrodes or a proprietary “hot press” process. We believe that we manufacture the broadest range of sizes in graphite electrodes and cathodes and that the quality of our electrodes and cathodes is competitive with or better than that of comparable products of any other major manufacturer.

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

As a result of repositioning our global manufacturing network and other actions, together with our proprietary process technology, we now have the capability, depending on product demand and mix, to incrementally manufacture more than 220,000 metric tons of graphite electrodes and more than 40,000 metric tons of cathodes annually from our existing assets. We also have the capacity to manufacture about 30,000 metric tons of carbon electrodes annually. The following table sets forth certain information regarding our sales volumes.

	For the Year Ended December 31,
	2001	2002	2003
	(Metric tons)
Volume of graphite electrodes sold	174,000	180,500	200,500
Volume of cathodes sold	33,000	37,000	36,000
Volume of carbon electrodes sold	19,000	17,000	21,000

Graphite electrodes are manufactured in Brazil, Mexico, South Africa, France, Spain and Russia. Cathodes are manufactured in France and Brazil. Carbon electrodes and refractories are manufactured in the U.S.

Advanced Synthetic Graphite Products. Advanced synthetic graphite products are manufactured by a process comparable to that for graphite electrodes. Our facilities have the capability to process a wide range of raw materials, mill, mix and extrude or mold small to very large graphite blocks, impregnate, bake and graphitize the blocks, purify the blocks to reduce the impurities to parts per million levels, and machine the blocks using advanced machining stations to manufacture products finished to high tolerances and unique shapes. Advanced synthetic graphite products are manufactured in the U.S. and France.

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

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

Quality Standards and Maintenance. Certain of our global manufacturing facilities are certified and registered to QS-9000, the U.S. quality standard, as well as ISO-9002, the international quality standard. Our natural graphite line of business has a quality assurance system designed to meet the most stringent requirements of its customers. Major maintenance at our facilities is conducted on an ongoing basis.

Raw Materials and Suppliers. The primary raw materials for electrodes and cathodes are engineered by-products and residues of the petroleum and coal industries. We use these raw materials because of their high carbon content. The primary raw materials for graphite electrodes and graphite cathodes are calcined petroleum cokes (needle coke for electrodes and regular grade cokes for cathodes), coal tar pitch and petroleum pitch. The primary raw materials for carbon electrodes and carbon cathodes are calcined anthracite coal and coal tar pitch and, in some instances, a petroleum coke-based material. The primary raw material for our natural graphite products is natural graphite flake.

We purchase raw materials from a variety of sources. In many cases, we purchase them under short term contracts or on the spot market, in each case at fluctuating prices. We believe that adequate supplies of these raw materials are available at market prices. We entered into a strategic alliance with ConocoPhillips, the largest producer of petroleum coke, to improve the supply chain for our primary raw material and, since the beginning of 2001, we have purchased a majority of our requirements for petroleum coke, at variable prices, from multiple plants of ConocoPhillips under a supply agreement that continues through the end of 2006. In addition, in 2001, we shut down our coal calcining operations primarily because we entered into a five-year agreement to purchase calcined coal from a third party at a competitive cost. These agreements contain customary terms and conditions. We believe that the quality and cost of these raw materials on the whole is competitive with or better than those available to our major competitors and that, under current conditions, these raw materials are available in adequate quantities. We also believe that we are able to purchase these raw materials on a more cost efficient basis than our competitors who have more limited product lines and production volumes.

We purchase natural graphite flake from a variety of sources. We believe that adequate supplies of natural graphite flake are available at market prices. We entered into an arrangement with Mazarin Mining Corporation to develop and commercialize a natural graphite deposit in Canada. The initial phase of a feasibility study, relating to the quality of the natural graphite flake in the deposit, was completed in 2000 with favorable results. The second phase of the feasibility study was expected to be completed by the end of 2004. However, based on current market conditions relating to the fuel cell industry, the timing of the feasibility study is being reevaluated. The feasibility study is expected to cost us about $2 million, for which we will receive a 25% interest in the mine. After completion of the study, we may decide to commence commercial production of the deposit with Mazarin, exercise an option to extend the period for the development decision for five one-year periods until 2009, or terminate the arrangement. In the case of extension, we will have to make option payments totaling Cdn. $800,000 if the option is extended for the full five years. We have the right to purchase the entire production of natural graphite flake from the deposit. We believe that at full capacity, if developed, the deposit should produce about 50,000 tons of natural graphite flake per year, which would make it one of the largest single sources of natural graphite flake in the world. We believe that, if developed, the deposit would have sufficient reserves to meet our projected needs for the next 10 to 15 years. Consummation of the arrangement is subject to, among other things, the receipt of any required governmental approvals. In December 2003, Mazarin completed a reorganization, pursuant to which the assets of Mazarin were transferred to Sequoia Minerals Inc., a subsidiary of Mazarin that was subsequently spun off and that is expected to continue Mazarin’s operations and focus on development of metals and industrial minerals. We do not believe that this reorganization will have any material impact on our arrangement.

We purchase energy from a variety of sources. Electric power or natural gas used in manufacturing processes is purchased from local suppliers primarily under short-term contracts or in the spot market. We have entered into short duration fixed rate purchase contracts with certain of our North American natural gas suppliers in order to mitigate seasonal increases in our natural gas costs. These contracts expire at the end of the 2004 first quarter. In addition, we have entered into natural gas hedge contracts, effectively fixing 100% of our direct and indirect natural gas cost exposure in North America (approximately 45% of direct worldwide exposure) through April 2004.

Distribution

Our graphite electrode customers generally seek to negotiate prices and anticipated volumes on an annual basis. These customers then generally place orders for graphite electrodes three to six months prior to the desired delivery date. These orders are cancelable by the customer. Therefore, we manufacture graphite electrodes and seek to manage graphite electrode inventory levels to meet rolling sales forecasts. We generally seek to maintain an appropriate level of finished graphite electrode inventories, taking into account these factors and the length of graphite electrode manufacturing cycles. We have entered into long term supply contracts with purchasers of our cathodes and carbon electrodes, and we may, from time to time in the future, enter into long term supply contracts with purchasers of graphite electrodes or our other products. Currently, our other products are generally manufactured or fabricated to meet customer orders. Currently, we do not manage or operate based on a backlog.

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

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

Sales and Customer Service

We believe that we are the recognized industry leader in providing value added technical services to customers for our major product lines and that we have the largest customer technical service and related supporting engineering and scientific organizations in our industry, with more than 245 engineers, scientists and specialists around the world. As part of the redesign and implementation of changes to our global business and work processes, we have redirected marketing and sales activities to better service the needs of both existing and new customers.

Synthetic Graphite Business. Our synthetic graphite line of business sells products in every major geographic market primarily through its direct sales force, whose members are trained and experienced with our products. Its direct sales force operates from about 16 sales offices located around the world. It also sells products through independent sales agents and distributors.

Our synthetic graphite line of business has customer technical service personnel based around the world who assist customers to maximize their production and minimize their costs. It employs about 160 engineers and technicians to provide technical service and advice to key steel and other metals customers in furnace design, operation and upgrade to reduce energy consumption, improve raw material costs and increase output. In connection therewith, it recently developed and is now providing the UCAR Connex™ Virtual Meltshop™ Monitor to key electric arc furnace steel producers. The UCAR Connex™ Virtual Meltshop™ Monitor is a computer-based furnace data collection and analytic service with real time and web based capabilities. It is the next generation of service that we believe is not available from any other source and is particularly valuable to multi-plant customers. We have an agreement with AMI GE, S.A. de C.V., a Mexican supplier of furnace regulators and other furnace equipment that is 50% owned by General Electric, to market and supply our UCAR Connex™ Virtual Meltshop™ Monitor to their customers. We believe that our synthetic graphite line of business has more technical service engineers located in more countries than any of its competitors.

The sales and service groups of our synthetic graphite line of business include those dedicated to cathodes who are employed by Carbone Savoie. Carbone Savoie’s sales and service groups work closely with those of Pechiney, which is our 30% joint venture partner in Carbone Savoie, to maximize use of their respective products and technologies.

Natural Graphite Business. Our natural graphite line of business has six direct field sales employees in the U.S. and two in Europe. It also sells products through independent sales agents and distributors. Its customer service personnel, supported by a staff of more than 30 development scientists and manufacturing engineers, assist customers in learning about and using our products, improving their manufacturing processes and operations, and solving their technical dilemmas. A particular focus is assisting customers and others who design, develop or produce electronic devices to integrate our advantaged flexible graphite product solutions into their new devices.

Advanced Carbon Materials Business. Our advanced carbon materials line of business sells products through the direct global sales force, located in all of its major markets, as well as through independent agents and distributors. Its U.S. sales office coordinates the activities of an experienced sales staff and these agents and distributors. Our experienced engineering staff provides technical service to customers around the world. It provides specialized technical assistance to submerged arc and other furnace operators with regard to product performance, furnace monitoring and operations analysis. We believe that its customer technical service staff is highly regarded.

Technology

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

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

We believe that our technological and manufacturing strengths and capabilities provide us with a significant growth opportunity as well as a competitive advantage and are important factors in the selection of us by industry leaders and others as a strategic partner. Our technological capabilities include developing products with superior thermal, electrical and physical characteristics that provide a differentiating advantage. We seek to exploit these strengths and capabilities across all of our businesses, to improve existing products and to develop and commercialize new products for markets with high growth potential for us. In particular, we believe that our research and development capabilities were an important factor in the selection of us by Ballard Power Systems to enter into an exclusive long term product development and collaboration agreement.

Developments by us include:

larger and stronger graphite electrodes;

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

patented advanced pin technology for graphite electrodes;

improved supersize graphite electrodes for the most demanding electric arc steel producing furnaces;

cold pastes with reduced environmental impact for use with cathodes;

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

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

new electronic thermal management technologies with over 140 product approvals from industry leading strategic partners, customers and others.

We have been awarded preferred or certified supplier status by many major steel and aluminum companies and have received numerous technological innovation and other awards by industry groups, customers and others. In September 2003, we received R&D Magazine’s prestigious R&D 100 Award, granted to identify the 100 most technologically significant products and advancements each year, for our achievements in electronic thermal management heat sink products.

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

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

research and development services;

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

high temperature heat treating services;

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

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

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

Intellectual Property. We believe that our intellectual property, consisting primarily of patents and proprietary know-how and information, particularly the intellectual property relating to electronic thermal management and fuel cell power generation, provides us with competitive advantages and is important to our growth opportunities. Our intellectual property portfolio is extensive, with over 310 U.S. and foreign patents and 280 U.S. and foreign pending patent applications, which we believe is more than any of our major competitors. Among our competitors, we hold the largest number of patents for flexible graphite as well as the largest number of patents relating to the use of natural graphite for PEM fuel cell applications. In addition, we have obtained exclusive and non-exclusive licenses to various U.S. and foreign patents relating to our technologies. These patents and licenses expire at various times over the next two decades. Over 110 of these patents were granted during the past four years.

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

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

Strategic Alliances

We pursue strategic alliances that strengthen our business, enhance our research and development initiatives or support our new product commercialization activities. Strategic alliances may be in the form of joint venture, licensing, supply or other arrangements.

Synthetic Graphite Business. We have a strategic alliance in the cathode business with Pechiney, the world’s recognized leader in aluminum smelting technology. Pechiney uses its technology in its own smelting operations and licenses its technology to other aluminum producers. Under our alliance, Pechiney is a 30% joint venture partner in our subsidiary, Carbone Savoie, which holds our entire cathode manufacturing capacity. With this alliance, we believe that we are positioned as the quality leader in the low cost production of graphite cathodes, the preferred technology for deployment in new aluminum smelting furnaces due to their ability to provide substantial improvements in process efficiency. We are using Pechiney’s smelting technology and our graphite technology and expertise in high temperature industrial applications to develop further improvements in graphite cathodes. Our cathodes are sold to Pechiney for use in its own plants under a requirements contract that remains in effect through 2006 and are marketed to Pechiney’s licensees as to well as other aluminum producers.

Natural Graphite Business. We have been working with Ballard Power Systems since 1992 on developing natural graphite products for use in its PEM fuel cells. In 2000, Ballard Power Systems launched its Mark 900 series fuel cell stack and announced that it was the foundation for future Ballard Power Systems’ fuel cells for transportation, stationary and portable applications. The flow field plates used in the Mark 900 are made from our GRAFCELL® advanced flexible graphite products. In October 2001, Ballard Power Systems launched its most advanced PEM fuel cell platform to date, the Mark 902. GRAFCELL® advanced flexible graphite products are a strategic material for the Mark 902. Building upon the Mark 900, the advantages of the Mark 902 include lower cost, improved design for volume manufacturing, improved reliability, higher power density and enhanced compatibility with customer system requirements. The unit cell design of the Mark 902 allows scalable combinations to achieve a variety of power outputs ranging from 10 kilowatt to 300 kilowatt and is designed to allow configuration for stationary and transportation applications.

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

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

Competition

Synthetic Graphite and Advanced Carbon Materials Businesses. Competition in the graphite electrode, cathode, advanced synthetic graphite and advanced carbon materials businesses is based primarily on price, product quality and customer service.

There is only one other global manufacturer and about ten other notable regional or local manufacturers of graphite electrodes, including SGL Carbon (whose facilities are located on only two continents, Europe and North America, virtually all of which are located in higher cost countries), and four manufacturers in Japan (one of whom, Showa Denko Carbon, also has a plant located in the U.S.).

Global and regional economic conditions and antitrust investigations, lawsuits and claims are having an impact on the graphite electrode industry. We believe that, at a minimum, these impacts include increased price competition and increased debt or cost burdens, or both, for most manufacturers in the industry. In October 2001, The Carbide/Graphite Group, Inc. filed for bankruptcy protection and, in December 2002, ceased operations. In April 2003, it announced that it sold a portion of its graphite electrode manufacturing capacity (which we estimate was approximately 19,000 metric tons) to a third party bidder in a bankruptcy auction process. The third party has begun to produce and sell graphite electrodes. In late 2002, a German competitor filed for bankruptcy protection and, in early 2003, ceased operations. It is possible that other competitors could make similar bankruptcy filings. It is not uncommon for companies subject to bankruptcy filings to enjoy, at least temporarily, a cost advantage as compared to their competitors. This advantage enables them to compete more aggressively on price. It is also possible that one or more of our competitors could divest graphite electrode manufacturing facilities. These divestitures could increase the number or change the capabilities of our competitors.

There are seven notable manufacturers of cathodes in the world. We believe that we and SGL Carbon are the largest manufacturers in the world. There are two significant manufacturers of carbon electrodes in the world, us and SGL Carbon. There are about five significant manufacturers of advanced synthetic graphite products in the world.

We believe that there are no current commercially viable substitutes for graphite electrodes in electric arc furnace steel production or for cathodes in aluminum smelting furnaces. We are aware of commercially viable technologies that are competitive with carbon electrodes.

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

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

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

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

Environmental Matters

We are subject to a wide variety of federal, state, local and foreign laws and regulations relating to the presence, storage, handling, generation, treatment, emission, release, discharge and disposal of hazardous, toxic and other substances and wastes governing our current and former properties and neighboring properties and our current operations. These laws and regulations (and the enforcement thereof) are periodically changed and are becoming increasingly stringent. We have experienced some level of regulatory scrutiny at most of our current and former facilities, and have been required to take remedial action and incurred related costs, in the past and may experience further regulatory scrutiny, and may 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 U.S. laws and regulations to which we are subject include:

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

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

the Toxic Substances Control Act and related laws that are designed to assess the risk of new products to health and to the environment at early developmental stages.

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

Our manufacturing operations outside the U.S. are subject to the laws and regulations of the countries in which those operations are conducted. These laws and regulations primarily relate to pollution prevention and the control of the impacts of industrial activities on the quality of the air, water and soil. Regulated activities include, among other things: use of hazardous 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. We have received and continue periodically to receive notices from the U.S. Environmental Protection Agency (the “USEPA”) or state environmental protection agencies, as well as claims from others, alleging that we are a potentially responsible party (a “PRP”) under Superfund and similar state laws for past and future remediation costs at hazardous substance disposal sites. Although Superfund liability is joint and several, in general, final allocation of responsibility at sites where there are multiple PRPs is made based on each PRP’s relative contribution of hazardous substances to the site. Based on information currently available to us, we believe that any potential liability we may have as a PRP will not have a material adverse effect on us.

As a result of amendments to the Clean Air Act enacted in 1990, certain of our facilities will be required to comply with new standards for air emissions to be adopted by the USEPA and state environmental protection agencies over the next several years pursuant to regulations that have been or will be promulgated, including the USEPA’s anticipated promulgation of maximum achievable control technology standards for carbon and graphite manufacturing plants. The regulations which have been promulgated to date will necessitate the installation of additional controls and 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.

We have sold or closed a number of facilities that had solid waste landfills. In the case of virtually all of our sold facilities, we have retained ownership of the landfills. We have closed these landfills, and we believe that we have done so in material compliance with applicable laws and regulations. We continue to monitor these landfills pursuant to applicable laws and regulations. To date, the costs associated with the landfills have not been, and we do not anticipate that future costs will be, material to us.

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

Estimates of future costs 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 that we believe appropriate as described above. We cannot assure you, however, that we will not incur losses beyond the limits of or outside the coverage of our insurance. Our insurance has not and will not cover any material liabilities that have or may become due in connection with antitrust investigations, lawsuits or claims.

Employees

Since 1998, we have reduced our global workforce by about 1,700 employees, or over 30%. At December 31, 2003, we had 3,762 employees, of which 1,868 were in Europe (including Russia), 841 were in Mexico and Brazil, 373 were in South Africa, 3 were in Canada, 671 were in the U.S. and 6 were in the Asia Pacific region. At December 31, 2003, 2,706 of our employees were hourly employees.

At December 31, 2003, about 69% of our worldwide employees were covered by collective bargaining or similar agreements, which expire at various times in each of the next several years. At December 31, 2003, about 780 employees, or 21% of our employees, were covered by agreements, which expire, or are subject to renegotiation, at various times through December 31, 2004. We believe that, in general, our relationships with our unions are satisfactory and that we will be able to renew or extend our collective bargaining or similar agreements on reasonable terms as they expire. We cannot assure you, however, that renewed or extended agreements will be reached without a work stoppage or strike or will be reached on terms satisfactory to us.

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

Corporate History

Our business was founded in 1886 by National Carbon Company. In 1917, National Carbon Company and four other businesses were combined to become the predecessor to Union Carbide Corporation. National Carbon Company eventually 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 us. We remained wholly owned by Union Carbide.

In 1991, Union Carbide sold 50% of our common equity to Mitsubishi Corporation. In January 1995, we consummated a leveraged equity recapitalization, following which, among other things, Blackstone Capital Partners II Merchant Banking Fund L.P. and its affiliates held about 70% of our then outstanding common stock, Union Carbide held about 25% and certain members of management held the remaining 5%.

In August 1995, GTI completed an initial public offering of our common stock, in which Union Carbide sold all of our common stock then held by it.

In March 1996 and April 1997, Blackstone sold its shares of our common stock in secondary public offerings and thereafter ceased to be a principal stockholder of GTI.

In June 1997, antitrust investigations by authorities in the U.S. and the European Union were commenced against us and other producers and distributors of graphite and carbon products. Subsequently, antitrust investigations by authorities in other countries and civil antitrust lawsuits were commenced and threatened against us and them. In March 1998, we began to implement management changes, which resulted in a new senior management team.

In February 2000, we completed a debt recapitalization and obtained the Senior Facilities. In July 2001, we completed a public offering of our common stock. In February and May 2002, we completed private offerings of the Senior Notes. In October 2003, we completed a public offering of our common stock. In January 2004, we completed a private offering of the Debentures.

Risk Factors and Forward Looking Statements

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

Risks Relating to Us

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

We sell graphite electrodes, which accounted for about 66% of our total net sales in 2003, primarily to the electric arc furnace steel production industry. We also sell cathodes, which accounted for about 13% of our total net sales in 2003, to the aluminum industry. Many of our other products are sold primarily to the transportation, semiconductor, petrochemical and other metals industries. These are global basic industries, and they are experiencing various degrees of growth and consolidation. Customers in these industries are located in every major geographic market. As a result, our customers are affected by changes in global and regional economic conditions. This, in turn, affects overall demand and prices for our products sold to these industries. Accordingly, we are directly affected by changes in global and regional economic conditions. These conditions are affected by events and circumstances beyond our control such as geopolitical events (such as the war on terror and the circumstances involving Iraq and North Korea), changes in demand by consumers, businesses and governments and policy decisions by governments and central banks. As a result of changes in economic conditions, demand and pricing for our products sold to these industries has fluctuated significantly.

Demand for our products sold to these industries may be adversely affected by improvements in our products as well as in the manufacturing operations of customers, which reduce the rate of consumption or use of our products for a given level of production by our customers. In the case of graphite electrodes, we estimate that specific consumption declined from about 4.3 kilograms of graphite electrodes per metric ton of steel produced in 1990 to about 2.3 kilograms per metric ton in 2003. While we believe that the rate of decline of specific consumption over the long term has slowed, we believe that there was a slightly more significant decline in 2001 than would otherwise have been the case due to the accelerated shutdown of older, less efficient electric arc furnaces as a result of global and regional economic conditions.

Sales volumes and prices of our products sold to these industries are impacted by the supply/demand balance as well as overall demand and growth of and consolidation within the end markets for our products. In addition to the factors mentioned above, the supply/demand balance is affected by factors such as business cycles, rationalization within our industry, and output and productivity within our industry and the end markets for our products, some of which factors are affected by decisions by us. In the case of graphite electrodes, although our volume of graphite electrodes sold has increased significantly over the past three years, we have in the past experienced significant fluctuations in volume. In addition, although we implemented graphite electrode price increases over the past eighteen months, prices have declined since 1998.

Over the past few years, we faced extremely challenging business and industry conditions. Adverse global and regional economic conditions negatively impacted many of the end markets for our products, with many customers in these markets reducing production, becoming less creditworthy or being acquired due to consolidation within their industries. Industry-wide capacity for most of our products exceeded demand, and competition has been intense. Although our net sales and net income have improved in 2003 from 2002, they have declined significantly since 1999.

We cannot assure you that the electric arc furnace steel production industry will continue to be the higher long term growth sector of the steel industry, that the aluminum industry will continue to experience long term growth or that any of the other industries to which we sell products will experience strong recovery from current economic conditions affecting them. Accordingly, we cannot assure you that there will be stability or growth in demand for or prices of graphite electrodes or our other products sold to these industries. An adverse change in global or certain regional economic conditions could materially adversely affect us.

Any substantial growth in net sales, cash flow from operations or net income from our natural graphite line of business depends on successfully developing, manufacturing and selling new products on a profitable basis. If we are not successful, we will not achieve our planned growth.

Our planned growth of our natural graphite line of business depends on successful and profitable development, manufacture and sale primarily of thermal management products for electronic devices and products for PEM fuel cells and fuel cell systems.

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

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

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

the possibility that, even if our products are incorporated in new products of our customers, our customers' new products may not become viable or commercially accepted or may be subsequently displaced;

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

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

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

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

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

Since 1997, we have been subject to antitrust investigations and related lawsuits and claims. We have recorded pretax charges of $382 million against results of operations as a reserve for estimated potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. Through December 31, 2003, we have paid an aggregate of $257 million of fines and net settlements and expenses which has been applied against the reserve and $19 million of imputed interest (which is described below) that has not been applied against the reserve. The balance of the reserve (before giving effect to the provisional payment described below) is available for the $52.5 million balance of the fine (the “DOJ antitrust fine”) payable by us to the U.S. Department of Justice (the “DOJ”) that was imposed in 1998, the €50.4 million fine (the “EU antitrust fine”) that was assessed against us in 2001 by the Directorate General IV of the European Communities (the “EU Competition Authority”) and which we have appealed, and other antitrust related matters.

The DOJ antitrust fine does not bear interest prior to April 2004 and bears interest at the statutory rate (which was 1.28% annually at December 31, 2003) after April 2004. The reserve does not cover interest on the DOJ antitrust fine (including interest that, for accounting purposes, is imputed on the DOJ antitrust fine for the period during which it is non-interest bearing). Such interest is recorded in interest expense on the Consolidated Statements of Operations.

In February 2004, we posted a provisional payment of $72 million to the EU Competition Authority against the EU antitrust fine. The provisional payment included $9 million for accrued interest for the period from October 2001 to the date of the provisional payment at the rate of 6.04% per annum. The EU Competition Authority has advised us that its position is that the provisional payment should have included accrued interest at the rate of 8.04% per annum. We have advised the EU Competition Authority that we disagree with its position and will file an interim appeal challenging its position, if necessary.

At December 31, 2003, after giving effect to the provisional payment, $53 million remained in the reserve. The remaining amount of the reserve is unfunded. We believe that the amount of the EU antitrust fine will be reduced on appeal. To the extent that the actual amount of the EU antitrust fine (after all appeals and including any interest thereon) is less than the amount so provisionally paid, any excess would be refunded to us. To the extent that such actual amount exceeds the amount so provisionally paid, we will be required to make an additional payment equal to such excess. Such additional payment may require us to record an additional charge.

Our insurance has not and will not cover any material liabilities that have or may become due in connection with antitrust investigations, lawsuits or claims.

We cannot assure you that remaining liabilities and expenses in connection with antitrust investigations, lawsuits and claims will not materially exceed the remaining balance of the reserve or that the timing of payment thereof will not be sooner than anticipated. If such liabilities or expenses materially exceed such balance or if the timing of payment thereof is sooner than anticipated, such events could materially adversely affect us, and we may not be able to comply with the financial covenants under the Senior Facilities. In the event of such noncompliance, we could experience the material adverse consequences described, and be forced to take the unfavorable actions referenced, in the risk factor relating to restrictive covenants under the Senior Facilities and Senior Notes on pages 39 through 40.

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

We are highly leveraged, and we have substantial obligations in connection with antitrust investigations, lawsuits and claims. At December 31, 2003, after giving effect to the issuance and sale of the Debentures and application of the net proceeds therefrom to repay the remaining $21 million of term loans outstanding under the Senior Facilities and to make a provisional payment of $72 million to the EU Competition Authority toward the EU antitrust fine, we had total debt of $707 million (including unamortized bond premium and fair value of hedged debt obligation), cash and cash equivalents of $158 million and a stockholders’ deficit of $128 million. In addition, we have historically discounted or factored a substantial portion of our accounts receivable and used the proceeds to reduce our debt. Certain of our subsidiaries sold receivables totaling $175 million in 2003. If we had not sold such receivables, our accounts receivable and our debt would have been about $45 million higher at December 31, 2003. We intend to reduce our factoring of accounts receivable and use a portion of the net proceeds from the issuance and sale of the Debentures to replace the financing previously provided thereby. Further, a significant majority of our debt is or has been effectively converted into variable rate debt. We use cash and cash equivalents, funds available under the Revolving Facility and cash flow from operations as our primary sources of liquidity. Availability of funds under the Revolving Facility is subject to continued compliance with the financial covenants under the Senior Facilities. At December 31, 2003, we were in compliance with the financial covenants under the Senior Facilities and had no outstanding balance under the Revolving Facility with $236 million (after consideration of outstanding letters of credit and at currency exchange rates in effect at December 31, 2003) fully available. We believe that we will have net cash provided by operating activities in 2004 (excluding payments related to restructurings, antitrust fines and the impact of the reduction of factoring of accounts receivables). We expect to make payments of about $15 million related to restructurings, about $82 million related to antitrust fines and about $45 million related to replacement of financing that would have been provided by factoring of accounts receivable. We expect that we will have net cash used in operating activities in 2004 including such exclusions.

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

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

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

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

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

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

Our ability to service our debt and meet our other obligations depends on certain factors beyond our control.

Our ability to service our debt and meet our other obligations as they come due is dependent on our future financial and operating performance. This performance is subject to various factors, including factors beyond our control such as changes in global and regional economic conditions, developments in antitrust investigations, lawsuits and claims involving us, changes in our industry or the end markets for our products, changes in interest or currency exchange rates, and inflation in raw materials, energy and other costs.

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

We cannot assure you as to the timing of such actions or the amount of proceeds that could be realized from such actions. Accordingly, we cannot assure you that we will be able to meet our debt service and other obligations as they become due or otherwise.

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

The Senior Facilities and the Senior Notes 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 or sale/leaseback transactions; make investments or acquisitions; engage in mergers or consolidations; make certain payments and investments, including dividend payments and stock repurchases; make capital expenditures; or engage in certain transactions with subsidiaries and affiliates.

The Senior Facilities also require us to comply with specified financial covenants, including minimum interest coverage and maximum leverage ratios. In addition, pursuant to the Senior Facilities, we cannot borrow under the Revolving Facility:

if the additional borrowings would cause us to breach the financial covenants; or

if the aggregate amount of reserves created (plus the aggregate amount of payments made (excluding payments attributable to imputed interest on the DOJ antitrust fine) over or outside of any reserve) in connection with antitrust, securities and stockholder derivative investigations, lawsuits and claims exceed $415 million, reduced by the principal amount of certain debt ($1 million of which debt was outstanding at December 31, 2003).

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

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

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

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

currency devaluations and fluctuations in currency exchange rates, including impacts of transactions in various currencies, translation of various currencies into dollars for U.S. reporting and financial covenant compliance purposes, and impacts on results of operations due to the fact that costs of our foreign subsidiaries for our principal raw material, petroleum coke, are incurred in dollars even though their products are primarily sold in other currencies;

imposition of or increases in customs duties and other tariffs;

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

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

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

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

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

We cannot assure you that such risks will not have a material adverse effect on us in the future.

In general, our results of operations and financial condition are affected by inflation in each country in which we have a manufacturing facility. We 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, defined as cumulative inflation of about 100% or more over a three calendar year period. We cannot assure you that future increases in our costs will not exceed the rate of inflation or the amounts, if any, by which we may be able to increase prices for our products.

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

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

We own, and have obtained exclusive and non-exclusive licenses to, various domestic and foreign patents related to our technologies. These patents and licenses expire at various times over the next two decades. When such patents and exclusive licenses expire, we will no longer have the right to exclude others from making, using or selling the claimed inventions.

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

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

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

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

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

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

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

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

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

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

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

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

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

We purchase raw materials and energy from a variety of sources. In many cases, we purchase them under short term contracts or on the spot market, in each case at fluctuating prices. We purchase a majority of our requirements for petroleum coke, our principal raw material, at variable prices, from multiple plants of a single supplier under a supply agreement that continues through the end of 2006. The availability and price of raw materials and energy may be subject to curtailment or change due to:

limitations which may be imposed under new legislation or regulation;

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

interruptions in production by suppliers; and

market and other events and conditions.

Petroleum and coal products, including petroleum coke and pitch, our principal raw materials, and energy, particularly natural gas, have been subject to significant price fluctuations. Over the past several years, we have largely mitigated the effect of price increases on our results of operations primarily through our cost reduction efforts. We cannot assure you that such efforts will successfully mitigate future increases in the price of 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 or energy, would have a material adverse effect on us.

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

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

We have significant non-dollar-denominated intercompany loans and significant interest rate swaps and may in the future have significant foreign currency financial instruments. Translation gains and losses due to changes in currency exchange rates or interest rates have in the past resulted and may in the future result in significant gains or losses.

We have non-dollar-denominated intercompany loans between GrafTech Finance and some of our foreign subsidiaries. At December 31, 2003, the aggregate principal amount of these loans was $423 million (based on currency exchange rates in effect on December 31, 2003). These loans are subject to translation gains and losses due to changes in currency exchange rates. A portion of these loans are deemed to be essentially permanent and, as a result, translation gains and losses on these loans are recorded in accumulated other comprehensive loss on the Consolidated Balance Sheets. The balance of these loans are deemed to be temporary and, as a result, translation gains and losses on these loans are recorded as unrealized gains or losses in other expense (income), net, on the Consolidated Statements of Operations. We have the ability to replace each intercompany loan with a substantially identical new intercompany loan. When we replace such a loan, we record net cumulative realized translation gains or losses with respect to that loan in other expense (income), net. Those realized gains or losses are, however, non-cash gains or losses. Foreign currency translation gains and losses relating to these loans included in other (income) expense, net, were a gain of $39 million in 2003.

We have interest rate swaps that effectively convert fixed rate debt (represented by the Senior Notes) into variable rate debt in order to seek to minimize interest expense and optimize the risk in our portfolio of fixed and variable interest rate obligations. At December 31, 2003, we had swaps for a notional amount of $485 million. Our swaps are designated as hedging the exposure to changes in the fair value of the related debt (called a fair value hedge). Our swaps are marked-to-market monthly, and we are required to provide cash collateral to the counterparty to the extent that the fair value of the derivative exceeds $15 million, net of market value of our interest rate caps. The fair value of the hedge at the end of a period is recorded on the Consolidated Balance Sheets on the line entitled “fair value of hedged debt obligation.” At December 31, 2003, the carrying value of our debt was reduced by $18 million (excluding the offsetting value of our interest rate caps of $4 million) as a result of our fair value hedge. The interest rate swap derivative was valued at $18 million at December 31, 2003 and is recorded as part of other long-term obligations on the Consolidated Balance Sheets. When we sell swaps, the gain or loss realized is amortized as a credit or charge to interest expense over the remaining term of the Senior Notes. When we effectively reduce the outstanding principal amount of the Senior Notes (through exchanges or otherwise), the related portion of such credit or charge is accelerated and recorded in the period in which such reduction occurs. In 2003, we realized net proceeds of $30 million with respect to the sale of swaps, which will be amortized as a credit to interest expense over the remaining term of the Senior Notes.

We have foreign currency financial instruments to attempt to limit our risks associated with changes in currency exchange rates by attempting to hedge existing exposures, firm commitments and, potentially, anticipated transactions. These instruments are marked-to-market monthly. Gains and losses are recorded as unrealized gains or losses in other expense (income), net, on the Consolidated Statements of Operations. When we sell the instruments, we record net cumulative realized gain or loss with respect to the instruments in other expense (income), net, on the Consolidated Statements of Operations. In 2003, we recorded a loss of $7 million with respect to the instruments held during the course of the year. We had no such contracts outstanding at December 31, 2003.

We may purchase or sell these financial instruments, and open and close hedges or other positions, at any time. We cannot assure you that we will have gains, or will not have losses, of the type described above. Incurrence of material losses, and provision of material cash collateral, could materially adversely affect our ability to comply with the financial covenants under the Senior Facilities.

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

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

We have also experienced volatility with respect to prices of raw materials and energy, and it has frequently required several quarters of cost reduction efforts to mitigate increases in those prices. We expect to experience volatility in such prices in the future. We have experienced translation gains and losses in the past, some of which have been significant, and expect to experience translation gains and losses in the future.

Accordingly, results of operations for any quarter are not necessarily indicative of the results of operations for a full year.

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

Competition in the graphite and carbon products industry (other than with respect to new products) is based primarily on 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 or our competitors with respect to prices, volumes or profit margins, technological developments, changes in the desirability or necessity of entering into long term supply contracts with customers or other competitive or market factors or strategies could adversely affect our market share, net sales or net income.

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

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

We may not be successful in the lawsuit against our former parents initiated by us.

In February 2000, we initiated a lawsuit against our former parents. In February 2004, this lawsuit was dismissed. We subsequently appealed the dismissal. Successful prosecution of this lawsuit is subject to many risks and uncertainties, including:

failure to successfully challenge the dismissal of that lawsuit;

failure to successfully prove our claims at trial;

successful assertion by the defendants of substantive defenses, including statute of limitations defenses, to liability at trial or on appeal; and

successful assertion by the defendants of counterclaims or cross claims, including claims for indemnification, at trial or on appeal.

Litigation such as this lawsuit is complex. Complex litigation can be lengthy and expensive. This lawsuit is in its earliest stages. We cannot predict the ultimate outcome of this lawsuit, including the possibility, timing or amount of any settlement or recovery of damages by us or any liability we may have in connection with any counterclaims or cross claims. In addition, we cannot assure you as to the effect of this lawsuit on management’s focus and time available for our ongoing operations.

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

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

We may not achieve the cost savings targeted under our 2002 major cost savings plan.

We are targeting, under the 2002 plan, cumulative annual recurring pretax cost savings of $60 million in 2004 and $80 million in 2005. We recorded an aggregate of $33 million of restructuring charges and $48 million of impairment losses on long-lived and other assets and expect to record an additional $6 million of restructuring charges (primarily for severance associated with further global business and work process changes, but excluding additional restructuring charges that may be recorded relating to the closure of the majority of the graphite electrode manufacturing operations in Italy). These charges include payments through December 31, 2003 of $8 million of cash costs and expected payments of an additional $27 million of cash costs. We cannot assure you that the charges and cash costs associated with the 2002 plan will not be higher than anticipated.

Our targeted cost savings are based on assumptions regarding activities undertaken and to be undertaken as part of the 2002 plan. We cannot assure you that these assumptions are correct or that we will be able to implement these activities. If we are unable to implement these activities as and when we have assumed, we may not be able to meet our cost savings targets.

Risks Relating to our Securities and Pledges of Our Assets

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

The borrower under the Senior Facilities is GrafTech Finance. The Senior Facilities are guaranteed by all of our domestic subsidiaries, including AET. Substantially all of our assets in the U.S. (except for the unsecured intercompany term note obligations described below) are pledged to secure obligations of GrafTech Finance as borrower under, or guarantees by our domestic subsidiaries of, the Senior Facilities. In addition, UCAR Carbon and our Swiss subsidiary are obligors under intercompany revolving notes that are pledged to secure the Senior Facilities. Substantially all of the assets of our Swiss subsidiary are pledged to secure its intercompany revolving note. The secured intercompany revolving note of our Swiss subsidiary is also guaranteed by our other principal foreign subsidiaries. Those guarantees are secured by a pledge of most of the assets of the foreign subsidiary guarantors. Those guarantees are pledged to secure the Senior Facilities. As a result, most of our assets outside the U.S. are pledged to secure the intercompany revolving note of our Swiss subsidiary and guarantees of that note. Further, our obligation to pay the balance of the DOJ antitrust fine is secured by a lien on all of the assets of GTI and we have posted a $72 million provisional payment to the EU Competition Authority to secure payment of the EU antitrust fine pending the outcome of our appeal.

The Senior Notes have been issued by GrafTech Finance, and the Debentures have been issued by GTI. Unsecured intercompany term notes in an aggregate principal amount equal to $528 million (based on currency exchange rates in effect at December 31, 2003) and unsecured guarantees of those unsecured intercompany term notes by certain of our foreign subsidiaries have been pledged by GrafTech Finance to secure the Senior Notes, subject to the limitation that at no time will the combined value of the pledged portion of any foreign subsidiary’s unsecured intercompany term note and unsecured guarantee of unsecured intercompany term notes issued by other foreign subsidiaries exceed 19.99% of the principal amount of the then outstanding Senior Notes. As a result of this limitation, at December 31, 2003, the aggregate principal amount of unsecured intercompany term notes pledged to secure the Senior Notes equaled $366 million (based on currency exchange rates in effect at December 31, 2003), or about 74% of the aggregate principal amount of the then outstanding Senior Notes. The remaining unsecured intercompany term notes held by GrafTech Finance is about 31% of the aggregate principal amount of the unsecured intercompany term notes or $162 million (based on currency exchange rates in effect at December 31, 2003), and any pledged unsecured intercompany term notes that cease to be pledged due to a reduction in the principal amount of the then outstanding Senior Notes due to redemption, repurchase or other events, will not be subject to any pledge and will be available to satisfy the claims of creditors (including the lenders under the Senior Facilities, the holders of the Senior Notes and, pursuant to the guarantee by GrafTech Finance of the Debentures, the holders of the Debentures) of GrafTech Finance, as their interests may appear. The Senior Notes contain provisions restricting the pledge of those unsecured intercompany term notes to secure any debt or obligation. The foreign subsidiaries who are obligors under any of such unsecured intercompany term notes or the related guarantees are called “unsecured intercompany term note obligors” and their obligations thereunder are called “unsecured intercompany term note obligations.”

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

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

The Senior Notes are guaranteed by GTI, UCAR Carbon and other U.S. subsidiaries that collectively hold a substantial majority of our U.S. operating assets. The Debentures are guaranteed by GrafTech Finance, UCAR Carbon and other U.S. subsidiaries that collectively hold a substantial majority of our U.S. operating assets. Except for a subsidiary that is being dissolved and liquidated, the obligors (including the guarantors) under the Senior Notes and the Debentures are the same. The guarantees of the Senior Notes and the Debentures are unsecured, except the guarantee of the Senior Notes by UCAR Carbon. Each of the obligors (including guarantors) under the Senior Notes and the Debentures is also an obligor (including a guarantor) under the Senior Facilities, and those obligations are secured. AET has guaranteed the Senior Facilities, but has not guaranteed the Senior Notes or the Debentures. The guarantee of the Senior Facilities by AET is secured. The guarantee of the Senior Notes by UCAR Carbon is secured by a pledge of all of the shares of capital stock (constituting 97.5% of the outstanding shares of capital stock) of AET held by UCAR Carbon (called the “AET Pledged Stock”). While all of the AET Pledged Stock is pledged to secure the UCAR Carbon guarantee of the Senior Notes, at no time will the value of the pledged portion of the AET Pledged Stock exceed 19.99% of the principal amount of the then outstanding Senior Notes. Moreover, the pledge of the AET Pledged Stock is junior to the pledge of the same shares to secure the UCAR Carbon guarantee of the Senior Facilities.

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

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

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

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

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

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

Our operating subsidiary in Italy engaged in the advanced graphite materials business, our operating subsidiary in Russia and Carbone Savoie, AET and certain immaterial domestic and foreign operating and holding companies are neither guarantors of the secured intercompany revolving note of our Swiss subsidiary, nor guarantors of the Senior Notes or the unsecured intercompany term notes, nor guarantors of the Debentures. At December 31, 2003, the aggregate combined book value of their assets was about $189 million. For 2003, their aggregate combined net loss was about $8 million and their aggregate combined net use of cash from operations was about $10 million (excluding the impact of payments and borrowings under a short-term unsecured intercompany cash flow note issued by Carbone Savoie).

GrafTech Finance has made and may continue to make intercompany revolving loans to our Swiss subsidiary and UCAR Carbon. At December 31, 2003 (based on currency exchange rates in effect on December 31, 2003), the aggregate principal amount of the secured intercompany revolving loan to our Swiss subsidiary was nil. GTI, GrafTech Finance and our other domestic subsidiaries may make intercompany term and revolving loans to one or more other domestic or foreign subsidiaries. To the extent that these loans are made under the Senior Facilities, any of these loans made to foreign subsidiaries may be secured, and guaranteed on a secured basis, by other foreign subsidiaries. Neither the Senior Notes nor the Debentures contain limitations on existing or new secured intercompany revolving loans pursuant to the Senior Facilities to domestic or foreign subsidiaries that are guarantors of the Senior Notes or unsecured intercompany term note obligors.

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

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

As a result, the Senior Notes and the Debentures are structurally subordinated to all existing and future debt and other obligations, including trade payables and obligations to preferred stockholders, of our subsidiaries that are neither guarantors of the Senior Notes or the Debentures, respectively, nor, in the case of the Senior Notes only, unsecured intercompany term note obligors, and the ability of the issuers and guarantors of the Senior Notes and the Debentures to receive (and therefore the ability of the holders of the Senior Notes and the Debentures to participate in) the assets of any subsidiary upon liquidation, bankruptcy, insolvency or similar proceedings involving any such subsidiary will be subject to the claims of the holders of such debt and other obligations, including trade creditors and preferred stockholders. In addition, to the extent that the issuers and guarantors of the Senior Notes and the Debentures are creditors of any such subsidiary, whether as trade creditors, creditors under the unsecured intercompany term notes or otherwise, their rights as a creditor could be equitably subordinated to such claims. At December 31, 2003, the debt and liabilities of such subsidiaries totaled $78 million (excluding intercompany trade and other miscellaneous liabilities of $20 million).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

If we are party to a merger, consolidation, binding share exchange, sale, transfer or lease of all or substantially all of our assets or similar transaction pursuant to which our common stock is converted into, or into the right to receive, cash, securities or other property, then, at the effective time of the transaction, the right to convert a Debenture into our common stock will be changed into a right to convert it into the kind and amount of cash, securities or other property which the holder would have received if the holder had converted its Debenture immediately prior to the transaction. This change could substantially lessen or eliminate the value of the conversion right associated with the Debentures. For example, if we were acquired in a cash merger, each Debenture would become convertible solely into cash and would no longer be convertible into securities whose value would vary depending on future prospects and other factors.

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

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

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

Holders of Debentures are not entitled to any rights with respect to our common stock (including voting rights and rights to receive dividends or other distributions), but will be subject to all changes affecting our common stock. A holder will have rights with respect to our common stock only if and when we deliver shares of our common stock to such holder upon conversion of its Debentures and, to a limited extent, by virtue of the conversion rate adjustments applicable to the Debentures. For example, if an amendment is proposed to GTI’s Amended and Restated Certificate of Incorporation or Amended and Restated By-Laws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to the delivery of shares of our common stock to a holder upon conversion of its Debenture, such holder will not be entitled to vote on the amendment, although such holder will nevertheless be subject to any changes in the powers, preferences or rights pertaining to our common stock affected by the amendment.

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

The Debenture Indenture does not:

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

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

restrict our ability to pledge our assets;

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

restrict our ability to make investments; or

restrict our ability to issue new securities.

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

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

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

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

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

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

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

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

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

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

changes in general capital market conditions.

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

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

Forward Looking Statements

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

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

the possibility that global or regional economic conditions affecting our products may not improve or may worsen due to geopolitical events, governmental actions or other factors;

the possibility that additions to capacity for producing steel in electric arc furnaces may not occur, that reductions in graphite electrode manufacturing capacity may not continue or that increases in graphite electrode manufacturing capacity may occur;

the possibility that increases in production of steel in electric arc furnaces or reductions in graphite electrode manufacturing capacity may not result in stable or increased demand for or prices or sales volume of graphite electrodes;

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

the possibility that additions to aluminum smelting capacity using graphite cathodes may not occur or that increases in production of graphite cathodes by competitors may occur;

the possibility that increases in production of aluminum or stable production of graphite cathodes by competitors may not result in stable or increased demand for or prices or sales volume of graphite cathodes;

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

the possibility of delays in or failure to achieve successful development and commercialization of new or improved electronic thermal management or other products;

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

the possibility that end markets for our products (other than those mentioned above) may not improve or may worsen;

the possibility of delays in meeting or failure to meet contractually specified or other product development milestones or delays in expanding or failure to expand our manufacturing capacity to meet growth in demand for existing, new or improved products, if any;

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

the occurrence of unanticipated events or circumstances relating to antitrust investigations, lawsuits or claims or to the lawsuit initiated by us against our former parents;

the possibility that expected cost savings from our 2002 major cost savings plan or our other cost savings efforts will not be fully realized;

the possibility that the anticipated benefits from the corporate realignment of our subsidiaries or the refinement of our organizational structure into three lines of business may be delayed or may not occur;

the possibility that our provision for income taxes and effective income tax rate (as distinguished from our tax payments) may fluctuate significantly based on changes in financial performance of subsidiaries in various countries, changes in estimates of future ability to use foreign tax credits, changes in tax laws and other factors;

the occurrence of unanticipated events or circumstances relating to health, safety or environmental compliance or remediation obligations or liabilities to third parties, labor relations, or raw material or energy supplies or cost;

changes in interest rates, in currency exchange rates (including those impacting our euro-denominated antitrust liabilities or non-dollar denominated intercompany loans), in competitive conditions or in inflation affecting our raw material, energy or other costs;

the possibility of failure to satisfy conditions or milestones under, or occurrence of breach of terms of, our strategic alliances with Pechiney, Ballard Power Systems or others;

the possibility of changes in appropriation or non-appropriation of government funds for, or our failure to satisfy eligibility conditions to, government grants awarded to us;

the possibility that changes in financial performance may affect our compliance with financial covenants or the amount of funds available for borrowing under the Senior Facilities;

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

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

Occurrence of any of the events or circumstances described above could also have a material adverse effect on our business, financial condition, results of operations or cash flows.

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

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

Item 2. Properties

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

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

We believe that our facilities, which are of varying ages and types of construction, are in good condition, are suitable for our operations and generally provide sufficient capacity to meet our requirements for the foreseeable future.

Item 3. Legal Proceedings

The information required by Item 3 is set forth under “Contingencies” in Note 14 to the Consolidated Financial Statements and under “Subsequent Events” in Note 19 to the Consolidated Financial Statements, and is incorporated herein by reference. Such description contains all of the information required with respect thereto.

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

None.

PART II

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

Market Information

Our common stock is listed on the NYSE under the trading symbol “GTI.” The closing sale price of our common stock was $13.50 on December 31, 2003, the last trading day of our last fiscal year. The following table sets forth, for the periods indicated, the high and low closing sales price per share for our common stock as reported by the NYSE.

		High	Low
2002
	First Quarter	$14.30	$9.80
	Second Quarter	14.05	11.00
	Third Quarter	11.85	7.05
	Fourth Quarter	7.60	3.82
2003
	First Quarter	5.89	2.57
	Second Quarter	6.30	2.39
	Third Quarter	8.94	5.50
	Fourth Quarter	13.82	8.23

At February 27, 2004, there were 109 record holders of common stock. We estimate that there were about 8,300 stockholders represented by nominees.

Our common stock is included in the Russell 2000 Index.

A description of GTI’s Stockholder Rights Plan is set forth under “Stockholder Rights Plan” in Note 16 to the Consolidated Financial Statements contained in this Report, and such description is incorporated herein by reference. Such description contains all of the information required with respect thereto.

Dividend Policies and Restrictions

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

GTI is a holding company that derives substantially all of its cash flow from GrafTech Global and GrafTech Finance. GTI’s ability to pay dividends or repurchase common stock from earnings or cash flow from operating or investing activities is dependent upon the earnings and cash flow from operating or investing activities of GrafTech Global and its subsidiaries and the distribution of those earnings and cash flows by GrafTech Global to GTI.

Under the Senior Facilities, GTI is permitted to pay dividends on common stock and repurchase common stock only in an annual aggregate amount of $25 million, plus up to an additional $25 million if certain leverage ratio and excess cash flow requirements are satisfied. 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 February 22, 2000. In addition, GrafTech Global is permitted to pay dividends to GTI for those purposes and also in respect of GTI’s administrative fees and expenses and to fund payments in connection with antitrust, securities and stockholder derivative investigations, lawsuits and claims. The total amount of dividends to fund those payments (in each case, excluding certain imputed interest), plus the total amount paid on intercompany debt owed to GTI for the same purpose (in each case, excluding certain imputed interest), plus the amount of additional reserves created with respect to these investigations, lawsuits and claims may not exceed $340 million by more than the difference between $75 million (or $33 million, after giving effect to the $10 million charge relating to the EU antitrust fine recorded in July 2001 and the $32 million charge recorded in the 2003 fourth quarter) and the principal amount of certain other debt ($1 million of which debt was outstanding at December 31, 2003).

Under the Senior Notes, GTI is permitted to pay dividends on common stock and repurchase common stock only in a cumulative (from February 15, 2002) amount of $25 million (subject to reduction if we make other restricted payments), plus, if certain leverage ratio requirements are satisfied, an amount of up to the sum of 50% of certain cumulative (from April 1, 2002) consolidated net income, 100% of net cash proceeds from certain sales of common stock (subsequent to February 15, 2002) and certain investment returns. We are also permitted to repurchase common stock from present or former directors, officers or employees of up to the lesser of $5 million annually or $10 million on a cumulative basis from February 15, 2002. GrafTech Global is permitted to pay dividends to GTI for those and other purposes.

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

Equity Compensation Plan Information

The following table sets forth certain information relating to the shares of our common stock that may be issued under our equity compensation plans at December 31, 2003.

	A		B		C
Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column A)
Equity compensation plans approved by stockholders (1)		6,048,993		$12.82		538,733

Equity compensation plans not approved by stockholders (2)		5,460,994		$13.21		910,304
Total		11,509,987		$13.00		1,449,037	(3)

(1)	Includes the Management Stock Incentive Plan (Original Version), the 1995 Equity Incentive Plan and the Management Stock Incentive Plan (Senior Version).

(2)	Includes the Management Stock Incentive Plan (Mid-Management Version) and the 1996 Mid-Management Equity Incentive Plan.

(3)	Of these shares, 538,733 shares are available for awards to non-employee directors and officers within the meaning of the rules of the NYSE.

See Note 13 to the Consolidated Financial Statements for a more detailed discussion regarding our equity compensation plans.

Item 6. Selected Financial Data

The following selected consolidated financial data at and for the years ended December 31, 1999, 2000, 2001, 2002 and 2003 have been derived from our audited annual Consolidated Financial Statements, except for the data under “Other Operating Data.” The data set forth below should be read in conjunction with “Preliminary Notes-Presentation of Financial, Legal and Market Data,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto.

	Year Ended December 31,
	1999			2000			2001			2002			2003
	(Dollars in millions, except per share data)
Statement of Operations Data:
Net sales	$	818		$	763		$	634		$	596		$	712
Gross profit		256			214			179			135			168
Selling, administrative and other expenses		84			84			75			81			85
Restructuring charges (credit) (a)		(6	)		6			12			6			20
Impairment loss on long-lived and other assets (b)		35			3			80			17			7
Antitrust investigations and related lawsuits and
claims (c)		--			--			10			--			32
Securities class action and stockholder derivative
lawsuits (d)		13			(1	)		--			--			--
Other expense (income), net (e)		(9	)		20			3			(9	)		(12	)
Interest expense		84			75			60			60			45
Provision for (benefit from) income taxes		1			2			14			(16	)		5
Income (loss) from continuing operations
(a)(b)(c)(d)(e)		42			10			(89	)		(19	)		(26	)
Income from discontinued operations (less
applicable income tax expense) (f)		--			--			2			1			1
Gain on sale of discontinued operations (less
applicable income tax expense) (f)		--			--			--			--			1
Net income (loss) (a)(b)(c)(d)(e)(f)		42			10			(87	)		(18	)		(24	)
Basic income (loss) per common share:
Income (loss) from continuing
operations	$	0.94		$	0.22		$	(1.79	)	$	(0.35	)	$	(0.38	)
Income from discontinued operations		--			--			0.04			0.02			0.02

Net income (loss)	$	0.94		$	0.22		$	(1.75	)	$	(0.33	)	$	(0.36	)

Weighted average common shares outstanding (in
thousands)		45,114			45,224			49,720			55,942			67,981

Diluted income (loss) per common share:
Income (loss) from continuing
operations	$	0.91		$	0.22		$	(1.79	)	$	(0.35	)	$	(0.38	)
Income from discontinued operations		--			--			0.04			0.02			0.02

Net income (loss)	$	0.91		$	0.22		$	(1.75	)	$	(0.33	)	$	(0.36	)

Weighted average common shares outstanding (in
; thousands)		46,503			45,813			49,720			55,942			67,981

Balance sheet data (at period end):
Cash and cash equivalents	$	17		$	47		$	38		$	11		$	34
Total assets		933			908			797			859			967

	Year Ended December 31,
	1999			2000			2001			2002			2003
	(Dollars in millions, except per share data)
Short-term debt		--			3			7			18			1
Payments due within one year on long-term debt		82			27			--			--			--
Long-term debt carrying value		640			705			631			699			516
Fair value of hedged debt obligation		--			--			--			8			(18	)
Unamortized bond premium		--			--			--			6			4
Total debt		722			735			638			731			503
Other long-term obligations (excluding the reserve
for antitrust investigations, lawsuits and
claims) (g)		120			126			132			163			182
Balance of reserve for antitrust investigations,
lawsuits and claims		131			107			101			98			125
Other long-term obligations		224			209			231			258			225
Stockholders' deficit		(293	)		(316	)		(332	)		(381	)		(128	)
Working capital		101			99			112			115			94
Other financial data:
Gross profit margin		31.3	%		28.1	%		28.2	%		22.7	%		23.6	%
Depreciation and amortization	$	44		$	42		$	35		$	28		$	31
Capital expenditures		56			52			40			50			41
Net cash provided by (used in) operating
activities from continuing operations		77			92			14			(60	)		(26	)
Net cash provided by (used in) operating
activities from discontinued operations		3			2			3			--			1
Net cash provided by (used in) operating activities		80			94			17			(60	)		(25	)
Net cash used in investing activities		(39	)		(50	)		(39	)		(50	)		(22	)
Net cash provided by (used in) financing activities		(80	)		(13	)		15			79			69
Other operating data:
Ratio of earnings to fixed charges (h)		1.55x			1.20x			--			--			--
Quantity of graphite electrodes sold (in thousands
of metric tons)		206			217			174			180			200
Quantity of cathodes sold (in thousands of metric
tons)		31			35			33			37			36

(a)

For 1999, represents a net reduction in the estimate of shutdown costs recorded in 1998. For 2000, represents a $2 million cash charge in connection with the restructuring of our advanced synthetic graphite products (then called advanced graphite materials) business and a $4 million cash charge in connection with a corporate restructuring involving a workforce reduction. These costs consisted primarily of severance. For 2001, represents a $5 million charge related to a corporate realignment of our businesses, the relocation of our corporate headquarters (including severance and related benefits associated with workforce reductions) and the shutdown of graphite electrode manufacturing operations in Clarksville and Columbia, Tennessee and coal calcining operations in Niagara Falls, New York, and a $7 million charge related primarily to the mothballing of graphite electrode manufacturing operations in Caserta, Italy. The cash portion of these charges was $10 million. For 2002, represents a $6 million charge related primarily to the mothballing of graphite electrode manufacturing operations in Caserta, Italy, including estimated pension, severance and other employee benefit costs. For 2003, represents a $9 million charge for organizational changes related to U.S. voluntary and selective severance programs and related benefits associated with workforce reductions and an $11 million charge for the closure and settlement of our U.S. non-qualified defined benefit plan for the participating salaried workforce.

(b)

For 1999, represents impairment loss on long-lived advanced synthetic graphite product assets. For 2000, represents impairment loss on long-lived cathode assets. For 2001, represents a $53 million impairment loss on long-lived assets primarily related to the shutdowns in Tennessee described in note (a) above, a $1 million impairment loss related to long-lived assets related to the shutdown in New York described in note (a) above, a $1 million impairment loss related to the corporate realignment of our subsidiaries, a $24 million impairment loss related to long-lived assets related to the mothballing in Italy described in note (a) above and a $3 million impairment loss related to available-for-sale securities. For 2002, represents a $12 million ($8 million after tax) impairment loss on long-lived carbon electrode assets in Columbia, Tennessee, a $2 million impairment loss on available-for-sale securities, and a $3 million ($2 million after tax) impairment loss on our investment in our joint venture with Jilin. For 2003, represents a $5 million impairment loss on long-lived assets relating to the closure of the majority of the graphite electrode manufacturing operations in Caserta, Italy and a $2 million net non-cash write-off of the remaining book value of assets of our former graphite electrode manufacturing operations in Clarksville, Tennessee.

(c)	Represents additional estimated potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims.

(d)	Represents estimated liabilities and expenses in connection with securities class action and stockholder derivative lawsuits, $1 million of which was reversed in 2000.

(e)

Includes: for 2000, a $21 million write-off of capitalized bank fees and other costs resulting from early extinguishment of debt in connection with a debt recapitalization; for 2002, $21 million of gains due to currency translation on intercompany loans and translation of financial statements of foreign subsidiaries which use the dollar as their functional currency, $7 million of gains due to transactions with third parties and a $4 million write-off of capitalized bank fees and other costs in connection with early extinguishment of debt; and, for 2003, $35 million of gains due to currency exchange benefits primarily associated with euro-denominated intercompany loans, partially offset by other expenses.

(f)	Represents gain from the sale of our non-strategic composite tooling business in the 2003 second quarter.

(g)	Represents pension, post-retirement and related benefits, employee severance liabilities and miscellaneous other long-term obligations.

(h)

The ratio of earnings to fixed charges has been computed by dividing (i) earnings before income taxes, plus minority stockholders’ equity in consolidated entities, plus fixed charges (excluding capitalized interest), plus amortization of capitalized interest, by (ii) fixed charges, which consist of interest charges (including capitalized interest), plus the portion of rental expense that we deem to include an interest factor. Earnings were insufficient to cover fixed charges by $72 million in 2001, $32 million in 2002 and $23 million 2003. Non-cash restructuring charges and impairment losses on long-lived and other assets were $82 million 2001, $17 million in 2002 and $11 million in 2003. Cash restructuring charges were $10 million in 2001, $6 million in 2002 and $16 million in 2003.

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 “Preliminary Notes-Presentation of Financial, Legal and Market Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto.

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
	(Dollars in millions, except per share data)
2002
Net sales	$	133		$	157		$	150		$	156
Gross profit		30			35			33			37
Loss from continuing operations		(5	)		(7	)		(5	)		(2	)
Income from discontinued operations (less applicable income taxes expense)		1			--			--			--
Gain on sale of discontinued operations (less applicable income tax expense)		--			--			--			--
Net loss (a)(b)(c)(d)		(4	)		(7	)		(5	)		(2	)
Basic income (loss) per common share:
Loss from continuing operations	$	(0.08	)	$	(0.15	)	$	(0.09	)	$	(0.04	)
Income from discontinued operations		0.02			0.01			0.01			--

Net loss per share	$	(0.06	)	$	(0.14	)	$	(0.08	)	$	(0.04	)

Diluted income (loss) per common share:
Loss from continuing operations	$	(0.08	)	$	(0.15	)	$	(0.09	)	$	(0.04	)
Income from discontinued operations		0.02			0.01			0.01			--

Net loss per share	$	(0.06	)	$	(0.14	)	$	(0.08	)	$	(0.04	)

	First Quarter			Second Quarter		Third Quarter		Fourth Quarter
	(Dollars in millions, except per share data)
2003
Net sales	$	170		$	181	$	173	$	188
Gross profit		39			43		41		45
Income (loss) from continuing operations		(10	)		6		6		(28	)
Income from discontinued operations (less applicable income taxes expense) .		1			--		--		--
Gain on sale of discontinued operations (less applicable income tax expense)		--			1		--		--
Net loss (e)(f)(g)		(9	)		7		6		(28	)
Basic income (loss) per common share:
Income (loss) from continuing operations	$	(0.17	)	$	0.11	$	0.09	$	(0.30	)
Income from discontinued operations		0.01			0.01		--		--

Net loss per share	$	(0.16	)	$	0.12	$	0.09	$	(0.30	)

Diluted income (loss) per common share:
Income (loss) from continuing operations	$	(0.17	)	$	0.11	$	0.09	$	(0.30	)
Income from discontinued operations		0.01			0.01		--		--

Net income (loss) per share	$	(0.16	)	$	0.12	$	0.09	$	(0.30	)

(a)	The 2002 first quarter includes a restructuring charge of $5 million related primarily to the mothballing of graphite electrode manufacturing operations in Caserta, Italy.

(b)	The 2002 second quarter includes a $12 million ($8 million after tax) impairment loss on long-lived carbon electrode assets in Columbia, Tennessee and a $1 million impairment loss on available-for-sale securities.

(c)	The 2002 third quarter includes a $1 million impairment loss on available-for-sale securities.

(d)	The 2002 fourth quarter includes a $3 million ($2 million after tax) impairment loss on our investment in our joint venture with Jilin and an additional restructuring charge of $1 million related to the mothballing of graphite electrode manufacturing operations in Caserta, Italy.

(e)	The 2003 first quarter includes a restructuring charge of $19 million related to organizational changes and closure and settlement of our U.S. non-qualified defined benefit plan for the participating salaried workforce.

(f)	The 2003 second quarter includes an additional restructuring charge of $1 million related to organizational changes.

(g)

The 2003 fourth quarter includes a $5 million impairment loss on long-lived assets relating to the closure of graphite electrode manufacturing operations in Caserta, Italy and a $2 million net non-cash write off of the remaining book value of assets of our former graphite electrode manufacturing operations in Clarksville, Tennessee.

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

Reference is made to the information elsewhere in this Report for background information on our businesses, industry and related matters.

Repositioning Our Global Manufacturing Network and Other Initiatives

In January 2002, we announced a major cost savings plan that we believe is one of the most aggressive major cost reduction plans being implemented in our industry.

The key elements of the 2002 plan consist of:

the further rationalization of graphite electrode manufacturing capacity at our higher cost facilities and the expansion of capacity at our lower cost facilities;

the implementation of global business and work process changes;

the redesign and implementation of changes in our benefit plans for active and retired employees;

the corporate realignment of our subsidiaries to generate significant tax savings; and

sales of non-strategic assets.

Under the 2002 plan, we are targeting cumulative recurring annual pretax cost savings of $60 million in 2004 and $80 million in 2005. Savings achieved under the 2002 plan are additive to those which we achieved by the end of 2001 under our 1998 global restructuring and rationalization plan. All cost savings described below under this section entitled “Repositioning Our Global Manufacturing Network and Other Initiatives” are included in the aggregate amounts set forth above. We achieved recurring pretax cost savings of $19 million in 2003, for total cumulative savings of $33 million since January 1, 2002.

We recorded an aggregate of $33 million of restructuring charges and $48 million of impairment losses on long-lived and other assets, and expect to record an additional $6 million of restructuring charges (primarily for severance associated with further global business and work process changes, but excluding additional restructuring charges that may be recorded relating to the closure of the majority of the graphite electrode manufacturing operations in Italy), in connection with the 2002 plan. These charges include payments through December 31, 2003 of $8 million of cash costs and expected payments of an additional $27 million of cash costs. All charges described below under this section entitled “Repositioning our Global Manufacturing Network and Other Initiatives” are included in the aggregate amounts set forth above.

Remaining actions associated with the 2002 plan that could result in additional restructuring charges relate primarily to the implementation of global work process changes and additional overhead cost reductions.

Rationalization of Our Global Manufacturing Network. We have repositioned our global manufacturing network by rationalizing our higher cost manufacturing facilities and redeploying capacity to our remaining larger, lower cost, strategically located facilities.

Graphite Electrodes. In 1999 and 2000, we shut down the high cost graphite electrode manufacturing operations at our facilities in Canada and Germany and rationalized the graphite electrode manufacturing operations at our facilities in Russia. In 2001, we shut down the high cost graphite electrode manufacturing operations at our facilities in Tennessee. In 2001, we recorded a $5 million restructuring charge and a $53 million impairment loss on long-lived assets primarily relating to the shutdown in Tennessee. In addition, in 2001, we incrementally expanded graphite electrode manufacturing capacity at our lower cost facilities in Mexico, Spain and South Africa for a capital investment of about $3 million.

In the 2001 fourth quarter, we recorded a $7 million restructuring charge and a $24 million impairment loss on long-lived assets in connection with the planned mothballing of our high cost graphite electrode manufacturing operations at our facility in Italy. In 2002, we mothballed the Italian facility and recorded an additional $6 million restructuring charge. These operations had the capacity to manufacture 26,000 metric tons of graphite electrodes annually. At the end of 2003, we announced the permanent closure of the majority of our graphite electrode manufacturing operations in Italy. We also recorded a $5 million impairment loss on long-lived assets relating to the remaining fixed assets. In the next twelve to eighteen months, we may record additional restructuring charges and incur additional exit costs in connection with such closure. It is also possible that we may, at any time, decide to permanently shut down our remaining graphite electrode operations in Italy. In such event, we may record additional restructuring charges and incur additional exit costs.

During the 2002 second quarter, we launched the expansion of our graphite electrode manufacturing facility in Mexico from about 40,000 metric tons to about 60,000 metric tons annually. We completed 10,000 metric tons of expansion at this facility by the end of 2002. We completed the remaining 10,000 metric tons of expansion during the 2003 first quarter. The 2003 second quarter was the first full quarter of operation of the fully expanded capacity. In 2002 and 2003, we also incrementally expanded graphite electrode manufacturing capacity at our other facilities. The expansions required capital investments of about $15 million.

The repositioning of our network allows us to deliver the same graphite electrode sales volume that we delivered over the past few years with a significantly lower fixed cost base. With the repositioning and our proprietary process and technological improvements, we now have the capability, depending on product demand and mix, to manufacture more than 220,000 metric tons of graphite electrodes from our existing assets.

Other Products. In 2001, we shut down our coal calcining operations in New York primarily because we entered into a five-year agreement to purchase calcined coal from a third party at a competitive cost. We recorded a $1 million impairment loss on the related long-lived assets.

In 2001, we also launched operations on our new advanced natural graphite production line, which was financed with a portion of the net proceeds from our public offering of common stock in July 2001.

In 2002, we recorded a $12 million impairment loss on our long-lived carbon electrode assets in Tennessee as a result of a decline in demand and loss of market share. The primary end market for carbon electrodes is silicon metal, which was very depressed in the U.S. where our main customer base is located.

Redesign and Implementation of Changes to Global Manufacturing, Marketing and Sales Processes. We have evaluated virtually every aspect of our global supply chain, and we have redesigned and implemented changes to our global manufacturing, marketing and sales processes to leverage the strengths of our repositioned network. Among other things, we have eliminated manufacturing bottlenecks, improved product and service quality and delivery reliability, expanded our range of products, and improved our global sourcing and product mix for our customers. Since 1999, we have reduced annual customer compensation for graphite electrode quality claims from $3 million to less than $1 million. We also redirected marketing and sales activities to better service the needs of both existing and new customers.

Redesign and Implementation of Changes to Benefit Plans. In the 2001 fourth quarter and the 2002 first quarter, we redesigned and implemented changes in our retiree medical insurance plan and our U.S. retirement and savings plans for active employees. Among other things, we froze our qualified defined benefit plan and established a new defined contribution plan for most of our U.S. employees.

In July 2002, we amended our U.S. post-retirement medical coverage. Effective March 31, 2003, we discontinued the Medicare supplement plan (for retirees 65 years or older or those eligible for Medicare benefits). This change applies to all active employees except for some employees covered by a collective bargaining agreement, all current retirees who were not covered by a collective bargaining agreement when they retired and those retirees who retired under a former collective bargaining agreement.

In June 2003, we announced the termination of the early retiree medical plan for retirees under age 65, effective December 31, 2005. In addition, we will limit the amount of retiree’s life insurance after December 31, 2004.

The impact of these changes is being amortized over the average remaining period to full eligibility of the related post-retirement benefits and resulted in a $8 million net benefit in 2003 that is reflected on the Consolidated Statements of Operations.

Effective March 2003, we froze our qualified defined benefit plan for our remaining U.S. employees and closed our non-qualified U.S. defined benefit plan for the participating salaried workforce. The closure and settlement of our non-qualified U.S. defined benefit plan resulted in a $11 million restructuring charge in the 2003 first quarter.

Implementation of Changes to Global Business Processes. We began to implement in 2000 and continue to implement global business and work process rationalization and transformation initiatives, including:

the streamlining of our organizational structure within our three major lines of business;

the consolidation and streamlining of order fulfillment, purchasing, finance and accounting, and human resource processes;

the identification and implementation of outsourcing opportunities;

the improvement in performance through realignment and enterprise-wide standardization of supply chain processes and systems; and

the improvement of interfaces and information technology infrastructures with trading partners.

These activities are targeted for completion by the end of 2005. Through December 31, 2003, our investment in these initiatives included about $13 million of consulting fees and internal costs and $16 million of capital expenditures, primarily for costs related to implementation of global information technology systems for advanced planning and scheduling software and for global treasury management systems.

We have also implemented and continue to implement an enterprise-wide risk management process whereby we assess the business risks to our goal of maximizing cash flow, using a structured and disciplined approach. This approach seeks to align our personnel and processes with our critical strategic risks so that our management team and GTI’s Board of Directors may better evaluate and manage those uncertainties.

Effective April 2001, we entered into a ten-year service contract with CGI Group Inc. (“CGI”) valued at $75 million. Pursuant to this contract, CGI became the delivery arm for our global information technology service requirements, including the design and implementation of our global information and advanced manufacturing and demand planning processes, using J.D. Edwards software. Through this contract, we are seeking to transform our information technology service capability into an efficient, high quality enabler for our global supply chain initiatives as well as a contributor to our cost reduction activities. Under the outsourcing provisions of this contract, CGI manages our data center services, networks, desktops, telecommunications and legacy systems. Through this contract, we believe that we will be able to leverage the resources of CGI to assist us in achieving our information technology goals and our cost savings targets.

In the 2002 third quarter, we entered into a ten year outsourcing contract with CGI valued at $36 million. Pursuant to this contract, CGI became the delivery arm for our finance and accounting business process services, including accounts receivable and accounts payable activities. CGI also provides various related analytical services such as general accounting, cost accounting and financial analysis activities. Through this contract, we believe that we will be able to further leverage the resources of CGI to assist us in achieving our cost savings targets.

Severance Programs. We have implemented and continue to implement voluntary and selective severance programs, designed to complement our global business and work process rationalization and transformation initiatives.

Through December 31, 2003, we substantially completed U.S. voluntary and selective severance programs announced in December 2002, resulting in a reduction of 103 U.S. employees (or 27% of the U.S. salaried workforce). We recorded an $8 million restructuring charge in the 2003 first quarter in connection with these programs.

From 1998 through December 31, 2003, we reduced our global workforce by about 1,700 employees, or over 30%. Current severance programs are expected to reduce our global workforce by about 75 employees (or about 2%) over the next 12 to 18 months.

Corporate Realignment of Our Subsidiaries. In the 2002 first half, we substantially completed the realignment of our foreign subsidiaries under the 2002 plan. Most of the operations and net sales of our synthetic graphite line of business are located outside the U.S. and, as a result of the realignment, are held by our Swiss subsidiary or its subsidiaries. Most of our technology is held by our U.S. subsidiaries.

The realignment of our foreign subsidiaries has resulted and is expected to result in substantial tax savings. We used opportunities created by the realignment to improve cash management and corporate services delivery and reallocate intercompany debt as well as reduce taxes. This reallocation of intercompany debt better matches intercompany debt with cash flow from operations. Debt service on our intercompany debt provides an important source of funds to repay our debt to third parties, including the Senior Facilities, the Senior Notes and the Debentures.

The legal and tax restructuring and global realignment mentioned herein are part of the corporate realignment of our subsidiaries. The tax benefits from the realignment have been recorded separately on the Consolidated Financial Statements from expenses to implement the realignment (which are included in other (income) expense, net).

Sales of Non-Strategic Assets. Net cash proceeds from asset sales in 2003 totaled $24 million, including the sale of our non-strategic composite tooling business based in California in June 2003 for $16 million (which included a $1 million working capital adjustment) and the termination of our executive life insurance program and liquidation of our split dollar life insurance policies for executives for net cash proceeds of $3 million. We intend to continue to sell real estate, non-strategic businesses and certain other non-strategic assets. We are targeting an additional $25 million of asset sales in 2004, for an aggregate total of about $50 million from January 1, 2002 through the end of 2004.

Recent Strategic Alliance Developments

We have developed a strategic alliance in the cathode business with Pechiney, the world’s recognized leader in aluminum smelting technology. To broaden our alliance, in March 2001, we contributed our Brazilian cathode manufacturing operations to Carbone Savoie. Pechiney, our 30% joint venture partner in Carbone Savoie, contributed approximately $9 million in cash to Carbone Savoie as part of this transaction. The cash contribution was used to upgrade manufacturing operations in Brazil and France, which was completed by the end of the 2002 first quarter. Ownership in Carbone Savoie remains 70% by us and 30% by Pechiney. Carbone Savoie holds our entire cathode manufacturing capacity.

We have been working with Ballard Power Systems since 1992 on developing natural graphite-based materials for use in its PEM fuel cells. In June 2001, our subsidiary, AET, entered into an expanded exclusive development and collaboration agreement and an expanded exclusive long-term supply agreement with Ballard Power Systems. In addition, Ballard Power Systems became a strategic investor in AET in June 2001, investing at that time $5 million in shares of Ballard Power Systems common stock for a 2.5% equity ownership interest in AET.

In April 2001, we entered into a graphite electrode production joint venture with Jilin in China. We are required to make capital contributions of $6 million of cash ($2 million of which has been contributed to date) plus technical assistance ($1 million of which has been contributed to date) for our 25% ownership interest in the joint venture. During the 2002 fourth quarter, we recorded an impairment loss of $3 million associated with our investment in the joint venture. This impairment resulted from uncertainty about the completion and start-up of the joint venture facilities in China due to the effects that the challenging 2002 graphite electrode industry conditions had on Jilin. We continue to work with Jilin on alternatives. However, we will make no further contributions to the joint venture until we have agreed upon an alternative.

Global Economic Conditions and Outlook

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

Over the past three years through the 2003 first half, we faced extremely challenging business and industry conditions. Adverse global and regional economic conditions negatively impacted many of the end markets for our products. Many of the customers in these markets reduced production levels (which reduced demand and adversely impacted prices for products sold by us and our competitors), became less creditworthy, filed for bankruptcy protection or were acquired as part of the consolidation trends within their industries. In the 2003 second half, global and certain regional economies began to strengthen. In addition, for most of this period, industry-wide capacity for most of our products exceeded demand. We have been experiencing intense competition, particularly in the graphite electrode industry.

2001. Economic weakening in North America continued and became more severe in 2001. This economic weakness was exacerbated by the impact on economic conditions of the terrorist acts in the U.S. in September 2001. Electric arc furnace steel production declined in 2001 as compared to 2000 by about 11% in the U.S.

Worldwide electric arc furnace steel production was stable in 2001 as compared to 2000, as declines in the U.S., Asia (excluding China) and South America were offset by gains in China. The decline of electric arc furnace steel production in South America was caused primarily by shortages of electricity brought on by a drought that reduced hydroelectric power generation in Brazil (that was largely relieved in 2002), and a currency, debt and related economic crisis in neighboring Argentina.

Worldwide electric arc furnace steel production in 2001 was 285 million metric tons, about 33% of total steel production, which was similar to 2000.

While worldwide electric arc furnace steel production was stable, weaker economic conditions resulted in reduced production and, in some cases, the closing of older, less efficient electric arc furnaces. This led to a decline in demand for graphite electrodes worldwide. We estimate that worldwide graphite electrode sales volume declined in 2001 as compared to 2000 by about 9%. Overall pricing worldwide was weak throughout most of this period. While we implemented increases in local currency selling prices of our graphite electrodes in 2000 and early 2001 in Europe, the Asia Pacific region, the Middle East and South Africa, we were not able to maintain all of these price increases. Our volume of graphite electrodes sold declined in 2001 as compared to 2000 by about 20% due primarily to the decline in demand for graphite electrodes worldwide as well as weak economic conditions in some of our more important markets, our efforts to implement and maintain local currency selling price increases and our efforts to seek to minimize credit risks.

The global and regional economic conditions that impacted demand and prices for graphite electrodes also impacted demand and prices for most of our other products. In general, demand was relatively stable and pricing remained relatively weak. Demand and prices for graphite cathodes remained relatively strong primarily due to construction of new aluminum smelters using graphite cathodes, even as old smelters using carbon cathodes are removed from service.

2002. Global economic conditions remained relatively weak into 2002, but strengthened slightly in certain markets during the course of the year. We estimate that worldwide electric arc furnace steel production increased by about 5% in 2002 (to a total of about 299 million metric tons, about 33% of total steel production) from 2001. This increase was primarily due to an increase in production in the U.S., Mexico, Brazil and Asia.

In March 2002, President Bush announced his decision to impose tariffs, of up to 30% initially and declining thereafter over a three year period, on most imported steel as part of a broader plan to rescue the financially troubled steel industry in the U.S. Several additional exemptions were granted in 2002 by the Bush administration. We believe that the tariffs had a modest positive impact on electric arc furnace steel production in the U.S. While steel imported from Mexico was exempt from the tariffs, steel imported from Europe and Asia was not exempt. Steel production in those regions had been adversely impacted by the tariffs in 2002. In November 2003, the World Trade Organization ruled that these tariffs are illegal. In December 2003, President Bush announced his decision to lift the tariffs. In turn, the World Trade Organization dropped its pursuit of retaliation against the U.S. and China cancelled many of its steel trade safeguards and duties.

Worldwide graphite electrode demand was very depressed in the 2002 first quarter, but rebounded from those depressed levels during the balance of 2002. During the last three quarters of 2002, we utilized virtually all of our graphite electrode manufacturing capacity. For the entire year 2002, our volume of graphite electrodes sold increased about 4% from 2001. We believe that worldwide graphite electrode demand increased by 3% in 2002 from 2001. We believe that graphite electrode pricing declined by about 10% in 2002 as compared to 2001, driven by global and industry economic conditions in 2001 and early 2002 and the fact that the prices of graphite electrodes sold in 2002 were largely negotiated during the order book season in late 2001 when global economic conditions were weak.

Demand and prices for cathodes remained strong primarily due to construction of new aluminum smelters using graphite cathodes, even as old smelters using carbon cathodes were removed from service. We used virtually all of our cathode manufacturing capacity during 2002 and our volume of cathodes sold increased about 10% in 2002 from 2001. Weak economic conditions in 2002 resulted in relatively low demand and weak pricing for most of our other products.

2003. Global and certain regional economic conditions began to strengthen in the 2003 second half. Steel production increased globally and was particularly strong in China. We estimate that worldwide steel production was about 960 million metric tons in 2003. We estimate that electric arc furnace steel production increased correspondingly, to about 305 million metric tons in 2003. We operated our graphite electrode manufacturing capacity at very high levels, and estimate that (excluding China, for which reliable information is not available) industry-wide graphite electrode manufacturing capacity utilization rate was approximately 97% in 2003.

Graphite electrode price increases announced since September 2002 have been successfully implemented. In February 2003, we implemented graphite electrode price increases of €100 per metric ton in Europe, $200 per metric ton in Asia, the Middle East, North Africa and South America and $0.05 per pound in the U.S. In July 2003, we implemented graphite electrode price increases in the following regions: South Africa, to an average price range of $2,500 to $2,600 per metric ton; Asia (except China) and the Middle East of $500 per metric ton; and North and South America, to $2,600 per metric ton, effective August 1, 2003. In September 2003, we announced additional graphite electrode price increases in Europe of €100 per metric ton.

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

Outlook. We believe that we are well positioned to increase earnings and cash flow from operations (excluding payments in connection with restructurings, investigations, lawsuits and claims and the impact of the reduction of factoring of accounts receivable as described under “–Liquidity and Capital Resources”) under current and improving global and regional economic conditions. We expect net sales of all our products to increase by about 10% in 2004 from 2003.

Synthetic Graphite. The graphite electrode supply/demand balance has improved, and supply remains tight primarily due to graphite electrode industry-wide rationalization, including bankruptcies of competitors, and, to a lesser extent, increased electric arc furnace steel production. Since September 2002, we have successfully implemented graphite electrode price increases around the world as described above. In February 2004, we announced graphite electrode price increases of $150 per metric ton in North and South America (bringing the spot price to $2,750 per metric ton) and $150/ €115 per metric ton in Europe, Russia and the other countries in the Community of Independent States, the Middle East, Africa and Asia. These price increases are driven by continued upward pressure on energy and raw material costs, strength in steel production and the tight supply/demand balance in the graphite electrode industry. As the majority of our graphite electrode order book has been placed, this recent price increase is expected to impact less than 10% of our 2004 business.

For 2004, we continue to fill our graphite electrode order book and expect average sales revenue per metric ton of graphite electrodes to be approximately $2,550 for 2004. This represents an increase of approximately $200 over the average for 2003, an estimated one-quarter of which is associated with expected benefits from net changes in currency exchange rates. We expect graphite electrode sales volume for 2004 to be approximately 210,000 metric tons.

We expect demand for our cathodes in 2004 to be similar to 2003. Our strategic alliance with Pechiney, which is a 30% owner of our cathode business and purchases cathodes from us under a requirements contract that remains in effect through 2006, continues to position us as the leading supplier of cathodes to the aluminum industry.

Operation of our synthetic graphite facilities at capacity is expected to positively impact synthetic graphite cost of sales in 2004 as compared to 2003, offset by higher energy, freight and other raw material costs and the negative impact of net changes in currency exchange rates on costs. In addition, we expect to benefit from our rationalization and other initiatives that allow us to achieve significant increases in productivity and output from our existing assets, including economies of scale and other cost savings that we believe will increase as we grow our sales.

Other. We expect growing net sales of our electronic thermal management products and services, due to our continuing successful product development and commercialization initiatives, the development of new, higher performance electronic devices and the strengthening economic condition of the electronics industry. We have developed new electronic thermal management technologies with over 140 product approvals from industry leading strategic partners, customers and others. Sales of our products are growing, from about $500,000 in 2002 to $2.2 million in 2003 and an estimated $8 million in 2004.

We expect financial performance of most of our other businesses to improve from the current levels primarily due to the recovery of economic conditions in the end markets for their products. In particular, demand for carbon electrodes in the U.S. and demand for advanced synthetic graphite products used in the semiconductor, telecommunications and electronics industries is strengthening. In addition, demand for our refractories has strengthened as a result of our increased penetration of various markets, particularly Europe and China, and increased blast furnace construction and refurbishment. We continue to seek to drive productivity and cost improvements in all of these businesses.

At December 31, 2003, after giving effect to the sale of the Debentures and application of the net proceeds therefrom to repay the remaining $21 million of term loans outstanding under the Senior Facilities and to make a provisional payment of $72 million to the EU Competition Authority toward the EU antitrust fine, we would have had total debt of $707 million (including unamortized bond premium and fair value of hedged debt obligation) cash and cash equivalents of $158 million and a stockholders’ deficit of $128 million.

We continue to implement interest rate management initiatives to seek to minimize interest expense and optimize the risk in our portfolio of fixed and variable interest rate obligations as described under “Item 7A–Quantitative and Qualitative Disclosures about Market Risks” in this Report. We are targeting interest expense of approximately $40 million for 2004.

As a result of, among other things, the successful completion of the corporate realignment of our subsidiaries, we are targeting an effective income tax rate of 35% for 2004.

Our outlook could be significantly impacted by, among other things, changes in interest rates by the U.S. Federal Reserve Board and the European Central Bank, changes in tax laws and tax and fiscal policies by the U.S. and other governments, developments in the Middle East, the occurrence of further terrorist acts and developments (including increases in security, insurance, data back-up, energy and transportation and other costs, transportation delays and continuing or increased economic uncertainty and weakness) resulting from terrorist acts and the war on terrorism, and other factors mentioned elsewhere in this Report.

Financing Transactions

In July 2001, we completed a public offering of 10,350,000 shares of common stock at a public offering price of $9.50 per share. The net proceeds from that offering were $91 million. 60% of the net proceeds were used to repay term loans outstanding under the Senior Facilities.

In February 2002, we completed an offering of $400 million aggregate principal amount of Senior Notes at a price of 100% of principal amount. In May 2002, we completed an offering of $150 million aggregate principal amount of additional Senior Notes at a price of 104.5% of principal amount, plus accrued interest from February 2002. The Senior Notes bear interest at an annual rate of 10.25% and mature in 2012.

The net proceeds from the offering completed in February 2002 were $387 million. The net proceeds (excluding accrued interest paid by the purchasers of the Senior Notes) from the offering completed in May 2002 were $151 million. We used all of the net proceeds to reduce the balance outstanding under the Revolving Facility and to repay term loans outstanding under the Senior Facilities. We paid approximately $13 million of debt issuance costs related to the Senior Notes sold in February 2002 and $6 million related to the Senior Notes sold in May 2002. These costs are being amortized over the term of the Senior Notes. The $7 million premium received upon issuance of the additional Senior Notes issued in May 2002 is classified as long-term liability on the Consolidated Balance Sheets and amortized (as a credit to interest expense) over the term of the additional Senior Notes. As a result of our receipt of such premium, the effective annual interest rate on the additional Senior Notes is about 9.5%. We recorded an extraordinary charge of $4 million ($3 million, net of tax) in 2002 for write-off of capitalized fees associated with the term loans repaid with the net proceeds from the issuance of the Senior Notes. These extraordinary charges have been reclassified and included in other (income) expense, net, on the Consolidated Statements of Operations, in accordance with SFAS No. 145 relating to SFAS No. 4.

During 2003, we exchanged $55 million aggregate principal amount of Senior Notes, plus accrued interest of $2 million, for approximately 9.9 million shares of our common stock and we purchased $2.5 million aggregate principal amount of Senior Notes, plus accrued interest, for $3 million in cash.

In October 2003, we sold an aggregate of 25,300,000 shares of our common stock in a registered public offering at a public offering price of $8.00 per share. The net proceeds from this offering were approximately $190 million, of which $114 million was used to repay term loans outstanding under the Senior Facilities, $56 million was used to reduce the balance outstanding under the Revolving Facility, and the balance was used to repay other short-term debt. In connection therewith, we recorded a charge of $2 million for the write-off of capitalized fees associated with the term loans repaid with the net proceeds. The write-off has been included in other (income) expense, net, on the Consolidated Statements of Operations.

On January 22, 2004, we completed an offering of $225 million aggregate principal amount of Debentures at a price of 100% of principal amount. The net proceeds from the offering were approximately $217 million. We used the net proceeds to repay the remaining $21 million of term loans outstanding under the Senior Facilities and to make a provisional payment of $72 million to the EU Competition Authority against the EU antitrust fine. We intend to use the balance for general corporate purposes, including replacement of financing previously provided by factoring of accounts receivable and strategic acquisitions that are complementary to our businesses. Pending use for a specific corporate purpose, we intend to initially use the net proceeds to reduce the outstanding balance under the Revolving Facility, if any, and, to the extent that at the time there is no such amount outstanding, to invest in short-term, investment quality, interest-bearing securities or deposits.

Litigation Against Our Former Parent Companies Initiated by Us

In February 2000, we commenced a lawsuit against our former parents, Mitsubishi Corporation and Union Carbide Corporation, to recover certain payments made to them in connection with our leveraged equity recapitalization in January 1995 as well as certain unjust receipts by them from their investments in us and damages for aiding and abetting breaches of fiduciary duties owed to us by our former senior management in connection with illegal graphite electrode price fixing activities. We are seeking to recover more than $1.5 billion, including interest. On January 27, 2004, the court granted the defendants’ motions to dismiss the lawsuits. We have appealed this decision. We expect to incur $10 million to $20 million for legal expenses to pursue this lawsuit from the date of filing the complaint through appeal and ultimately trial. Through December 31, 2003, we had incurred about $6 million of these legal expenses. This lawsuit is in its earliest stages, and the ultimate outcome of this lawsuit is subject to many uncertainties.

Antitrust Litigation Against Us

Since 1997, we and other producers and distributors of graphite and carbon products have been subject to antitrust investigations by antitrust authorities in the U.S., the European Union, Canada, Japan and Korea. In addition, civil antitrust lawsuits have been commenced and threatened against us and other producers and distributors of graphite and carbon products in the U.S., Canada and elsewhere.

In April 1998, GTI pled guilty to a one count charge of violating U.S. federal antitrust law 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. The payment schedule has been revised periodically at our request. The payment schedule for the $52.5 million balance consists of quarterly payments ranging from $3.25 million to $5.375 million, payable from April 2004 through January 2007. Beginning in 2004, the DOJ may ask the U.S. District Court for the Eastern District of Pennsylvania to accelerate the payment schedule based on a change in our ability to make such payments. Interest will begin to accrue on the unpaid balance, commencing in April 2004, at the statutory rate of interest then in effect. At December 31, 2003, the statutory rate of interest was 1.28% per annum. Accrued interest will be payable together with each quarterly payment. Of the $110 million original aggregate amount, $90 million is treated as a fine and $20 million is treated as imputed interest for accounting purposes.

In January 2000, the EU Competition Authority alleged that we and other producers violated European antitrust laws in connection with the sale of graphite electrodes. In July 2001, the EU Competition Authority assessed a fine of € 50.4 million ($64 million, based on currency exchange rates in effect at December 31, 2003) against us. This decision established the maximum obligation with respect to our last major remaining antitrust liability. After an in-depth analysis of the decision, in October 2001, we filed an appeal to the Court challenging, among other things, the amount of the EU antitrust fine, including the accrual of interest and the rate thereof. The Court has not yet issued its decision. Appeals of this type may take two years or longer to be decided.

Under its decision, the EU Competition Authority stated that, until paid (including a provisional payment described below), the EU antitrust fine would accrue interest at the statutory rate of 8.04% per annum, commencing October 2001, provided, however, that if a letter of credit, sufficient to secure payment of both the fine and interest accrued and accruing thereon, was provided to the EU Competition Authority, then the rate of interest would be 6.04% per annum.

Since the filing of our appeal in October 2001 through September 2003, we negotiated with the EU Competition Authority regarding the appropriate form of collateral security for the EU antitrust fine during the pendency of our appeal. In September 2003, we filed an interim appeal to the Court to waive the requirement for provisional payment of the EU antitrust fine or delivery of a letter of credit as collateral security for payment thereof or to allow us to provide alternative security for payment during the period prior to the Court’s decision on our appeal. We withdrew the interim appeal after we posted the provisional payment described below.

In February 2004, we used net proceeds from the issuance and sale of the Debentures to post a provisional payment of $72 million to the EU Competition Authority against the EU antitrust fine. The provisional payment included $9 million for accrued interest for the period from October 2001 to the date of the provisional payment at the rate of 6.04% per annum. The EU Competition Authority has advised us that its position is that the provisional payment should have included accrued interest at the rate of 8.04% per annum. We have advised the EU Competition Authority that we disagree with its position and will file an interim appeal challenging its position, if necessary.

A provisional payment constitutes the furnishing of cash collateral intended to secure payment to the EU Competition Authority of a fine and any interest thereon that is ultimately determined to be due, is not an admission of or acquiescence to any liability and will not prejudice our appeal challenging, among other things, the amount of the EU antitrust fine. We will earn interest on the amount paid at an annual rate of 2.1% until the Court’s decision on our appeal is issued and becomes final. Such payment does not reflect a change in our assessment of the outcome of our appeal.

In the 2001 second quarter, we became aware that the Brazilian antitrust authority had requested written information from various steelmakers in Brazil. In April 2002, our Brazilian subsidiary received a request for information from that authority. We have provided that information.

Except as described above, the antitrust investigations against us in the U.S., Canada, the European Union, Japan and Korea with respect to graphite electrodes and in the European Union with respect to isostatic and extruded specialty graphite have been resolved. Under plea agreements in the U.S. and Canada, we will not be subject to prosecution by the respective antitrust authorities with respect to any other violations of their respective antitrust laws occurring prior to the date of the applicable plea agreement in connection with the sale of graphite and carbon products. All payments due have been timely paid. It is possible that antitrust investigations seeking, among other things, to impose fines and penalties could be initiated against us by antitrust authorities in Brazil or other jurisdictions.

We have settled, among other things, virtually all of the actual and potential claims against us by customers in the U.S. and Canada arising out of alleged antitrust violations occurring prior to the date of the relevant settlement in connection with the sale of graphite electrodes. All settlement payments due have been timely paid. None of the settlements or plea agreements contain restrictions on future prices of our graphite electrodes. There remain, however, certain pending claims as well as pending lawsuits in the U.S. relating to the sale of graphite electrodes sold to foreign customers. It is also possible that additional antitrust lawsuits and claims could be asserted against us in the U.S. or other jurisdictions.

We have recorded pretax charges of $382 million against results of operations as a reserve for potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. The charges of $382 million are calculated on a basis that (i) excludes, among other things, both actual and imputed interest on the DOJ antitrust fine and actual interest, if any, on the EU antitrust fine after the Court’s decision on our appeal is issued and becomes final and (ii) includes, among other things, the impact of changes in currency exchange rates on the euro-denominated EU antitrust fine and interest accrued or to accrue on the EU antitrust fine prior to the time the Court’s decision on our appeal is issued and becomes final.

Despite the fact that a provisional payment of a fine is only provisional under European law, generally accepted accounting principles require a charge to be recorded to cover the full amount of the provisional payment, to the extent that payment was not already covered by a reserve. In connection with our provisional payment, we recorded a $32 million charge in the 2003 fourth quarter, which increased our reserve from $350 million to $382 million. To the extent that aggregate liabilities and expenses, net, are known or reasonably estimable, as of December 31, 2003, $382 million represents our estimate of these liabilities and expenses. The guilty pleas and the decisions by the antitrust authorities make it more difficult to defend against other investigations, lawsuits and claims. We believe that the amount of the EU antitrust fine will be reduced on appeal. To the extent that the actual amount of the EU antitrust fine (after all appeals and including any interest thereon) is less than the amount so provisionally paid, any excess would be refunded to us. To the extent that such actual amount exceeds the amount so provisionally paid, we will be required to make an additional payment equal to such excess. Such additional payment may require us to record an additional charge.

Through December 31, 2003, we paid an aggregate of $257 million of fines and net settlements and expenses (of which $238 million has been applied against the reserve and $19 million of imputed interest (which is described below) has not been applied against the reserve). In the aggregate, the fines and net settlements and expenses are within the amounts we used to evaluate the aggregate charges of $382 million. Our insurance has not and will not materially cover liabilities that have or may become due in connection with antitrust investigations or related lawsuits or claims.

At December 31, 2003, after giving effect to the provisional payment, $53 million remained in the reserve. The remaining amount of the reserve is unfunded. Such remaining amount is available for the DOJ antitrust fine and other matters. The reserve does not cover interest on the DOJ antitrust fine (including interest that, for accounting purposes, is imputed on the DOJ antitrust fine for the period during which it is non-interest bearing). Such interest is recorded in interest expense on the Consolidated Statements of Operations. Interest accruing on the EU antitrust fine, if any, after the date of the Court’s decision on our appeal will be recorded in interest expense.

Actual aggregate liabilities and expenses (including settled investigations, lawsuits and claims as well as continuing investigations, pending appeals and unsettled pending, threatened and possible lawsuits and claims mentioned above) could be materially higher than $382 million and the timing of payment thereof could be sooner than anticipated.

Customer Base

We are a global company and serve all major geographic markets. Sales of our products to customers outside the U.S. accounted for about 70% of our net sales in 2001, 71% of our net sales in 2002, and 76% of our net sales in 2003. Our customer base includes both steel and non-steel producers. In 2003, two of our ten largest customers were purchasers of non-graphite electrode products. In 2003, three of our ten largest customers were based in Europe, two were in the U.S., two were in South Africa and one was based in Brazil. No single customer or group of affiliated customers accounted for more than 5% of our net sales in 2003.

Results of Operations

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

2003 Compared to 2002. Net sales of $712 million in 2003 represented a $116 million, or 20%, increase from net sales of $596 million in 2002. The increase in net sales was primarily due to higher net sales in our synthetic graphite and advanced carbon materials lines of business. Cost of sales of $544 million in 2003 represented an $83 million, or 18%, increase from cost of sales of $461 million in 2002. The increase in cost of sales was primarily due to the higher sales volumes. Gross profit of $168 million in 2003 represented a 24% increase from gross profit of $135 million in 2002. Gross margin increased to 23.6% of net sales in 2003 from 22.7% in 2002.

Synthetic Graphite Segment. Net sales of $639 million in 2003 represented a $101 million, or 18%, increase from net sales of $538 million in 2002, primarily due to higher sales volume of graphite electrodes and higher average graphite electrode sales revenue per metric ton. Volume of graphite electrodes sold was 200,500 metric tons in 2003 as compared to 180,500 metric tons in 2002. The higher volume of graphite electrodes sold represented an increase of $42 million in net sales. The increase was a result of stronger demand for graphite electrodes primarily in the United States and Europe. Average sales revenue per metric ton of graphite electrodes in 2003 was $2,344 as compared to the average in 2002 of $2,100. The higher average sales revenue per metric ton represented an increase of $49 million in net sales. The increase was primarily due to net changes in currency exchange rates and, to a lesser extent, increases in graphite electrode prices. Net sales of cathodes increased in 2003 by 4%, or $4 million, from net sales of $90 million in 2002. The increase was primarily due to the net positive impact of changes in currency exchange rates, partially offset by lower sales volume and lower average sales price.

Cost of sales of $488 million in 2003 represented a $75 million, or 18%, increase from cost of sales of $413 million in 2002, primarily due to the higher sales volume of graphite electrodes. Gross profit in 2003 was $151 million, or 21% or $26 million higher than in 2002. The increase in gross profit was primarily due to higher graphite electrode net sales, and improved productivity from higher operating levels throughout the production network and the net positive impact of changes in currency exchange rates. These improvements were partially offset primarily by higher freight, higher energy and other raw materials costs. Gross margin was 23.7% of net sales in 2003, higher than the 23.2% of net sales in 2002.

Other Segment. Net sales of $73 million in 2003 represented a $15 million, or 27%, increase from net sales of $58 million in 2002, primarily due to higher volume of refractories sold by our advanced carbon materials line of business. Cost of sales of $56 million in 2003 represented an $8 million, or 19%, increase from cost of sales of $48 million in 2002. The increase in cost of sales was primarily related to higher sales volume in our advanced carbon materials line of business, higher energy costs and changes in product mix, partially offset by improved productivity from higher operating levels. Gross profit in 2003 was $17 million (a gross margin of 23.1% of net sales) as compared to gross profit in 2002 of $10 million (a gross margin of 18.5% of net sales).

Items Affecting Us As a Whole. Research and development was $11 million in 2003, a decrease of $2 million from 2002. The decrease was primarily due to cost savings resulting from our voluntary and selective severance programs.

Selling, administrative and other expenses were $85 million in 2003, an increase of $4 million from 2002. In 2003, we recorded higher variable incentive compensation expense and incurred higher costs from continued strengthening of the euro in 2003 and the continued implementation of global work process changes and information systems. These higher costs were partially offset by cost savings from our voluntary and selective severance programs. In addition, in 2002, we benefited from a one-time reduction in franchise and other taxes associated with the corporate realignment of our subsidiaries.

Other (income) expense, net, was income of $12 million in 2003, primarily due to currency exchange benefits of $35 million, which were primarily associated with euro-denominated intercompany loans. These benefits were partially offset by other expenses, including primarily $5 million for bank fees, including losses on sales of accounts receivable, a $4 million non-cash write down of fixed assets, $4 million for employee benefit curtailment and related costs, $3 million for non-income taxes in Brazil and Switzerland, $2 million associated with the write-off of capitalized bank fees and related debt extinguishment costs and a $1 million charge associated with mark-to-market adjustments on interest rate caps. Other (income) expense, net, was net income of $9 million in 2002, primarily due to currency exchange benefits of $28 million which were associated with euro-denominated intercompany loans. These benefits were partially offset by other expenses, including primarily $4 million for bank fees, including losses on sales of accounts receivable, $3 million in legal expenses and settlements and $1 million associated with the curtailment of employee benefit plans.

We recorded $20 million of restructuring charges in 2003, consisting of $9 million for organizational changes and $11 million for the closure and settlement of our U.S. non-qualified defined benefit plan for the participating salaried workforce. The $9 million charge for organizational changes related to U.S. voluntary and selective severance programs and related benefits associated with a workforce reduction of 103 employees. The closure of our non-qualified U.S. defined benefit plan resulted in recognition of net actuarial losses of $11 million. Approximately half of the $9 million will involve cash outlays. We recorded $6 million of restructuring charges in 2002. The charges related primarily to the mothballing of graphite electrode manufacturing operations in Italy. This charge included estimated pension, severance and other related employee benefit costs for 102 employees and other cost related to the mothballing. At the end of 2003, we announced the permanent closure of the majority of our graphite electrode manufacturing operations in Italy. In the next twelve to eighteen months, we may record additional restructuring charges and incur additional exit costs in connection with such closure. It is also possible that we may, at any time, decide to permanently shut down our remaining graphite electrode operations in Italy. In such event, we may record additional restructuring charges and incur additional exit costs.

We recorded a $5 million impairment loss on long-lived and other assets relating to the remaining fixed assets at our graphite electrode manufacturing facility in Italy in connection with such closure. In 2003, we sold land in Clarksville, Tennessee and received net proceeds of $2 million. We recorded a $2 million net non-cash write off of the remaining book value of assets at this site. In 2002, we recorded a $12 million impairment loss on our long-lived carbon electrode assets in Columbia, Tennessee, a $3 million impairment loss on our investment in our joint venture with Jilin and a $2 million impairment loss on available-for-sale securities.

We recorded a $32 million charge in the 2003 fourth quarter relating to the EU antitrust fine.

Interest expense was $45 million in 2003 as compared to $60 million in 2002. Average total debt outstanding was $697 million in 2003 as compared to $701 million in 2002. The average annual interest rate was 7.1% in 2003 as compared to 8.5% in 2002. These average annual rates include $13 million of interest rate benefit from our interest rate swaps, but exclude imputed interest on the DOJ antitrust fine, $2 million of amortization of the net proceeds of $30 million with respect to the sale of swaps and $6 million credit to interest expense from the acceleration of the amortization of gains realized from the sale of interest rate swaps due to the early extinguishment of debt from our exchanges of common stock for Senior Notes during 2003.

Provision for income taxes was a charge of $5 million in 2003 as compared to a benefit of $16 million in 2002. The effective income tax rate was not meaningful in 2003 because we incurred income tax expense of $5 million even though we recognized a loss from continuing operations of $20 million, primarily due to tax expense of $8 million associated with non-deductible antitrust related charges and an additional $5 million from adjustments increasing the deferred tax asset valuation allowances. The effective income tax rate was a benefit of 49% in 2002, primarily due to higher state tax benefits of $13 million and certain other benefits of $17 million primarily associated with the impact of impairment losses on long-lived and other assets and restructuring charges, partially offset by tax expense of $16 million from adjustments increasing the deferred tax asset valuation allowances and $8 million from the impact of dividends of foreign earnings. The effective income tax rate was 40% in 2003 and about 35% in 2002, in each case excluding the impact of impairment losses on long-lived and other assets, restructuring charges and the charge related to the EU antitrust fine.

During 2003, we recorded a $1 million gain from the sale of our non-strategic composite tooling business. The discontinued business recorded a net income from operations of $1 million in 2003 and 2002.

As a result of the changes described above, net loss was $24 million in 2003 as compared to net loss of $18 million in 2002.

2002 Compared to 2001. Net sales in 2002 were $596 million, a decrease of $38 million, or 6%, from net sales in 2001 of $634 million. Gross profit in 2002 was $135 million, a decrease of $44 million, or 24%, from gross profit in 2001 of $179 million. Gross profit margin in 2002 was 22.7% of net sales as compared to gross profit margin in 2001 of 28.2% of net sales. The decrease in net sales and gross profit was primarily due to lower sales revenue per metric ton for our graphite electrodes, which reduced net sales by about $43 million.

Synthetic Graphite Segment. Net sales decreased 4%, or $21 million, to $538 million in 2002 from $559 million in 2001. The decrease was primarily attributable to a decrease in average sales revenue per metric ton of graphite electrodes, partially offset by higher sales volumes for graphite electrodes and cathodes sold. The volume of graphite electrodes sold increased 6,000 metric tons, or 4%, to 180,500 metric tons in 2002 as compared to 174,000 metric tons in 2001. The increase in volume of graphite electrodes sold represented an increase in net sales of about $16 million. The average sales revenue per metric ton (in U.S. dollars and net changes in currency exchange rates) of our graphite electrodes was $2,100 in 2002 as compared to $2,341 in 2001. The reduced average sales revenue per metric ton of graphite electrodes represented a decrease of about $43 million in net sales. Unfavorable changes in currency exchange rates represented a reduction of about $4 million in net sales of graphite electrodes. Volume of cathodes sold in 2002 was 10% higher than in 2001, with 36,900 metric tons in 2002 as compared to 33,400 metric tons in 2001, and net sales of cathodes in 2002 were 17% higher than in 2001. We completed the expansion of our cathode manufacturing capacity in Brazil in 2002 and were successful in selling virtually all of our cathode manufacturing capacity for 2002.

Synthetic Graphite segment cost of sales increased 4%, or $15 million, to $413 million in 2002 from $398 million in 2001. The increase in cost of sales was primarily due to higher volume of graphite electrodes sold, partially offset by lower average graphite electrode cost of sales per metric ton. The reduction in average graphite electrode cost of sales per metric ton was primarily due to cost savings initiatives and lower average fixed cost per metric ton due to facility closures and, to lesser extent, net changes in currency exchange rates.

Gross profit decreased 22%, or $36 million, to $125 million (23.2% of net sales) in 2002 from $161 million (28.8% of net sales) in 2001.

Other Segment. Net sales decreased 23%, or $17 million, to $58 million in 2002 from $75 million in 2001. We had lower net sales in each of our product lines, especially in advanced carbon materials due to a cyclical decrease in the volume of refractories sold and in flexible graphite due to lower sales of sealing products sold to the transportation industry. Cost of sales decreased 17%, or $9 million, to $48 million in 2002 from $57 million in 2001. The decline was primarily due to lower volume of products sold. Gross profit decreased 41%, or $8 million, to $10 million (18.5% of net sales) in 2002 from $18 million (24.3% of net sales) in 2001.

Other Items Affecting Us as a Whole. Selling, administrative and other expense increased by $1 million to $81 million in 2002 from $75 million in 2001. In 2002, we recorded a $5 million charge related to the accelerated vesting of restricted stock.

Other expense (income), net, was $9 million of income in 2002 as compared to $3 million of expense in 2001. We recorded both other income and other expense in both periods resulting from various non-operational activities, including gains from currency transactions and translation. In 2002, we had $28 million in currency gains, $21 million of which gain was due to currency translation on intercompany loans and translation of financial statements of foreign subsidiaries which use the dollar as their functional currency and $7 million of which related to transactions with third parties. These gains were partially offset by other expenses, including primarily $4 million for bank fees resulting partially from losses on sales of accounts receivable, $3 million in legal expenses and settlements, $3 million in corporate realignment and related expenses and $1 million associated with the curtailment of employee benefit plans.

In 2002, we recorded a total of $23 million in impairment losses and restructuring charges as described below:

In the 2002 fourth quarter, we recorded a $3 million ($2 million after tax) charge relating to the impairment of our investment in our joint venture with Jilin. This impairment resulted from uncertainty about the completion and start-up of the joint venture facilities in China due to the effects that the challenging 2002 graphite electrode industry conditions had on Jilin.

In the 2002 second and third quarters, we recorded a total of $2 million of charges related to the impairment of available-for-sale securities.

In the 2002 second quarter, we recorded a $12 million ($8 million after tax) charge primarily related to the impairment of our long-lived carbon electrode assets in Columbia, Tennessee.

In the 2002 first and fourth quarter, we recorded a total of $6 million of restructuring charges related primarily to the mothballing of our graphite electrode manufacturing operations in Caserta, Italy. These charges included estimated pension, severance and other related employee benefit costs.

In 2001, we recorded a total of $92 million, net, in impairment losses and restructuring charges as described below:

In the 2001 fourth quarter, we recorded a $7 million restructuring charge and a $27 million impairment loss on long-lived and other assets. The restructuring charge related primarily to exit costs related to the mothballing of our graphite electrode manufacturing operations in Caserta, Italy. $24 million of the impairment loss on long-lived assets related to assets located at our facility in Caserta, Italy. The remaining $3 million related to the impairment of available-for-sale securities.

In the 2001 third quarter, we recorded a $2 million restructuring charge related to a corporate realignment of our businesses, the relocation of our corporate headquarters and the shutdown of our coal calcining operations located in Niagara Falls, New York. The charge includes severance and related benefits associated with a workforce reduction of 24 employees and impairment of leasehold improvement assets.

In 2001 third quarter, we reversed $2 million of prior restructuring charges based on revised lower estimates of workforce reductions and plant closure costs, and we reclassified $4 million of prior restructuring charges related to on-site waste disposal post-monitoring costs to other long-term obligations.

In the 2001 second quarter, we recorded a $58 million charge for restructuring and impairment loss on long-lived assets related to the shutdown of our graphite electrode manufacturing operations in Clarksville and Columbia, Tennessee and our coal calcining operations in Niagara Falls, New York. The $58 million charge includes restructuring charges of $2 million for severance and related benefits associated with a workforce reduction of 171 employees and $3 million in plant shutdown and related costs. The remaining $53 million relates to the impairment loss on long-lived assets.

In addition, in 2001, we recorded a $10 million charge for additional potential liabilities and expenses in connection with antitrust investigations.

Interest expense was stable at $60 million in each of 2002 and 2001. Our average outstanding total debt was $701 million in 2002 as compared to $683 million in 2001 and our average annual interest rate was 8.5% in 2002 as compared to 8.1% in 2001. These average annual interest rates exclude imputed interest on antitrust fines, which decreased $3 million to $1 million in 2002 from $4 million in 2001.

Benefit from income taxes was $16 million in 2002 as compared to provision for income taxes of $14 million for 2001. The effective income tax rate was a benefit of 49% in 2002, primarily due to higher state tax benefits of $13 million and certain other benefits of $17 million primarily associated with the impact of impairment losses on long-lived and other assets and restructuring charges, partially offset by tax expense of $16 million from adjustments increasing the deferred tax asset valuation allowances and $8 million from the impact of dividends of foreign earnings. During 2001, the benefit from and provision for income taxes reflected an effective rate of about 35%, excluding the impact of impairment losses on long-lived and other assets, restructuring charges, the charge related to antitrust investigations and related lawsuits and claims, and the charge related to the corporate realignment of our subsidiaries.

As a result of the changes described above, net loss was $18 million in 2002, an improvement of $69 million from net loss of $87 million in 2001.

Effects of Inflation

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

During the past three years, we experienced higher freight, energy and other raw material costs primarily due to substantial increases in regional and worldwide market prices of natural gas and other petroleum-based raw materials. We have been able to generally mitigate the effects of those increases on our cost of sales by a combination of improved operating efficiency and on-going cost savings. In addition, during 2003, we mitigated seasonal increases in our natural gas costs by entering into short duration fixed rate purchase contracts with certain of our North American suppliers. These contracts expire at the end of the 2004 first quarter. In addition, we have entered into natural gas hedge contracts, effectively fixing 100% of our direct and indirect natural gas cost exposure in North America (45% of direct worldwide exposure) through April 2004. Except as described above, we did not experience significant inflation with respect to our costs. We cannot assure you that future increases in our costs will not occur or exceed the rate of inflation or the amounts, if any, by which we may be able to increase prices for our products.

Currency Translation and Transactions

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

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

We account for our Mexican subsidiary using the dollar as its functional currency, irrespective of Mexico’s inflationary status, because its sales and purchases are predominantly dollar-denominated. In addition, we account for our Russian subsidiary using the dollar as its functional currency because Russia is considered to have a highly inflationary economy.

Significant changes in currency exchange rates impacting us are described under “–Effects of Changes in Currency Exchange Rates.” Foreign currency translation adjustments decreased stockholders’ equity by $29 million, including $21 million associated with our South African subsidiary, in 2001 and $20 million, including $16 million associated with our Brazilian subsidiary, in 2002. These adjustments increased stockholders’ equity by $12 million in 2003.

Effects of Changes in Currency Exchange Rates

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

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

Many of the non-U.S. countries in which we have a manufacturing facility have been subject to significant economic pressures, which have impacted inflation and currency exchange rates. We seek to mitigate adverse impacts of changes in currency exchange rates on net sales by increasing local currency prices for some of our products in various regions as circumstances permit.

During 2001, the euro declined about 5%, the Brazilian real declined about 16% and the South African rand declined about 36% relative to the dollar.

During 2002, the Brazilian real declined about 35%, the South African rand increased about 38% and the euro increased about 18% relative to the dollar. During 2003, the average exchange rate of the euro and the South African rand increased about 20% and 40%, respectively, when compared to the average exchange rate for 2002. During 2003, the average exchange rate for the Brazilian real and the Mexican peso declined about 1% and 11%, respectively, when compared to the average exchange rate for 2002.

In the case of net sales of graphite electrodes, the impact of these events was a reduction of about $15 million in 2001, a reduction of about $4 million in 2002 and an increase of about $33 million in 2003. In the case of cost of sales of graphite electrodes, the impact of these events was a reduction of about $6 million in 2001, a reduction of about $5 million in 2002 and an increase of about $24 million in 2003.

We seek to mitigate adverse impacts of changes in currency exchange rates on net sales by increasing local currency prices for some of our products in various regions as circumstances permit. We cannot predict changes in currency exchange rates in the future or whether those changes will have net positive or negative impacts on our net sales, cost of sales or net income. We cannot assure you that we would be able to mitigate any adverse effects of such changes.

We have non-dollar denominated intercompany loans between GrafTech Finance and some of our foreign subsidiaries. At December 31, 2003, the aggregate principal amount of these loans was $423 million (based on currency exchange rates in effect at December 31, 2003). These loans are subject to translation gains and losses due to changes in currency exchange rates. A portion of these loans are deemed to be essentially permanent and, as a result, translation gains and losses on these loans are recorded in accumulated other comprehensive loss on the Consolidated Balance Sheets. The balance of these loans are deemed to be temporary and, as a result, translation gains and losses on these loans are recorded as unrealized gains or losses in other expense (income), net, on the Consolidated Statements of Operations. We have the ability to replace each intercompany loan with an identical new intercompany loan. When we replace such a loan, we record net cumulative realized translation gains or losses with respect to that loan in other expense (income), net. Those realized gains or losses are, however, non-cash gains or losses. Foreign currency translation gains and losses relating to these loans included in other (income) expense, net, were a loss of $4 million in 2001, a gain of $21 million in 2002 and a gain of $39 million in 2003. To manage certain exposures to specific financial market risks caused by changes in currency exchange rates, we use various financial instruments as described under “Item 7A – Qualitative and Quantitative Disclosures about Market Risks.”

Liquidity and Capital Resources

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

We use cash and cash equivalents, funds available under the Revolving Facility and cash flow from operations as our primary sources of liquidity. Availability of funds under the Revolving Facility is subject to continued compliance with the financial covenants under the Senior Facilities. At December 31, 2003, we were in compliance with the financial covenants under the Senior Facilities and had no outstanding balance under the Revolving Facility with $236 million (after consideration of outstanding letters of credit and at currency exchange rates in effect at December 31, 2003) fully available.

At December 31, 2003, after giving effect to the issuance and sale of the Debentures and initial application of the net proceeds therefrom to repay the remaining $21 million of term loans outstanding under the Senior Facilities and to make a provisional payment of $72 million to the EU Competition Authority toward the EU antitrust fine, 70% (or $493 million) of our total debt had effectively been converted to variable rate obligations. At December 31, 2003, we also had interest rate caps for a total notional amount of $500 million through August 2007. These instruments effectively cap our interest rate exposure (represented by the net impact of our swaps on the Senior Notes) to no greater than 428 basis points above the six-month LIBOR rate of 122 basis points at December 31, 2003.

2003 Deleveraging Actions. We completed over $300 million in de-leveraging actions in 2003. These actions consisted of sales of non-strategic assets that generated net proceeds of $24 million, including the sale of our non-strategic composite tooling business for $16 million (which includes a working capital adjustment of $1 million), the sale of interest rate swaps for net cash proceeds of $30 million, the exchange of common stock for $55 million aggregate principal amount of Senior Notes, plus accrued interest, and the public offering of shares of our common stock for net proceeds of $190 million. Virtually all of such proceeds were used to reduce debt.

Long-Term Contractual, Commercial and Other Obligations and Commitments. The following tables summarize our long-term contractual obligations and other commercial commitments at December 31, 2003.

	Payment Due by Period
	Total		Year Ending December 2004		Two Years Ending December 2006		Two Years Ending December 2008		Years Ending After December 2008
	(Dollars in Millions)
Contractual and Other Obligations
Long-term debt (a)	$	502	$	--	$	1	$	22	$	479
Capital lease obligations		--		--		--		--		--
Operating leases		8		3		5		--		--
Unconditional purchase obligations		45		8		15		10		12

Total contractual obligations (a)	$	555	$	11		21		32		491
Estimated liabilities and expenses in
connection with antitrust investigations
and related lawsuits and claims		125		82		38		5		--
Postretirement, pension and related benefits		105		28		16		15		46
Other long-term obligations		38		7		3		3		25

Total contractual and other obligations (a)	$	823	$	128	$	78	$	55	$	562

Other Commercial Commitments
Lines of credit	$	37	$	37	$	--	$	--	$	--
Letters of credit		17		17		--		--		--
Guarantees		4		1		2		--		1

Total other commercial commitments	$	58	$	55	$	2	$	--	$	1

(a)

At December 31, 2003, after giving effect to the issuance and sale of the Debentures and the application of the estimated net proceeds therefrom to repay the remaining $21 million of term loans outstanding under the Senior Facilities and to make a provisional payment of $72 million to the EU Competition Authority against the EU antitrust fine, (i) long-term debt would have been $706 million (all years), nil (year ending December 2004), $1 million (two years ending December 2006), $1 million (two years ending December 2008), and $704 million (years ending after 2008), (ii) total contractual obligations would have been $759 million (all years), $11 million (year ending December 2004), $21 million (two years ending December 2006), $11 million (two years ending December 2008), and $716 million (years ending after December 2008) and (iii) total contractual and other obligations would have been $955 million (all years), $56 million (year ending December 2004), $78 million (two years ending December 2006), $34 million (two years ending December 2008), and $787 million (years ending after December 2008).

The first preceding table includes our reserve for estimated liabilities and expenses in connection with antitrust investigations and related lawsuits and claims, which includes the EU antitrust fine of €50.4 million. The timing of payment of the EU antitrust fine is, for purposes of this table, reflected in the column captioned “payments due during year ending December 2004" on the line entitled “estimated liabilities and expenses in connection with antitrust investigations and related lawsuits and claims.” In February 2004, we made a provisional payment of $72 million to the EU Competition Authority against the EU antitrust fine. While we cannot assure you that such will be the case, we believe the amount of the EU antitrust fine will be reduced on appeal. To the extent that the actual amount of the EU antitrust fine (after all appeals and including any interest thereon) is less than the amount so provisionally paid, any excess would be refunded to us. To the extent that such actual amount exceeds the amount so provisionally paid, we will be required to make an additional payment equal to such excess.

Effective April 2001, we entered into a ten year service contract with CGI valued at $75 million ($38 million of which is the unconditional purchase obligation at December 31, 2003). Pursuant to this contract, CGI provides a majority of our global information technology service requirements. We are dependent on CGI for these services. A failure by CGI to provide these services to us in a timely manner could have an adverse effect on our operations and results of operations. The first preceding table includes a line entitled “unconditional purchase obligations” that includes the minimum purchases under that contract. In September 2002, we entered into a ten year outsourcing contract with CGI to provide finance and accounting business process services valued at $36 million. That contract does not constitute an unconditional purchase obligation and therefore is not included in the first preceding table.

The second preceding table includes a line entitled “lines of credit.” These are local lines of credit established by our foreign subsidiaries for working capital purposes and are not part of our revolving credit facility.

Our pension benefit obligations were underfunded by about $46 million at December 31, 2003 as compared to about $80 million at December 31, 2002. This decrease in underfunding was primarily due to contributions in cash and in shares of our common stock made by us and the increase in asset values resulting from the returns on invested assets in 2003.

Cash Flow and Plans to Manage Liquidity. As a result of our significant leverage, our substantial obligations in connection with antitrust investigations, lawsuits and claims, and our substantial other long-term contractual and commercial obligations and commitments, we have placed high priority on efforts to manage cash, generate additional cash flow and reduce debt. Our longer term efforts include our 1998 major cost savings plan, our 2002 major cost savings plan and our other cost savings activities, our strategic alliances and our financing activities. Our shorter term efforts include our interest rate management and working capital initiatives.

During the four years prior to 2002, we had positive annual cash flow from operations, excluding payments in connection with restructurings and investigations, lawsuits and claims. Typically, the first quarter of each year resulted in neutral or negative cash flow from operations (excluding payments in connection with restructurings, antitrust investigations, lawsuits and claims and the impact of the reduction of factoring of accounts receivable) due to various factors. These factors included customer order patterns, customer buy-ins in advance of annual price increases, fluctuations in working capital requirements and payment of variable compensation with respect to the immediately preceding year. Typically, the other three quarters resulted in positive cash flow from operations (before such exclusions). The third quarter tended to produce relatively less positive cash flow primarily as a result of scheduled plant shutdowns by our customers for vacations.

Our cash flow from operations (before such exclusions) in the first and third quarters typically is adversely impacted by the semi-annual interest payments on the Senior Notes and will be further impacted by the semi-annual interest payments on the Debentures beginning in July 2004. The second and fourth quarters correspondingly benefit from the absence of such interest payments.

As part of our cash management activities, we seek to manage accounts receivable credit risk, collections, and accounts payable and payments thereof to seek to maximize our free cash at any given time and minimize accounts receivable losses. In addition, we have historically discounted or factored a portion of our accounts receivable and used the proceeds to reduce our debt. Certain of our subsidiaries sold receivables totaling $223 million in 2001, $187 million in 2002 and $175 million in 2003. Accounts receivable sold and remaining on the Consolidated Balance Sheets was $1 million at December 31, 2002 and nil at December 31, 2003. If we had not sold such receivables, our accounts receivable and our debt would have been about $46 million higher at December 31, 2002 and $45 million higher at December 31, 2003. When we sell receivables, we incur costs equal to approximately 3.2% to 8.0% of the amount of the receivables sold. In addition, careful management of credit risk over at least the past three years has allowed us to avoid significant accounts receivable losses notwithstanding the poor financial condition of many of our potential and existing customers. In order to seek to minimize our credit risks, we reduced our sales of, or refused to sell (except for cash on delivery), graphite electrodes to some customers and potential customers in the U.S. and, to a limited extent, elsewhere. Our unrecovered trade receivables worldwide was only 0.2% of global net sales during this period. We cannot assure you that we will not be materially adversely affected by accounts receivable losses in the future. We currently intend to reduce factoring of accounts receivable and use a portion of the net proceeds from the sale of the Debentures to replace the financing previously provided by factoring of accounts receivable.

We use cash and cash equivalents, funds available under the Revolving Facility and cash flow from operations as our primary sources of liquidity. We believe that our cost savings initiatives will, over the next one to two years, continue to improve our cash flow from operations for a given level of net sales. Improvements in cash flow from operations resulting from these initiatives are being partially offset by associated cash implementation costs, while they are being implemented. We also believe that our planned sales of non-strategic assets together with these improvements in cash flow from operations should allow us to reduce our debt and other obligations over the long term.

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

Our significant leverage and substantial antitrust related and other obligations could have a material impact on our liquidity, reducing funds available to us for other purposes and making us more vulnerable to economic downturns or changes in the expected amount or timing of payment of these obligations.

Our ability to service our debt as it comes due, including maintaining compliance with the financial covenants and the representations regarding absence of material adverse changes under the Senior Facilities, and to meet our debt service and other obligations as they come due is dependent on our future performance, which is subject to various factors, including certain factors beyond our control such as changes in conditions affecting our industry, changes in global and regional economic conditions, changes in interest and currency exchange rates, developments in antitrust investigations, lawsuits and claims involving us and inflation in raw material, energy and other costs. A failure to comply with such covenants, unless waived, would be a default under the Senior Facilities. This would permit the lenders to accelerate the maturity of the Senior Facilities and terminate their commitments to extend credit under the Revolving Facility. An acceleration of maturity of the Senior Facilities would permit the holders of the Senior Notes to accelerate the maturity of the Senior Notes and the holders of the Debentures to accelerate the maturity of the Debentures. If we were unable to repay our debt to the lenders and holders or otherwise obtain a waiver from the lenders and holders, the lenders and holders could proceed against the collateral securing the Senior Facilities and the Senior Notes, respectively, and exercise all other rights available to them, and we could be required to undertake significant actions (which may be inconsistent with our plans or adverse to our stockholders) to raise the funds necessary for repayment. We cannot assure you that we would be able to obtain any such waiver or take any of such actions on favorable terms or at all.

As described above, availability of funds under the Revolving Facility is subject to continuing compliance with the financial covenants under the Senior Facilities. The Senior Facilities require us to, among other things, comply with financial covenants relating to specified minimum interest coverage and maximum net senior secured debt leverage ratios that become more restrictive over time. At December 31, 2003, we were in compliance with the financial covenants under the Senior Facilities. If we were to believe that we would not continue to comply with these covenants, we would seek an appropriate waiver or amendment from the lenders thereunder. We cannot assure you that we would be able to obtain such waiver or amendment on acceptable terms or at all.

At December 31, 2003, the Revolving Facility provided for maximum borrowings of up to €200 million ($253 million, based on currency exchange rates in effect at December 31, 2003). It is possible that our future ability to borrow under the Revolving Facility could effectively be less because of the impact of additional borrowings upon our compliance with the maximum net senior secured debt leverage ratio permitted or minimum interest coverage ratio required under the Senior Facilities. At December 31, 2003, we had no outstanding balance under the Revolving Facility and $236 million (after consideration of outstanding letters of credit and at currency exchange rates in effect at December 31, 2003) fully available thereunder.

We believe that the long term fundamentals of our business continue to be sound. Accordingly, although we cannot assure you that such will be the case, we believe that, based on our expected cash flow from operations, our expected resolution of our remaining obligations in connection with antitrust investigations, lawsuits and claims, and our existing capital resources, and taking into account our working capital needs and our efforts to reduce costs, improve efficiencies and product quality, generate growth and cash flow and maximize funds available to meet our debt service and other obligations, we will be able to manage our liquidity to permit us to service our debt and meet our obligations when due.

Related Party Transactions. We have not, since January 1, 2001, engaged in or been a party to any material transactions with affiliates or related parties other than transactions with our subsidiaries (including Carbone Savoie and AET), compensatory transactions (including employee benefits, stock option and restricted stock grants, compensation deferral and executive employee loans and stock purchases) with directors or officers, and transactions with our 25% owned joint venture with Jilin in China.

Off-Balance Sheet Arrangements and Commitments. We have not, since January 1, 2001, undertaken or been a party to any material off-balance-sheet financing arrangements or other commitments (including non-exchange traded contracts), other than:

Commitments under non-cancelable operating leases that, at December 31, 2003 totaled less than $3 million individually in each year and $5 million in the aggregate, respectively.

Minimum required purchase commitments under our information technology outsourcing services agreement with CGI described under “–Long-Term Contractual, Commercial and Other Obligations and Commitments” that, at December 31, 2003 totaled approximately $5 million in each year and about $38 million in the aggregate.

Factoring accounts receivable as described under “– Cash Flow and Plans to Manage Liquidity.”

We have not been, since January 1, 2001, affiliated with or related to any special purpose entity other than GrafTech Finance.

Cash Flows. In general, during 2001, 2002 and 2003, we used cash in operating activities (including restructuring and antitrust-related payments) as well as for capital expenditures. Financing for these uses was provided primarily by net proceeds from our public offerings of common stock in 2001 and 2003, our incurrence of long-term and short-term debt, and proceeds from sales of non-strategic assets and interest rate swaps. We believe that we will have net cash provided by operating activities in 2004 (excluding payments related to restructurings, antitrust fines and the impact of the reduction of factoring of accounts receivables). We expect to make payments of about $15 million related to restructurings, about $82 milion related to antitrust fines and about $45 million related to replacement of financing that would have been provided by factoring of accounts receivable. We expect that we will have net cash used in operating activities in 2004 including such exclusions.

Cash Flow (Used in) Provided by Operating Activities. Cash flow used in operating activities was $25 million in 2003 as compared to $60 million in 2002, an improvement of $35 million. Cash flow used in operating activities was $60 million in 2002 as compared to cash flow provided by operating activities of $17 million in 2001, a decline of $77 million.

Cash used in operating activities was $25 million in 2003. The primary uses consisted of $36 million for working capital and $10 million use for other liabilities offset by a source of cash of $20 million from the net loss, after adding back the net effect from non-cash items. Working capital uses related to decreases in payables from timing of payment patterns and increases in inventories to support anticipated customer demand. Other liability uses were primarily for pension and postretirement benefits. Non-cash charges consisted of $32 million related to antitrust investigations and related lawsuits and claims, $31 million of depreciation amortization, $27 million of restructuring charges and impairment losses, offset by other non-cash credits of $46 million related primarily to currency exchange gains on euro-denominated intercompany loans.

Cash used in operating activities was $60 million in 2002. The primary uses consisted of $10 million of net loss (after excluding the net effect from non-cash items), $38 million for working capital and $12 million for other liabilities. Working capital uses primarily related to $34 million relating to the mothballing of our Italian graphite electrode manufacturing operations, the shutdown of our U.S. graphite electrode manufacturing operations and the high level of accounts payable at December 31, 2001. Other liability uses were primarily for pension and postretirement benefit payments and contributions. Non-cash charges consisted of $17 million of impairment losses and $28 million of depreciation and amortization, offset by $27 million of deferred tax credits and $20 million relating primarily to currency exchange gains on euro-denominated intercompany loans.

Cash flow provided by operating activities was $17 million in 2001. Sources resulted primarily from income from continuing operations and an increase in working capital. Net income after excluding the net effect from non-cash items was $52 million in 2001. Working capital decreased $32 million in 2001, primarily due to a $21 million increase in inventories, an $18 million increase in restructuring payments, and $16 million in payments for antitrust investigations and related lawsuits and claims, partially offset by a $19 million reduction in accounts and notes receivables.

Cash Flow Used in Investing Activities. Cash flow used in investing activities was $22 million in 2003 as compared to $50 million in 2002 and $39 million in 2001. Virtually all of such investing activities consisted of capital expenditures. Capital expenditures in 2003 were $41 million, in 2002 were $50 million and in 2001 were $40 million. Capital expenditures in 2003 related primarily to the expansion of graphite electrode manufacturing capacity, implementation of J.D. Edwards information systems and essential capital maintenance. In 2003, $16 million of cash was provided to investing activities, primarily from the sale of our non-strategic composite tooling business for $16 million (including a $1 million working capital adjustment).

100

We used $50 million of cash flow in investing activities during 2002 as compared to $39 million during 2001. Capital expenditures in 2002 related primarily to expansion of graphite electrode manufacturing capacity in Mexico, expansion of cathode manufacturing capacity in France, J.D. Edwards system implementation and essential maintenance. In 2001, we limited capital expenditures to installation of our advanced natural graphite production lines, and similar critical or strategic capital investments and essential maintenance.

Cash Flow Provided by Financing Activities. Cash flow provided by financing activities was $69 million during 2003, $79 million in 2002 and $15 million in 2001. During 2003, we received net proceeds of $190 million from the registered public offering of common stock and $30 million from the sale of interest rate swaps. We used these proceeds primarily to repay term loans of $116 million outstanding under the Senior Facilities, reduce the outstanding balance under the Revolving Facility and repay other short-term debt.

Cash flow provided by financing activities during 2002 was primarily attributable to $557 million of proceeds from our sale of $550 million of Senior Notes in 2002, of which $392 million was used to repay other long term debt, $86 million was used to repay borrowings under the Revolving Facility and $21 million was used to pay financing costs. In addition, we received $10 million from the sale of interest rate swaps.

During 2001, we received net proceeds of $94 million, primarily from our public offering of common stock in July 2001. We also received $9 million from an additional minority investment in connection with the broadening of our strategic alliance in the cathode business with Pechiney, and made $96 million in debt repayments.

Restrictions on Dividends and Stock Repurchases

Under the Senior Facilities, we are generally permitted to pay dividends on our common stock and repurchase our common stock in an aggregate annual amount of between $25 million and $50 million, depending on our leverage ratio and excess cash flow. Under the Senior Notes, we are generally permitted to pay dividends on our common stock and repurchase our common stock in an aggregate cumulative (from February 15, 2002) amount of $25 million, plus certain consolidated net income, equity proceeds and investment gains. Under the Debentures, dividends on our common stock and repurchases of our common stock may result in adjustments to the conversion rate applicable to the Debentures.

Costs Relating to Protection of the Environment

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

101

	For the Year Ended December 31,
	2001		2002		2003
	(Dollars in millions)
Expenses relating to environmental protection	$	12	$	10	$	13
Capital expenditures related to environmental protection		3		2		2

Critical Accounting Policies

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

Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements. Not all of these significant accounting policies require management to make difficult, subjective or complex judgments. However, the following accounting policies could be deemed to be critical.

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

Employee Benefit Plans. We sponsor various retirement and pension plans, including defined benefit, defined contribution plans and post retirement benefit plans that cover most employees worldwide. Accounting for these plans requires assumptions as to the discount rate, expected return on plan assets, expected salary increases and health care cost trend rate. See Note 11 to the Consolidated Financial Statements for further detail on these rates and the effect of a change in these rates on our results of operations.

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

102

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

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

Inventories. We record the value of inventories at the lower of cost or market, and periodically review the book value of products and product lines to determine if they are properly valued. We also periodically review the composition of our inventories and seek to identify slow-moving inventories. In connection with those reviews, we seek to identify products that may not be properly valued and assess the ability to dispose of them at a price greater than cost. If it is determined that cost is less than market value, then cost is used for inventory valuation. If a write down to current market value is necessary, the market value cannot be greater than the net realizable value, sometimes called the ceiling (defined as selling price less costs to complete and dispose), and cannot be lower than the net realizable value less a normal profit margin, sometimes called the floor. Generally, we do not experience issues with obsolete inventory due to the nature of our products. If the actual value is significantly less than the recorded value, our assets may be overstated.

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

Estimate our actual current tax liability in each jurisdiction.

Estimate our temporary differences resulting from differing treatment of items, such as lease revenue and related depreciation, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which we include within our Consolidated Balance Sheets.

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

103

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

Recent Accounting Pronouncements

A description of recent accounting pronouncements is set forth under “New Accounting Standards” in Note 1 to the Notes to the Consolidated Financial Statements contained in this Report, and such description is incorporated herein by reference. Such description contains all of the information required with respect thereto.

Description of Our Financing Structure

We have the following three principal long term debt instruments and arrangements outstanding:

the Senior Facilities;

the Senior Notes; and

the Debentures

GrafTech Finance, a direct wholly owned subsidiary of GTI, is the borrower and primary obligor under the Senior Facilities. The Senior Facilities have been guaranteed, on a senior secured basis, by GTI and our other domestic subsidiaries.

GrafTech Finance has loaned and is required to loan all of the proceeds of borrowings under the Revolving Facility (that is part of the Senior Facilities) to:

our Swiss subsidiary under a secured intercompany revolving note that is guaranteed, on a senior secured basis, by most of our other principal foreign subsidiaries; or

UCAR Carbon under an unsecured intercompany revolving note that is guaranteed, on an unsecured senior basis, by GTI and our other domestic subsidiaries.

GrafTech Finance’s obligations under the Senior Facilities are secured by first priority security interests in these intercompany revolving notes (including the related guarantees and security) and all of its other assets (other than unsecured intercompany term notes described below). The guarantees of the Senior Facilities by GTI and our other domestic subsidiaries are secured, subject to certain limitations, by first priority security interests and pledges in all of the AET Pledged Stock, all of the outstanding capital stock of UCAR Carbon, GrafTech Finance and GrafTech Global, 65% of the outstanding shares of capital stock of our Swiss subsidiary and our other first-tier foreign subsidiaries, and all of the other assets of GTI and our other domestic subsidiaries. The intercompany revolving note of our Swiss subsidiary is secured by a pledge of all of its assets (including shares of capital stock of its first-tier foreign subsidiaries) and the guarantees of such intercompany revolving note are secured by pledges of assets of the foreign subsidiary guarantors. At December 31, 2003, the aggregate principal amount of such intercompany revolving note was nil.

104

GrafTech Finance is the issuer of and primary obligor under the Senior Notes. The Senior Notes have been guaranteed, on a senior unsecured basis, by GTI and our other domestic subsidiaries that collectively hold a substantial majority of our U.S. assets. GrafTech Finance loaned most of the proceeds from the sale of the Senior Notes to our principal foreign subsidiaries under unsecured intercompany term notes that are guaranteed, on an unsecured senior basis, by the same foreign subsidiaries that guarantee the secured intercompany revolving note of our Swiss subsidiary. GrafTech Finance’s indebtedness under the Senior Notes is secured, subject to certain limitations, by first priority pledges of these unsecured intercompany term notes (including the related guarantees). The guarantee of the Senior Notes by UCAR Carbon is secured by a second priority pledge of the AET Pledged Stock. At December 31, 2003, the aggregate principal amount of these unsecured intercompany term notes was $528 million (based on currency exchange rates in effect at December 31, 2003). The Senior Note Indenture contains a limitation that at no time will (i) the value of the pledged portion the AET Pledged Stock or (ii) the combined value of the pledged portion of any foreign subsidiary’s unsecured intercompany term note and unsecured guarantee of unsecured intercompany term notes issued by other foreign subsidiaries exceed 19.99% of the principal amount of the then outstanding Senior Notes. As a result of such limitation, unsecured intercompany term notes of our foreign subsidiaries in an aggregate principal amount, at December 31, 2003, equal to $162 million (based on currency exchange rates in effect at December 31, 2003), that would otherwise be subject to the pledge to secure the Senior Notes, are available to satisfy the claims of all creditors of GrafTech Finance (including the lenders under the Senior Facilities, the holders of the Senior Notes and, pursuant to the subsidiary guarantee of GrafTech Finance, the holders of the Debentures) as their respective interests may appear.

GTI is the issuer of and primary obligor under the Debentures. The Debentures have been guaranteed, on a senior unsecured basis, by GrafTech Finance and our other domestic subsidiaries that collectively hold a substantial majority of our U.S. assets. Except for a subsidiary that is being dissolved and liquidated, the obligors (including the guarantors) under the Senior Notes and the Debentures are the same.

GTI has no material assets other than all of the outstanding shares of capital stock of GrafTech Global and GrafTech Finance, its interest in the lawsuit initiated by us against our former parents, intercompany notes receivable by it from the subsidiary guarantors and $57.5 million aggregate principal amount of Senior Notes previously acquired by GTI. GTI has no material liabilities or obligations other than the Debentures, the secured DOJ antitrust fine of $52.5 million, the secured EU antitrust fine of €50.4 million, intercompany notes payable by it to the subsidiary guarantors, its secured guarantee of the Senior Facilities, its unsecured guarantee of the Senior Notes, and certain guarantees of commercial obligations of its subsidiaries.

GrafTech Finance has no material assets other than intercompany notes receivable by it from GTI or our other subsidiaries, including those described above. GrafTech Finance has no material liabilities or obligations other than its secured indebtedness under the Senior Facilities and the Senior Notes, its unsecured guarantee of the Debentures and its obligations in connection with treasury, cash management, cash pooling and hedging activities for GTI and its other subsidiaries.

105

GrafTech Global, a direct wholly owned subsidiary of GTI, has no material assets other than all of the outstanding shares of capital stock of UCAR Carbon, its interest in the lawsuit initiated by us against our former parents and intercompany notes receivable by it from GTI and the other subsidiary guarantors. GrafTech Global has no material liabilities or obligations other than intercompany notes payable by it to GTI or the other subsidiary guarantors, its secured guarantee of the Senior Facilities, its unsecured guarantee of the Senior Notes and the Debentures and certain guarantees of commercial obligations of its subsidiaries.

UCAR Carbon, a directly wholly owned subsidiary of GrafTech Global, is our principal operating subsidiary in the U.S. All of our other subsidiaries are direct or indirect subsidiaries of UCAR Carbon. Our Swiss subsidiary is a direct wholly owned subsidiary of UCAR Carbon. Most of our other principal foreign operating subsidiaries are direct or indirect subsidiaries of our Swiss subsidiary. Union Carbide Grafito, Inc. is a direct, wholly owned, subsidiary of UCAR Carbon that holds certain real property in Puerto Rico adjacent to property on which one of GTI’s graphite electrode manufacturing facilities was located. The facility was demolished in the 1990‘s. Graphite Electrode Network LLC is a direct, wholly owned, marketing subsidiary of UCAR Carbon created primarily to market graphite electrodes for specific market segments. UCAR Holdings V Inc. is a direct wholly owned subsidiary of UCAR Carbon which held and recently sold our composite tooling business and is being liquidated and dissolved.

Description of Senior Facilities, Senior Notes and Debentures. A description of the Senior Facilities, the Senior Notes and the Debentures is set forth under “Long-Term Debt and Liquidity” in Note 5 to the Notes to the Consolidated Financial Statements contained in this Report, and such description is incorporated herein by reference. Such description contains all of the information required with respect thereto.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

Our exposure to changes in interest rates results primarily from floating rate long-term debt tied to LIBOR or euro LIBOR. Our exposure to changes in currency exchange rates results primarily from:

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

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

106

export sales made by our subsidiaries in currencies other than local currencies.

Our exposure to changes in energy costs results primarily from the purchase of natural gas and electricity for use in our manufacturing operations.

Interest Rate Management. We implement interest rate management initiatives to seek to minimize our interest expense and optimize the risk in our portfolio of fixed and variable interest rate obligations. Use of these initiatives is allowed under the Senior Notes and the Senior Facilities. We have interest rate swaps that effectively convert fixed rate debt (represented by the Senior Notes) into variable rate debt in order to seek to minimize interest expense. At December 31, 2003, we had swaps for a notional amount of $485 million.

Our interest rate swaps are designated as hedging the exposure to changes in the fair value of the related debt (called a fair value hedge). The related debt for our swaps is the Senior Notes. Our swaps are marked-to-market monthly, and we are required to provide cash collateral to the counterparty to the extent that the fair value of the derivative exceeds $15 million, net of market value of our interest rate caps. We may, at any time, exit our position in these swaps. The fair value of the hedge at the end of a period is recorded on the Consolidated Balance Sheets on the line entitled “fair value of hedged debt obligation.” At December 31, 2003, the carrying value of our debt was reduced by $18 million (excluding the offsetting value of our interest rate caps of $4 million) as a result of our fair value hedge. The interest rate swap derivative was valued at $18 million at December 31, 2003 and is recorded as part of other long-term obligations on the Consolidated Balance Sheets. When we sell swaps, the gain or loss realized is amortized as a credit or charge to interest expense over the remaining term of the Senior Notes. When we effectively reduce the outstanding principal amount of the Senior Notes (through exchanges or otherwise), the related portion of such credit or charge is accelerated and recorded in the period in which such reduction occurs.

In the 2002 second quarter, we entered into $250 million notional amount of swaps through the remaining term of the Senior Notes, effectively converting that amount of fixed rate debt to variable rate debt. In the 2002 third quarter, we sold the entire $250 million notional amount of swaps for $10 million in cash. In the 2002 fourth quarter, we entered into $250 million notional amount of swaps through the remaining term of the Senior Notes. Interest rate swaps reduced our interest expense by $6 million in 2002. The credits to interest expense for these periods due to amortization of the $10 million proceeds for the sale of swaps was nominal. At December 31, 2002, the carrying value of our debt was increased by $8 million as a result of our fair value hedge. The interest rate swap derivative was valued at $8 million at December 31, 2003 and is recorded as part of other long-term assets on the Consolidated Balance Sheets.

In the 2003 first quarter, we entered into an additional $200 million notional amount of swaps (bringing our total notional amount of swaps to $450 million) through the remaining term of the Senior Notes, effectively converting that amount of fixed rate debt to variable rate debt. Subsequently in the 2003 first quarter, we sold the entire $450 million notional amount of swaps for $10 million in cash. Following the sale of the swaps, in the 2003 first quarter, we entered into $350 million notional amount of swaps through the remaining term of the Senior Notes. Subsequently, in the 2003 second quarter, we entered into an additional $50 million notional amount of swaps (bringing our total notional amount of swaps to $400 million). Subsequently in the 2003 second quarter, we sold the total notional amount of $400 million of swaps for $21 million in cash. In the 2003 third quarter, we entered into $500 million notional amount of swaps for the remaining term of the Senior Notes. Subsequently in the 2003 third quarter, we sold $15 million notional amount of swaps and paid $1 million in cash. As a result, at December 31, 2003, we held $485 million notional amount of swaps for the remaining term of the Senior Notes. Interest rate swaps reduced our interest expense by approximately $13 million in 2003. In 2003, we realized net proceeds of $30 million with respect to the sale of swaps, which will be amortized as a credit to interest expense over the remaining term of the Senior Notes. Such amortization amounted to $2 million for the year ended December 31, 2003. The credit to interest expense for 2003 due to the acceleration of the amortization of cash proceeds from the sale of swaps as a result of our exchanges of common stock for Senior Notes was $6 million.

107

We enter into agreements with financial institutions that are intended to limit, or cap, our exposure to the incurrence of additional interest expense due to increases in variable interest rates. In the 2003 first quarter, we entered into interest rate caps for a notional amount of $300 million through August 2007. In the 2003 second quarter, we entered into additional interest rate caps for a notional amount of $200 million through August 2007 (bringing our total notional amount of caps to $500 million through August 2007). These instruments effectively cap our interest rate exposure (represented by the net impact of our swaps on the Senior Notes) to no greater than 428 basis points above the six-month LIBOR rate of 122 basis points at December 31, 2003. All of our interest rate caps are marked to market monthly. Gains and losses are recorded as unrealized gains and losses in other (income) expense, net, on the Consolidated Statements of Operations. Unrealized losses on caps amounted to $1 million for 2003.

Currency Rate Management. We enter into foreign currency instruments to attempt to manage exposure to changes in currency exchange rates. These foreign currency instruments, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures, net, relating to euro-denominated debt and identifiable foreign currency receivables, payables and commitments held by our foreign and domestic subsidiaries. Forward exchange contracts are agreements to exchange different currencies at a specified future date and at a specified rate. Purchased foreign currency options are instruments which give the holder the right, but not the obligation, to exchange different currencies at a specified rate at a specified date or over a range of specified dates. The result is the creation of a range in which a best and worst price is defined, while minimizing option cost. Forward exchange contracts and purchased currency options are carried at market value. All of these contracts mature within one year and are marked to market monthly. Gains and losses due to the recording of such contracts at fair value are recognized currently in other expense (income), net, on the Consolidated Statements of Operations. Unrealized gains and losses on outstanding foreign currency contracts were nil at December 31, 2001, a loss of $3 million at December 31, 2002 and nil at December 31, 2003. The notional amount of these contracts at December 31, 2002 was $56 million and nil at December 31, 2003. In 2003, we recorded a loss of $7 million with respect to the instruments held during the course of the year. We had no such contracts outstanding at December 31, 2003; however, we may at any time purchase further instruments.

Commercial Energy Rate Management. We have entered into short duration fixed rate purchase contracts with certain of our North American natural gas suppliers in order to mitigate seasonal increases in our natural gas costs. These contracts expire at the end of the 2004 first quarter. In addition, we have entered into natural gas hedge contracts, effectively fixing 100% of our direct and indirect natural gas cost exposure in North America (45% of direct worldwide exposure) through April 2004.

108

Sensitivity Analysis. We used a sensitivity analysis to assess the potential effect of changes in currency exchange rates and interest rates for 2001, 2002 and 2003. Based on this analysis, a hypothetical 10% weakening or strengthening in the dollar across all other currencies would have changed our reported gross margin for 2001 by about $12 million, 2002 by about $4 million and 2003 by about $3 million. In addition, based on this analysis, a hypothetical increase in interest rates of 100 basis points across all maturities would have increased our interest expense (excluding the impact of any hypothetical interest rate swaps) for 2001, 2002 and 2003 by about $7 million.

109

Item 8.

Financial Statements and Supplementary Data

	Page
Independent Auditors' Reports	111
Consolidated Balance Sheets	112
Consolidated Statements of Operations	113
Consolidated Statements of Cash Flows	114
Consolidated Statements of Stockholders' Deficit	115
Notes to Consolidated Financial Statements	116

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

110

Independent Auditors’ Report

To the Board of Directors and Stockholders
GrafTech International Ltd.
Wilmington, Delaware

We have audited the accompanying consolidated balance sheets of GrafTech International Ltd. (formerly UCAR International Inc.) and subsidiaries (the “Company”) as of December 31, 2002 and 2003, and the related consolidated statements of operations, cash flows and stockholders’ deficit for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2002 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002.

/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania
March 12, 2004

111

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share data)

	At December 31,
	2002			2003
ASSETS
Current Assets:
Cash and cash equivalents	$	11		$	34
Accounts and notes receivable, net		104			126
Inventories:
Raw materials and supplies		39			47
Work in process		102			123
Finished goods		30			34

		171			204
Prepaid expenses (including deferred income taxes)		21			24
Current assets of discontinued operations		14			--

Total current assets		321			388

Property, plant and equipment		995			1,032
Less: accumulated depreciation		695			691

Net fixed assets		300			341
Deferred income taxes		171			176
Goodwill		15			20
Other assets		52			42

Total assets	$	859		$	967

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	105		$	98
Short-term debt		18			1
Accrued income and other taxes		23			31
Other accrued liabilities		57			164
Current liabilities of discontinued operations		3			--

Total current liabilities		206			294

Long-term debt:
Carrying value		699			516
Fair value of hedged debt obligation		8			(18	)
Unamortized bond premium		6			4

Total long-term debt		713			502

Other long-term obligations		258			225
Deferred income taxes		33			43
Minority stockholders' equity in consolidated entities		30			31
Commitments & contingencies		--			--
Stockholders' deficit:
Preferred stock, par value $.01, 10,000,000 shares authorized,
none issued		--			--
Common stock, par value $.01, 100,000,000 shares authorized at December 31, 2002, 150,000,000
shares authorized at December 31, 2003, 59,211,664 shares issued
at December 31, 2002, 96,402,287 shares issued at December 31, 2003		1			1
Additional paid-in capital		636			893
Accumulated other comprehensive loss		(304	)		(286	)
Accumulated deficit		(620	)		(644	)
Less: cost of common stock held in treasury, 2,542,539 shares at December 31, 2002, 2,451,035
shares at December 31, 2003		(88	)		(86	)
Common stock held in employee benefit trusts, 426,400 shares at December 31, 2002, 503,232
shares at December 31, 2003		(6	)		(6	)

Total stockholders' deficit		(381	)		(128	)

Total liabilities and stockholders' deficit	$	859		$	967

See accompanying Notes to Consolidated Financial Statements

112

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share data)

	For the Year Ended December 31,
	2001			2002			2003
Net sales	$	634		$	596		$	712
Cost of sales		455			461			544

Gross profit		179			135			168
Research and development		12			13			11
Selling, administrative and other expenses		75			81			85
Restructuring charges		12			6			20
Impairment loss on long-lived and other assets		80			17			7
Antitrust investigations and related lawsuits and claims		10			--			32
Other expense (income), net		3			(9	)		(12	)
Interest expense		60			60			45

		252			168			188
Loss from continuing operations before provision for
(benefit from) income taxes and minority interest		(73	)		(33	)		(20	)
Provision for (benefit from) income taxes		14			(16	)		5

Loss from continuing operations before minority interest		(87	)		(17	)		(25	)
Less: minority stockholders' share of income		2			2			1

Loss from continuing operations		(89	)		(19	)		(26	)
Income from discontinued operations, net of tax		2			1			1
Gain on sale of discontinued operations		--			--			1

Net loss	$	(87	)	$	(18	)	$	(24	)

Basic:
Loss from continuing operations	$	(1.79	)	$	(0.35	)	$	(0.38	)
Income from discontinued operations		0.04			0.02			0.02

Net loss per share	$	(1.75	)	$	(0.33	)	$	(0.36	)

Diluted:
Loss from continuing operations	$	(1.79	)	$	(0.38	)	$	(0.38	)
Income from discontinued operations		0.04			0.02			0.02

Net loss per share	$	(1.75	)	$	(0.33	)	$	(0.36	)

See accompanying Notes to Consolidated Financial Statements

113

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Dollars in millions, except per share data)

	For the Year Ended December 31,
	2001			2002			2003
Cash flow from operating activities:
Net loss	$	(87	)	$	(18	)	$	(24	)
Income from discontinued operations, net of tax		2			1			1
Gain on sale of discontinued operations, net of tax		--			--			1

Loss from continuing operations		(89	)		(19	)		(26	)
Non-cash (credits) charges to net loss:
Depreciation and amortization		35			28			31
Deferred income taxes		(9	)		(27	)		2
Antitrust investigations and related lawsuits and claims		10			--			32
Restructuring charges		12			6			20
Impairment loss on long-lived and other assets		80			17			7
Restricted stock vesting		--			5			--
Other non-cash charges		13			(20	)		(46	)
Working capital*		(32	)		(38	)		(36	)
Long-term assets and liabilities		(6	)		(12	)		(10	)

Net cash provided by (used in) operating activities from continuing operations		14			(60	)		(26	)
Net cash provided by operating activities from discontinued operations		3			--			1

Net cash provided by (used in) operating activities		17			(60	)		(25	)
Cash flow from investing activities:
Capital expenditures		(40	)		(50	)		(41	)
Purchase of investment		(2	)		--			--
Proceeds from sale of assets		3			--			3
Proceeds from sale of discontinued operations		--			--			16

Net cash used in investing activities		(39	)		(50	)		(22	)
Cash flow from financing activities:
Short-term debt (payments) borrowings, net		3			11			(19	)
Revolving Facility (payments) borrowings, net		7			(86	)		(10	)
Long-term debt borrowings		2			557			--
Long-term debt reductions		(96	)		(392	)		(116	)
Investment received from minority stockholder		9			--			--
Debt financing costs		(4	)		(21	)		(1	)
Proceeds from sale of interest rate swaps, net		--			10			30
Purchase of interest rate caps		--			--			(5	)
Net proceeds from sale of common stock		94			1			190
Proceeds from exercise of stock options		--			--			4
Dividends paid to minority stockholder		--			(1	)		(4	)

Net cash provided by financing activities		15			79			69

Net increase (decrease) in cash and cash equivalents		(7	)		(31	)		22
Effect of exchange rate changes on cash and cash equivalents		(2	)		4			1
Cash and cash equivalents at beginning of period		47			38			11

Cash and cash equivalents at end of period	$	38		$	11		$	34

Supplemental disclosures of cash flow information:
Net cash paid during the year for:
Interest	$	56		$	48		$	61
Income taxes		25			24			11
*Net change in working capital due to the following components:
(Increase) decrease in current assets:
Accounts and notes receivable, net		19			(6	)		(4	)
Inventories		(21	)		11			(9	)
Prepaid expenses and other current assets		--			(2	)		--
Payments for antitrust investigations and related lawsuits and claims		(16	)		(3	)		(4	)
Restructuring payments		(18	)		(4	)		(5	)
Increase (decrease) in payables and accruals		4			(34	)		(14	)

Working capital	$	(32	)	$	(38	)	$	(36	)

See accompanying Notes to Consolidated Financial Statements

114

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
(Dollars in millions, except per share data)

		Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Unearned Restricted Stock			Treasury Stock			Common Stock Held in Employee Benefit Trust			Total Stockholders' Deficit
Balance at January 1, 2001	47,485,443	$	-	$	525		$	(241	)	$	(515	)	$	--		$	(85	)	$	--		$	(316	)

Comprehensive income (loss):
Net loss	--		--		--			--			(87	)		--			--			--			(87	)
Other comprehensive income:
Recognized loss on available-for-sale
securities	--		--		--			1			--			--			--			--			1
Foreign currency translation adjustments	--		--		--			(29	)		--			--			--			--			(29	)

Total comprehensive income (loss)	--		--		--			(28	)		(87	)		--			--			--			(115	)
Sale of 2.5% equity interest in AET	--		--		4			--			--			--			--			--			4
Common stock issued to employee benefit trust	--		--		6			--			--			--			--			(6	)		--
Sale of common stock, net	11,138,270		1		94			--			--			--			--			--			95

Balance at December 31, 2001	58,623,713	$	1	$	629		$	(269	)	$	(602	)	$	--		$	(85	)	$	(6	)	$	(332	)

Comprehensive loss:
Net loss	--		--		--			--			(18	)		--			--			--			(18	)
Other comprehensive loss:
Minimum pension liability, net of tax	--		--		--			(15	)		--			--			--			--			(15	)
Foreign currency translation adjustments	--		--		--			(20	)		--			--			--			--			(20	)

Total comprehensive income (loss)	--		--		--			(35	)		(18	)		--			--			--			(53	)
Issuance of restricted stock	412,200		--		6			--			--			(6	)		--			--			--
Amortization of restricted stock	--		--		--			--			--			1			--			--			1
Accelerated vesting of restricted stock	--		--		--			--			--			5			--			--			5
Sale of common stock under stock options	175,751		--		1			--			--			--			--			--			1
Repurchase of treasury stock	--		--		--			--			--			--			(3	)		--			(3	)

Balance at December 31, 2002	59,211,664	$	1	$	636		$	(304	)	$	(620	)	$	--		$	(88	)	$	(6	)	$	(381	)

Comprehensive loss:
Net loss	--		--		--			--			(24	)		--			--			--			(24	)
Other comprehensive loss:
Minimum pension liability, net of tax	--		--		--			6			--			--			--			--			6
Foreign currency translation adjustments	--		--		--			12			--			--			--			--			12

Total comprehensive income (loss)	--		--		--			18			--			--			--			--			(18	)
Senior notes for common stock exchange	9,888,870		--		57			--			--			--			--			--			57
Treasury stock	--		--		(2	)		--			--			--			2			--			--
Common stock issued to savings and pension plan
trusts	1,403,475		--		8			--			--			--			--			--			8
Sale of common stock in equity offering, net	25,300,000		--		190			--			--			--			--			--			190
Sale of common stock under stock options	598,278		--		4			--			--			--			--			--			4

Balance at December 31, 2003	96,402,287	$	1	$	893		$	(286	)	$	(644	)	$	--		$	(86	)	$	(6	)	$	(128	)

See accompanying Notes to Consolidated Financial Statements

115

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Discussion of Business and Structure

Our businesses are organized around three lines of business:

a synthetic graphite line of business, which primarily serves the steel, aluminum, transportation and semiconductor industries and includes graphite electrodes, cathodes and other advanced synthetic graphite products as well as related services;

a natural graphite line of business, which primarily serves the automotive, petrochemical, electronics and power generation industries and includes advanced flexible graphite and flexible graphite as well as related services; and

an advanced carbon materials line of business, which primarily serves the silicon metal and ferro-alloy industries and includes carbon electrodes and refractories.

Important Terms

We use the following terms to identify various matters. These terms help to simplify the presentation of the information in these Notes.

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

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

“Debentures” mean our 1 5/8% convertible senior debentures due 2024, which were issued under an Indenture dated January 22, 2004 (the “Debenture Indenture”).

“GrafTech Finance” refers to GrafTech Finance Inc. only. GrafTech Finance is a direct, wholly owned, special purpose finance subsidiary of GTI and the borrower under our principal senior secured bank credit facilities (as amended, the “Senior Facilities”), which includes our principal revolving credit facility (the “Revolving Facility”). GrafTech Finance is the issuer of the Senior Notes and a guarantor of the Debentures. Prior to June 7, 2002, GrafTech Finance was named UCAR Finance Inc.

“GrafTech Global” refers to GrafTech Global Enterprises Inc. only. GrafTech Global is a direct, wholly owned subsidiary of GTI and the direct or indirect holding company for all of our operating subsidiaries. GrafTech Global is a guarantor of the Senior Notes, the Debentures and the Senior Facilities. Prior to June 7, 2002, GrafTech Global Enterprises Inc. was named UCAR Global Enterprises Inc.

116

“GTI” refers to GrafTech International Ltd. only. GTI is our public parent company and the issuer of the Debentures and our publicly traded common stock and the related preferred share purchase rights registered under the Exchange Act and listed on the NYSE. GTI is a guarantor of the Senior Notes and the Senior Facilities. Prior to our Annual Meeting of Stockholders for 2002, GTI was named UCAR International Inc.

“Senior Notes” means our 10.25% senior notes due 2012, which were issued under an Indenture dated February 15, 2002 (as supplemented, the “Senior Note Indenture”).

“Subsidiaries” refers to those companies that, at the relevant time, are or were majority owned or wholly owned directly or indirectly by GTI or its predecessors to the extent that those predecessors’ activities related to the graphite and carbon business. All of GTI’s subsidiaries have been wholly owned (with de minimis exceptions in the case of certain foreign subsidiaries) from at least January 1, 2000 through December 31, 2003, except for:

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

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

Our 100% owned Brazilian cathode manufacturing operations were contributed to Carbone Savoie and, as a result, became 70% owned on March 31, 2001.

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

(2) Summary of Significant Accounting Policies

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

Cash Equivalents

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

Investments

Investments in marketable debt and equity securities are generally classified and accounted for as investment, held-to-maturity or available-for-sale securities. We determine the appropriate classification of debt and equity securities at the time of purchase and reassess the

117

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

Revenue Recognition

Sales of our products and technology are recognized when persuasive evidence of an arrangement exists, delivery has occurred, title has passed, the revenue amount is determinable and collection is reasonably assured. Licenses of technology are recognized over the term of the license agreements. Revenue from service transactions is recognized when service is rendered.

Inventories

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

Fixed Assets and Depreciation

Fixed assets are carried at cost. Expenditures for replacements are capitalized and the replaced assets are retired. Gains and losses from the sale of property are included in other (income) expense, net.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. We generally use accelerated depreciation methods for tax purposes, where appropriate.

The average estimated useful lives are as follows:

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

The carrying value of fixed assets is assessed when events and circumstances indicating impairment are present. We determine such impairment by measuring undiscounted estimated future cash flows. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net cash flows expected to be generated by the assets. If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. At December 31, 2003, accumulated depreciation included about $223 million related to previously

118

impaired long-lived assets. Assets to be disposed are reported at the lower of the carrying amount or fair value less costs to sell. We capitalized $1 million of interest expense in 2002 and 2003.

Derivative Financial Instruments

Effective January 1, 2001, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137, SFAS No. 138 and SFAS No. 149. The adoption did not have a significant impact on our consolidated financial position or results of operations. We do not use derivative financial instruments for trading purposes. They are used to manage well-defined currency exchange rate risks, interest rate risks and commercial energy contract risks.

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

We implement interest rate management initiatives to seek to minimize our interest expense and optimize the risk in our portfolio of fixed and variable interest rate obligations. Use of these initiatives is allowed under the Senior Notes and the Senior Facilities. We have interest rate swaps that effectively convert fixed rate debt (represented by the Senior Notes) into variable rate debt.

We enter into agreements with financial institutions that are intended to limit, or cap, our exposure to the incurrence of additional interest expense due to increases in variable interest rates. All of our interest rate caps are marked to market monthly. Gains and losses are recorded as unrealized gains and losses in other (income) expense, net, on the Consolidated Statements of Operations.

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

We have entered into certain short duration fixed rate natural gas purchase contracts in order to mitigate seasonal increases in our natural gas costs. In addition, we have entered into natural gas hedge contracts to effectively fix a portion of our natural gas cost exposure. Natural gas contracts are marked-to-market monthly. Gains and losses are recorded as part of cost of sales on the Consolidated Statements of Operations.

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

119

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

Stock-Based Compensation Plans

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

No compensation expense has been recognized for our time vesting options granted with exercise prices at not less than market price on the date of grant. At December 31, 2003, all awards subject to performance conditions were fully vested. If compensation expense for our stock-based compensation plans was determined by the fair value method prescribed by SFAS No. 123, “Accounting for Stock Based Compensation,” our net loss and net loss per share would have been reduced to the pro forma amounts indicated below:

	For the Year Ended December 31,
	2001			2002			2003
	(Dollars in millions, except per share data)
Net loss as reported	$	(87	)	$	(18	)	$	(24	)
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects		(5	)		(6	)		(1	)

Pro forma net loss	$	(92	)	$	(24	)	$	(25	)

Loss per share:
Basic--as reported	$	(1.75	)	$	(0.33	)	$	(0.36	)
Basic--pro forma		(1.85	)		(0.43	)		(0.37	)
Diluted--as reported		(1.75	)		(0.33	)		(0.36	)
Diluted--pro forma		(1.85	)		(0.43	)		(0.37	)

Retirement Plans

The cost of pension benefits under our retirement plans is recorded in accordance with SFAS No. 87, “Employee Accounting for Pensions,” as determined by independent actuarial firms using the “projected unit credit” actuarial cost method. Contributions to the qualified U.S. retirement plan are made in accordance with the requirements of the Employee Retirement Income Security Act of 1974. Benefits under the non-qualified retirement plan have been

120

accrued, but not funded. Plan settlements and curtailments are recorded in accordance with SFAS No. 88, “Employers’Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and Termination Benefits.” Effective March 2003, we froze our qualified defined benefit plan for our remaining U.S. employees and closed our non-qualified U.S. defined benefit plan for the participating salaried workforce. The closure and settlement of our non-qualified U.S. defined benefit plan resulted in a $11 million restructuring charge in the 2003 first quarter. We started a new defined contribution plan on January 1, 2002 for U.S. employees.

Postretirement Health Care and Life Insurance Benefits

The estimated cost of future postretirement 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. Effective November 1, 2001, the U.S. plan was modified to limit our cost of future annual postretirement medical benefits to the cost in 2001. Effective March 31, 2003, we discontinued the Medicare supplement plan (for retirees 65 years or older or those eligible for Medicare benefits). This change applies to all active employees except for some employees covered by a collective bargaining agreement, all current retirees who were not covered by a collective bargaining agreement when they retired and those retirees who retired under a former collective bargaining agreement. In June 2003, we announced the termination of the early retiree medical plan for retirees under age 65, effective December 31, 2005. In addition, we will limit the amount of retiree’s life insurance after December 31, 2004. These modifications are accounted for prospectively.

Environmental, Health and Safety Matters

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

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

Environmental considerations are part of all significant capital expenditure decisions. Environmental remediation, compliance and management expenses were approximately $12 million in 2001, $10 million in 2002 and $13 million in 2003. The accrued liability relating to environmental remediation was $5 million at December 31, 2002 and $6 million at December 31, 2003. A charge to income is recorded when it is probable that a liability has been incurred and the cost can be reasonably estimated. Our environmental liabilities do not take into consideration possible recoveries of insurance proceeds. Because of the uncertainties associated

121

with environmental remediation activities at sites where we may be potentially liable, future expenses to remediate sites could be considerably higher than the accrued liability. However, while neither the timing nor the amount of ultimate costs associated with known environmental remediation matters can be determined at this time, management does not believe that these matters will have a material adverse effect on our financial position.

Post-employment Benefits

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

Use of Estimates

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

Reclassification

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

Foreign Currency Translation

Generally, except for operations in Russia where high inflation has existed, unrealized gains and losses resulting from translation of the financial statements of our foreign subsidiaries from their functional currencies into dollars are accumulated in other comprehensive income on the Consolidated Balance Sheets until such time as the operations are sold or substantially or completely liquidated. Translation gains and losses relating to operations, where high inflation has existed, are included in other (income) expense, net on the Consolidated Statements of Operations. Our Mexican subsidiary uses the dollar as its functional currency because its sales and purchases are predominantly dollar-denominated. We have intercompany loans between GrafTech Finance and some of our subsidiaries. Some of these loans are denominated in currencies other than the dollar and, accordingly, are subject to translation gains and losses due to changes in currency exchange rates. Some of these intercompany loans are deemed to be essentially permanent and, as a result, translation gains and losses on these loans are reflected in accumulated other comprehensive loss. The remaining intercompany loans are expected to be repaid in the foreseeable future and, as a result, translation gains and losses on these loans are reflected in other (income) expense, net. Translation gains and losses on these intercompany loans amounted to a $35 million gain in 2002 and a $48 million gain in 2003 recorded in accumulated other comprehensive loss, and a $4 million loss in 2001, a $21 million gain in 2002 and a $39 million gain in 2003 recorded in other (income) expense, net.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired and amounted to $15 million at December 31, 2002 and $20 million at December 31,

122

2003. Prior to January 1, 2002, goodwill was amortized on a straight-line basis over the expected periods to be benefited, generally 20 years. Effective January 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” The adoption of SFAS No. 142 did not have a significant impact on our consolidated financial position or results of operations, except that we no longer amortize goodwill. Goodwill amortization was $2 million in 2001. We have performed the goodwill impairment reviews required by SFAS No. 142 and the results of these reviews did not require our existing goodwill to be written down.

	For the Year Ended December 31,
	2001			2002			2003
	(Dollars in millions, except per share data)
Reported net income (loss)	$	(87	)	$	(18	)	$	(24	)
Add back: Goodwill amortization (net of tax)		1			--			--

Adjusted net income	$	(86	)	$	(18	)	$	(24	)

Basic earnings per share:
Reported net income (loss)	$	(1.75	)	$	(0.33	)	$	(0.36	)
Goodwill amortization (net of tax)		0.03			--			--

Adjusted net income	$	(1.72	)	$	(0.33	)	$	(0.36	)

Diluted earnings per share:
Reported net income (loss)	$	(1.75	)	$	(0.33	)	$	(0.36	)
Goodwill amortization (net of tax)		0.03			--			--

Adjusted net income	$	(1.72	)	$	(0.33	)	$	(0.36	)

Impairment review

Periodically, we assess the carrying value of our long-lived and intangible assets. Our assessment involves comparing the carrying value of the asset on our Consolidated Balance Sheets to the cash flows we expect to generate in the future from that asset. We forecast the cash flows based on our assessment of our business. If the expected cash flows are less than the asset’s carrying value, we record an impairment loss on the asset.

At December 31, 2003, there were no additional impairments required that we have not already recorded in our Consolidated Statements of Operations. However, future events and circumstances, some of which are described below, may result in an impairment charge:

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

significant negative economic or industry trends;

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

significant increases or decreases in our cost of capital; and

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

123

New Accounting Standards

In December 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits – an amendment of FASB Statements No. 87, 88 and 106.” SFAS No. 132 replaces existing FASB disclosure requirements for pensions and requires additional disclosures about the assets, obligations, cash flows and net periodic benefit costs of defined benefit pension plans and other defined benefit postretirement plans. SFAS No. 132 was initiated by FASB in response to concerns raised by investors and other users of financial statements about the need for greater transparency as to pension information. SFAS No. 132 is effective for fiscal years ending after December 15, 2003 and for the first fiscal quarter of the year following initial application of the annual disclosure requirements. The adoption of SFAS No. 132 as revised did not have a significant impact on our consolidated results of operations or financial position because the impact was limited to additional disclosure.

In May 2003, FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability or, in some circumstances, as an asset, with such financial instruments having been previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a significant impact on our consolidated results of operations or financial position, as we had no financial instruments which met these requirements. FASB is addressing certain implementation issues associated with the application of SFAS No. 150. On October 29, 2003, FASB decided to defer certain provisions of SFAS No. 150 related to mandatorily redeemable financial instruments representing noncontrolling interests in subsidiaries included in consolidated financial statements. We will monitor the actions of FASB and assess the impact, if any, that these actions may have on the Consolidated Financial Statements.

In April 2003, FASB issued SFAS No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered into or modified, and for hedging relationships designated, after June 30, 2003. Other provisions of SFAS No. 149 that related to SFAS No. 133 implementation issues should continue to be applied in accordance with their respective dates. The adoption of SFAS No. 149 did not have a significant impact on our consolidated results of operations or financial position.

In December 2002, FASB issued SFAS No. 148 “Accounting for Stock-Based Compensation – Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the

124

method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 was effective for financial statements with fiscal years ending after December 15, 2002. The adoption of SFAS No. 148 did not have a significant impact on our consolidated results of operations or financial position because the impact was limited to additional disclosure. The additional disclosure is set forth under “–Stock-Based Compensation Plans” above.

In June 2002, FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which is effective for exit or disposal activities initiated after December 31, 2002. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue No. 94-3, a liability for an exit cost as defined in Issue No. 94-3 is recognized at the date an entity commits to an exit plan. We adopted SFAS No. 146 effective January 1, 2003 and recorded $20 million of restructuring charges in 2003, $9 million of which was related to organizational changes and $11 million of which related to the closure and settlement of our U.S. non-qualified defined benefit plan for the participating salaried workforce.

In April 2002, FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 shall be applied in fiscal years beginning after May 15, 2002. The provisions of SFAS No. 145 related to SFAS No. 13 shall be effective for transactions occurring after May 15, 2002 and all other provisions of SFAS No. 145 shall be effective for financial statements issued on or after May 15, 2002. SFAS No. 145 rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” and an amendment thereto, and SFAS No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” Previously, generally accepted accounting principles required that gains and losses from extinguishment of debt be classified as an extraordinary item, net of related income tax effect. Based on SFAS No. 145, gains and losses from extinguishment of debt are classified as extraordinary items only if they meet the criteria of APB No. 30, “Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” The provisions of APB No. 30 distinguish transactions that are part of an entity’s recurring operations from those that are unusual or infrequent or that meet the criteria for classification as an extraordinary item. As such, those that do not meet the criteria of APB No. 30 are included in the statement of operations before income (loss) before provisions (benefits) for income taxes, minority interest and extraordinary items. Items presented in prior periods that do not meet the criteria in APB No. 30 for classification as an extraordinary item have been reclassified. SFAS No. 145 also rescinds SFAS No. 44, “Accounting for Intangible Assets of Motor Carriers.” SFAS No. 145 amends SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings or describe their applicability under changed conditions. We adopted SFAS No. 145 relating to SFAS No. 4 effective January 1, 2003. The effect of the adoption was to require reclassification of certain write-offs of capitalized bank fees and other debt extinguishment costs in the amount of approximately nil and $4 million for the years ended December 31, 2001 and 2002, respectively, from extraordinary items to other (income) expense, net. The corresponding provisions for income taxes have been adjusted accordingly in the amount of approximately nil and $1 million for the years ended December 31, 2001 and 2002, respectively. The provisions of SFAS No. 145 relating to SFAS No. 13 and the other provisions of SFAS No. 145, excluding the provisions relating to SFAS No. 4, did not have a significant impact on our consolidated results of operations or financial position.

125

In August 2001, FASB issued SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets, excluding goodwill and other intangible assets not being amortized pursuant to SFAS No. 142, and certain other assets. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001. We adopted SFAS No. 144 effective January 1, 2002. The adoption of SFAS No. 144 did not have a significant impact on our consolidated results of operations or financial position. See Note 18 for a discussion about discontinued operations.

In July 2001, FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The adoption of SFAS No. 143 did not have a significant impact on our consolidated results of operations or financial position.

In June 2001, FASB issued SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. It also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill. SFAS No. 142 requires that goodwill and certain other intangibles no longer be amortized, but instead be tested for impairment at least annually. SFAS No. 142 was effective January 1, 2002. The adoption of SFAS No. 141 and SFAS No. 142 did not have a significant impact on our consolidated financial position or results of operations, except that we no longer amortize goodwill. Goodwill amortization was $2 million in 2001. We have performed the goodwill impairment reviews required by SFAS 142 and the results of these reviews did not require our existing goodwill to be written down.

In January 2003, FASB issued Financial Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities.” FIN No. 46 clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN No. 46 applies immediately to variable interest entities created after January 31, 2003, and must be applied in the first period beginning after June 15, 2003 for entities in which an enterprise holds a variable interest entity that it acquired before February 1, 2003. We currently have no entities which have these characteristics. FASB has been addressing various implementation issues that could potentially broaden the application of FIN No. 46 to entities outside its originally interpreted scope and has issued and proposed several FASB staff positions. We do not expect FASB’s proposed positions to have a significant impact on our Consolidated Financial Statements.

126

In November 2002, FASB issued FIN No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others.” The initial recognition and measurement provisions of FIN No. 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, and require that we record a liability, if any, for the fair value of such guarantees on the Consolidated Balance Sheets. We adopted FIN No. 45 effective January 1, 2003. The adoption of FIN No. 45 did not have a significant impact on our consolidated financial position or results of operations because the impact was limited to additional disclosure. The additional disclosure is set forth below.

Certain of our subsidiaries have guaranteed the Senior Facilities and the Senior Notes as described in Note 5 – “Long-Term Debt and Liquidity” and Note 17 – “Financial Information About the Parent, the Issuer, the Guarantors and the Subsidiaries Whose Securities Secure the Senior Notes and Related Guarantees.”

We generally sell products with a limited warranty. We accrue for known warranty claims if a loss is probable and can be reasonably estimated, and accrue for estimated incurred but unidentified claims based on historical activity. The accruals were not significant for either 2001, 2002 or 2003.

(3) Financial Instruments

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

Foreign Currency Contracts

The notional amount of foreign exchange contracts used by us to minimize foreign currency exposure was $56 million at December 31, 2002. Of the total foreign exchange contracts outstanding, approximately $43 million (77%) were offsetting at December 31, 2002. We had no such contracts outstanding at December 31, 2003.

Sale of Receivables

Certain of our U.S. and foreign subsidiaries sold receivables of $223 million in 2001, $187 million in 2002 and $175 million in 2003. Receivables sold and remaining on the

127

Consolidated Balance Sheets were $1 million at December 31, 2002 and nil at December 31, 2003.

Interest Rate Risk Management

At December 31, 2003, we had interest rate swaps for a notional amount of $485 million that effectively convert fixed rate debt (represented by the Senior Notes) into variable rate debt in order to hedge against changes in the fair value of debt.

Our swaps are marked-to-market monthly, and we are required to provide cash collateral to the counterparty to the extent that the fair value of the swaps exceed $15 million, net of market value of our interest rate caps. We may, at any time, exit our position in these swaps. The fair value of the hedge at the end of a period is recorded on the Consolidated Balance Sheets on the line entitled “fair value of hedged debt obligation.” At December 31, 2003, the carrying value of our debt was reduced by $18 million as a result of our fair value hedge. The swaps were valued at $18 million (excluding the offsetting value of our interest rate caps of $4 million) at December 31, 2003 and recorded as part of other long-term obligations on the Consolidated Balance Sheets. When we sell swaps, the gain or loss realized is amortized as a credit or charge to interest expense over the remaining term of the Senior Notes. When we effectively reduce the outstanding principal amount of the Senior Notes (through exchanges or otherwise), the related portion of such credit or charge is accelerated and recorded in the period in which such reduction occurs.

In the 2002 second quarter, we entered into $250 million notional amount of swaps through the remaining term of the Senior Notes, effectively converting that amount of fixed rate debt to variable rate debt. In the 2002 third quarter, we sold the entire $250 million notional amount of swaps for $10 million in cash. In the 2002 fourth quarter, we entered into $250 million notional amount of swaps through the remaining term of the Senior Notes. Interest rate swaps reduced our interest expense by $6 million in 2002. The credits to interest expense for these periods due to amortization of the $10 million proceeds for the sale of swaps was nominal. At December 31, 2002, the carrying value of our debt was increased by $8 million as a result of our fair value hedge. The interest rate swap derivative was valued at $8 million at December 31, 2002 and is recorded as part of other long-term assets on the Consolidated Balance Sheets.

128

In the 2003 first quarter, we entered into interest rate caps for a notional amount of $300 million through August 2007. In the 2003 second quarter, we entered into additional interest rate caps for a notional amount of $200 million through August 2007 (bringing our total notional amount of caps to $500 million through August 2007). These instruments effectively cap our interest rate exposure (represented by the net impact of our swaps on the Senior Notes) to no greater than 428 basis points above the six-month LIBOR rate of 122 basis points at December 31, 2003. All of our interest rate caps are marked to market monthly. Gains and losses are recorded as unrealized gains and losses in other (income) expense, net, on the Consolidated Statements of Operations. Unrealized losses on caps amounted to $1 million for 2003.

Fair Market Value Disclosures

SFAS No. 107, “Disclosure about Fair Market Value of Financial Instruments,” defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. Such fair values must often be determined by using one or more methods that indicate value based on estimates of quantifiable characteristics as of a particular date. Values were estimated as follows:

Cash and cash equivalents, short-term notes and accounts receivables, accounts payable and other current payables—The carrying amount approximates fair value because of the short maturity of these instruments.

Debt—Fair value of debt was $586 million at December 31, 2002 and $573 million at December 31, 2003.

Foreign currency contracts—Foreign currency contracts are carried at market value. The unrealized loss on outstanding contracts was $3 million at December 31, 2002. We did not have any such contracts outstanding at December 31, 2003.

Interest rate swaps and caps—See “Interest Rate Risk Management” above.

Natural gas contracts—Natural gas contracts are carried at market value. We did not have any such contracts outstanding at December 31, 2002. The unrealized gain on outstanding contracts was $1 million at December 31, 2003.

129

(4) Segment Reporting

We evaluate the performance of our operating segments based on gross profit. Intersegment sales and transfers are not material. We may in the future evaluate performance based on additional or different measures. The accounting policies of the reportable segments are the same as those described in Note 2.

In 2002, our businesses were organized around two operating divisions, the Graphite Power Systems Division, which included the electrode and cathode businesses, and the Advanced Energy Technology Division, which included the natural graphite and advanced synthetic graphite and carbon materials businesses. In accordance with SFAS No. 131, “Segment Reporting,” we segregated our businesses into two reportable segments which corresponded with our two divisions.

In 2003, we further refined the organization of our businesses into three lines of business: synthetic graphite, natural graphite and advanced carbon materials, as described under Note 1.

In accordance with SFAS No. 131, we segregated our businesses into the following segments: Synthetic Graphite, which consists of the synthetic graphite line of business; and Other, which consists of the natural graphite and advanced carbon materials lines of business. We began reporting financial information using these new segments in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.

As required by SFAS No. 131, consolidated financial statements published by us in the future will reflect modifications to our reportable segments resulting from this organizational change, including reclassification of all comparable prior period segment information.

The following tables summarize financial information concerning our reportable segments.

	For the Year Ended December 31,
	2001		2002		2003
	(Dollars in millions)
Net sales to external customers:
Synthetic Graphite	$	559	$	538	$	639
Other		75		58		73

Consolidated net sales	$	634	$	596	$	712

Gross profit:
Synthetic Graphite	$	161	$	125	$	151
Other		18		10		17

Consolidated gross profit	$	179	$	135	$	168

Depreciation and amortization:
Synthetic Graphite	$	29	$	24	$	26
Other		6		4		5

Consolidated depreciation and amortization	$	35	$	28	$	31

130

“Other” in the table above, which includes natural graphite and advanced carbon materials, has been restated for the periods presented to exclude our composite tooling business that was sold in June 2003.

We do not report assets by reportable segment. Assets are managed based on geographic location because both reportable segments share certain facilities. The following tables summarize information as to our operations in different geographic areas.

	For the Year Ended December 31,
	2001		2002		2003
	(Dollars in millions)
Net sales (a):
U.S	$	176	$	164	$	206
Canada		21		12		6
Mexico		33		37		33
Brazil		44		33		41
France		137		150		168
Italy		30		22		32
Switzerland		79		77		103
South Africa		53		47		65
Spain		29		30		28
Other countries		32		24		30

Total	$	634	$	596	$	712

(a) Net sales are based on location of seller.

	At December 31,
	2001		2002		2003
	(Dollars in millions)
Long-lived assets (b):
U.S	$	66	$	61	$	62
Mexico		37		48		49
Brazil		34		25		26
France		94		109		134
Italy		6		7		4
South Africa		27		37		45
Switzerland		7		8		9
Other countries		17		20		32

Total	$	288	$	315	$	361

(b) Long-lived assets represent fixed assets, net of accumulated depreciation and goodwill.

131

(5) Long-Term Debt and Liquidity

The following table presents our long-term debt.

	At December 31,
	2002		2003
	(Dollars in millions)
Senior Facilities:
Tranche A euro facility	$	--	$	--
Tranche A U.S. dollar facility		--		--
Tranche B U.S. dollar facility		137		21
Revolving credit facility		10		--

Total Senior Facilities		147		21
Other European debt		2		2
Senior Notes:
Senior Notes due 2012		550		493
Fair value of hedged debt obligation		8		(18	)
Unamortized bond premium		6		4

Total Senior Notes		564		479

Total	$	713	$	502

The aggregate maturities of long-term debt (excluding the fair value of hedged debt obligation and unamortized bond premium relating to the Senior Notes) for each of the five years subsequent to December 31, 2003 are set forth in the following table.

2004			2005			2006			2007			2008 (and thereafter)			Total
		(Dollars in millions)
$-			$--			$	1		$	22		$	493		$	516

Senior Notes

On February 15, 2002, GrafTech Finance issued $400 million aggregate principal amount of Senior Notes. Interest on the Senior Notes is payable semi-annually on February 15 and August 15 of each year, commencing August 15, 2002, at the rate of 10.25% per annum. The Senior Notes mature on February 15, 2012.

In April 2002, we obtained consent from the holders of the Senior Notes issued in February 2002 to amend the Senior Note Indenture so as to waive the requirement to use the gross proceeds from the issuance of up to $150 million aggregate principal amount of additional Senior Notes to make intercompany loans to our foreign subsidiaries. On April 30, 2002, we entered into a supplement to the Senior Note Indenture.

On May 6, 2002, GrafTech Finance issued $150 million aggregate principal amount of additional Senior Notes at a purchase price of 104.5% of principal amount, plus accrued interest from February 15, 2002, under the Senior Note Indenture. All of the Senior Notes constitute one class of debt securities under the Senior Note Indenture. The additional Senior Notes bear interest at the same rate and mature on the same date as the Senior Notes issued in February 2002. The $7 million premium received upon issuance of the additional Senior Notes was added

132

to the principal amount of the Senior Notes shown on the Consolidated Balance Sheets and is amortized (as a credit to interest expense) over the term of the additional Senior Notes. As a result of our receipt of such premium, the effective annual interest rate on the additional Senior Notes is about 9.5%.

On June 5, 2002, GrafTech Finance offered to exchange new registered Senior Notes (and related guarantees) that are substantially identical to the previously outstanding Senior Notes (and related guarantees), except that certain transfer restrictions and registration rights relating to the previously outstanding Senior Notes would not apply to the new registered Senior Notes (and related guarantees). All of the previously outstanding Senior Notes (and related guarantees) were exchanged under the exchange offer.

Except as described below, GrafTech Finance may not redeem the Senior Notes prior to February 15, 2007. On or after that date, GrafTech Finance may redeem the Senior Notes, in whole or in part, at specified redemption prices beginning at 105.125% of the principal amount redeemed for the year commencing February 15, 2007 and reducing to 100.00% of the principal amount redeemed for the years commencing February 15, 2010 and thereafter, in each case plus accrued and unpaid interest to the redemption date.

In addition, before February 15, 2005, GrafTech Finance is entitled at its option on one or more occasions to redeem Senior Notes at a redemption price of 110.25% of the principal amount redeemed, plus accrued and unpaid interest to the redemption date, with the net cash proceeds from one or more underwritten primary public offerings of shares of our common stock pursuant to an effective registration statement under the Securities Act so long as:

at least 65% of the aggregate principal amount of Senior Notes originally issued remains outstanding immediately after each such redemption (excluding Senior Notes held, directly or indirectly, by us); and

each such redemption occurs within 60 days after the date of the related public offering.

Upon the occurrence of a change of control, GrafTech Finance will be required to make an offer to repurchase the Senior Notes at a price equal to 101.00% of the principal amount redeemed, plus accrued and unpaid interest to the redemption date. For this purpose, a change in control occurs on:

the date on which any person beneficially owns more than 35% of the total voting power of GTI;

the date on which individuals, who on the issuance date of the Senior Notes were directors of GTI (or individuals nominated or elected by a vote of 66?% of such directors or directors previously so elected or nominated), cease to constitute a majority of GTI’s Board of Directors then in office;

the date on which a plan relating to the liquidation or dissolution of GTI is adopted;

133

the date on which GTI merges or consolidates with or into another person, or another person merges into GTI, or all or substantially all of GTI’s assets are sold (determined on a consolidated basis), with certain specified exceptions; or

the date on which GTI ceases to own, directly or indirectly, all of the voting power of GrafTech Global, UCAR Carbon and GrafTech Finance.

The Senior Notes rank senior to present and future subordinated debt and equally with present and future senior debt and obligations of GrafTech Finance. The Senior Notes are effectively subordinated to present and future secured debt and obligations of GrafTech Finance, to the extent of the value of the assets securing such debt and obligations, and are structurally subordinated to debt and obligations, including trade payables, of subsidiaries that are neither guarantors of the Senior Notes nor unsecured intercompany term note obligors.

GTI, GrafTech Global and UCAR Carbon and other U.S. subsidiaries that collectively hold a substantial majority of our U.S. assets have guaranteed the Senior Notes on a senior unsecured basis, except that the guarantee by UCAR Carbon is secured as described below. None of AET, Graphite Electrode Network LLC or Union Carbide Grafito, Inc. are guarantors of the Senior Notes. UCAR Holdings V Inc. is a guarantor of the Senior Notes, but is being liquidated and dissolved. Additional information with respect to the guarantees is set forth in Note 17 to the Consolidated Financial Statements.

Unsecured intercompany term notes in an aggregate principal amount, at December 31, 2003, equal to $528 million (based on currency exchange rates in effect at December 31, 2003) and guarantees of those unsecured intercompany term notes by certain of our foreign subsidiaries have been pledged by GrafTech Finance to secure the Senior Notes, subject to the limitation that at no time will the combined value of the pledged portion of any foreign subsidiary’s unsecured intercompany term note and unsecured guarantee of unsecured intercompany term notes issued by other foreign subsidiaries exceed 19.99% of the principal amount of the then outstanding Senior Notes. As a result of this limitation, the principal amount of unsecured intercompany term notes pledged to secure the Senior Notes at December 31, 2003 equals $366 million (based on currency exchange rates in effect at December 31, 2003), or about 74% of the principal amount of the outstanding Senior Notes. The remaining unsecured intercompany term notes held by GrafTech Finance in an aggregate principal amount at December 31, 2003 of $162 million (based on currency exchange rates in effect at December 31, 2003), or about 31% of the aggregate principal amount of the unsecured intercompany term notes, and any pledged unsecured intercompany term notes that cease to be pledged due to a reduction in the principal amount of the then outstanding Senior Notes due to redemption, repurchase or other events, will not be subject to any pledge and will be available to satisfy the claims of creditors (including the lenders under the Senior Facilities, the holders of the Senior Notes and, pursuant to the subsidiary guarantee by GrafTech Finance of the Debentures, the holders of the Debentures) as their interests may appear. The Senior Notes contain provisions restricting, subject to certain exceptions, the pledge of these unsecured intercompany term notes or related guarantees to secure any other debt or obligation.

The guarantee by UCAR Carbon has been secured by a pledge of all of the shares of capital stock (constituting 97.5% of the outstanding shares of capital stock) of AET held by

134

UCAR Carbon (called the “AET Pledged Stock”), but at no time will the value of the pledged portion of the AET Pledged Stock exceed 19.99% of the principal amount of the then outstanding Senior Notes. The pledge of the AET Pledged Stock is junior to the pledge of the AET Pledged Stock to secure UCAR Carbon’s guarantee of the Senior Facilities.

Each of the guarantees of the Senior Notes is full, unconditional and joint and severable. Payment under the guarantees could be required immediately upon the occurrence of an event of default under the Senior Notes. If a guarantor makes a payment under its guarantee, it would have the right under certain circumstances to seek contribution from the other guarantors.

The unsecured intercompany term note obligations rank senior to present and future subordinated guarantees, debt and obligations of the respective obligors, and equally with present and future senior guarantees, debt and obligations of the respective obligors. The unsecured intercompany term note obligations are effectively subordinated to present and future secured guarantees, debt and obligations of the respective obligors, to the extent of the value of the assets securing such guarantees, debt and obligations, and are structurally subordinated to guarantees, debt and obligations, including trade payables and preferred stock, of subsidiaries of the respective obligors that are not also unsecured intercompany term note obligors.

The Senior Notes contain 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, sell assets, engage in certain transactions with affiliates, or enter into certain mergers and consolidations. The covenants may restrict our ability to repurchase or redeem the Debentures, even if so required thereby. Under the Senior Notes, GTI is permitted to pay dividends on common stock and repurchase common stock only in a cumulative amount of $25 million (subject to reduction if we make other restricted payments), plus, if certain leverage ratio requirements are satisfied, an amount of up to the sum of 50% of certain cumulative consolidated net income, 100% of net cash proceeds from certain sales of common stock and certain investment returns. We are also permitted to repurchase common stock from present or former directors, officers or employees of up to the lesser of $5 million annually or $10 million on a cumulative basis from February 15, 2002. GrafTech Global is permitted to pay dividends to GTI for those and other purposes.

In addition to the failure to pay principal and interest when due or to repurchase Senior Notes when required, events of default under the Senior Notes include: failure to comply with applicable covenants; failure to pay at maturity or upon acceleration indebtedness exceeding $10 million; judgment defaults in excess of $10 million to the extent not covered by insurance; and certain events of bankruptcy.

The Senior Notes contain provisions as to legal defeasance and covenant defeasance.

135

Senior Facilities

In February 2002, we completed a debt recapitalization and obtained the Senior Facilities which are described below. The Senior Facilities consist of:

A Tranche A Facility, which provided for initial term loans of $137 million and €161 million to GrafTech Finance. The Tranche A Facility was fully repaid and terminated in 2002.

A Tranche B Facility providing for initial term loans of $350 million to GrafTech Finance. At December 31, 2003, the principal amount of term loans outstanding under the Tranche B Facility was $21 million. The Tranche B Facility was fully repaid and terminated in January 2004.

A Revolving Facility providing for dollar and euro-denominated revolving and swing line loans to, and the issuance of dollar and euro-denominated letters of credit for the account of, GrafTech Finance and certain of our other subsidiaries in an aggregate principal and stated amount at any time not to exceed, initially, €250 million and, at December 31, 2003, €200 million (€25 million of which can only be used to pay or secure payment of the EU antitrust fine). The Revolving Facility terminates on February 22, 2006. As a condition to each borrowing under the Revolving Facility, we are required to represent, among other things, that the aggregate amount of payments made (excluding certain imputed interest) and additional reserves created in connection with antitrust, securities and stockholder derivative investigations, lawsuits and claims do not exceed $340 million by more than the difference between $75 million (being $33 million, after giving effect to the $10 million charge relating to the EU antitrust fine recorded in July 2001 and the $32 million charge relating to the EU antitrust fine recorded in the 2003 fourth quarter) and the principal amount of certain other debt ($1 million of which debt was outstanding at December 31, 2003).

We are generally required to make mandatory prepayments in the amount of:

Either 75% or 50% (depending on our net debt leverage ratio, which is the ratio of our net debt to our EBITDA (as defined in the Senior Facilities)) of excess cash flow. 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.

100% of the net proceeds of certain asset sales or incurrence of certain indebtedness.

50% of the net proceeds of the issuance of certain GTI equity securities.

We may make voluntary prepayments under the Senior Facilities. There is no penalty or premium due in connection with prepayments (whether voluntary or mandatory).

GrafTech Finance has made and is required to make domestic intercompany loans and foreign secured intercompany loans of the net proceeds of borrowings under the Senior Facilities to GrafTech Global’s subsidiaries. The obligations of GrafTech Finance under the Senior

136

Facilities are secured, with certain exceptions, by first priority security interests in all of these intercompany loans (including the related security interests and guarantees). We used the proceeds from the issuance of the Senior Notes in February 2002 to finance the repayment of all such foreign intercompany term loans that were outstanding at such time. The only other such intercompany loans that were outstanding at such time or thereafter were and are intercompany revolving loans to UCAR Carbon and our Swiss subsidiary. At December 31, 2003, the outstanding balance on the UCAR Carbon and our Swiss subsidiary intercompany revolving loans were $96 million and nil, respectively.

GTI guarantees the obligations of GrafTech Finance under the Senior Facilities. This guarantee is secured, with certain exceptions, by first priority security interests in all of GTI’s assets, including all of the outstanding capital stock of GrafTech Global and GrafTech Finance.

GrafTech Global and each of GrafTech Global’s domestic subsidiaries (including AET, Graphite Electrode Network LLC, Union Carbide Grafito, Inc. and UCAR Holdings V Inc.), with certain exceptions, guarantees the obligations of GrafTech Finance under the Senior Facilities. These guarantees are secured, with certain exceptions, by first priority security interests in all of their assets (including the AET Pledged Stock), 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, are pledged to secure these guarantees.

The intercompany revolving loan to our Swiss subsidiary is secured, with certain exceptions, by a first priority security interest in substantially all of its assets, including a first priority pledge of all of the outstanding capital stock of our foreign subsidiaries that are owned directly by it, and is guaranteed by most of our other principal foreign operating subsidiaries. These guarantees are secured, with certain exceptions, by first priority security interests in their assets.

Each of the guarantees is full, unconditional and joint and several, except as otherwise required to comply with applicable non-U.S. laws. Payment under the guarantees could be required immediately upon the occurrence of an event of default under the Senior Facilities. If a guarantor makes a payment under its guarantee, it would have the right under certain circumstances to seek contribution from the other guarantors.

The interest rate applicable to the Revolving Facility is, at our option, either LIBOR plus a margin ranging from 1.375% to 3.375% (depending on our leverage ratio) or, in the case of dollar-denominated loans, the alternate base rate plus a margin ranging from 0.375% to 2.375% (depending on our leverage ratio). The interest rate applicable to the Tranche B Facility is, at our option, either euro LIBOR plus a margin ranging from 2.875% to 3.625% (depending on our leverage ratio) or the alternate base rate plus a margin ranging from 1.875% to 2.625% (depending on our leverage ratio). The alternate base rate is the higher of (i) the prime rate announced by JP Morgan Chase Bank or (ii) the federal funds effective rate plus 0.50%. GrafTech Finance pays a per annum fee ranging from 0.375% to 0.500% (depending on our leverage ratio) on the undrawn portion of the commitments under the Revolving Facility. At December 31, 2002 and 2003, the interest rate on outstanding debt under the Tranche B Facility was 5.4 and 4.8%, respectively. At December 31, 2002 and 2003, there was $10 million and nil

137

outstanding under the Revolving Facility, respectively. During 2001, 2002 and 2003, the weighted average interest rate on the Senior Facilities was 8.1%, 5.6% and 5.1%, respectively.

The Senior Facilities contain a number of significant covenants that, among other things, significantly restrict our ability to sell assets, incur additional debt, repay or refinance other debt or amend other debt instruments, create liens on assets, enter into sale and lease back transactions, make investments or acquisitions, engage in mergers or consolidations, make capital expenditures, make intercompany dividend payments to GTI, pay intercompany debt owed to GTI, engage in transactions with affiliates, pay dividends to stockholders of GTI or make other restricted payments and that otherwise significantly restrict corporate activities. In addition, we are required to comply with financial covenants relating to specified minimum interest coverage ratios and maximum net senior secured debt leverage ratios (which is the ratio of our net senior secured debt to our EBITDA (as defined in the Senior Facilities)), which become more restrictive over time. The covenants may restrict our ability to repurchase or redeem the Senior Notes and the Debentures, even if so required thereby.

Under the Senior Facilities, GTI is permitted to pay dividends on, and repurchase, common stock in an aggregate annual amount of $25 million, plus up to an additional $25 million if certain leverage ratio and excess cash flow requirements are satisfied. 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 February 22, 2000.

In addition to the failure to pay principal, interest and fees when due, events of default under the Senior 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.

Certain Amendments to the Senior Facilities

In April 2001, the Senior Facilities were amended to, among other things, exclude certain expenses incurred in connection with the lawsuit initiated by us against our former parents (up to a maximum of $20 million, but not more than $3 million in any quarter) from the calculation of financial covenants.

In February 2002, the Senior Facilities were amended to, among other things, permit us to issue up to $400 million aggregate principal amount of Senior Notes. The amendment also changed the manner in which net debt and EBITDA (as defined in the Senior Facilities) are calculated for financial covenant purposes with respect to, among other things, certain expenses incurred in connection with the lawsuit initiated by us against our former parents. In May 2002, the Senior Facilities were amended to, among other things, permit us to issue up to $150 million aggregate principal amount of additional Senior Notes. In connection with this amendment, our maximum permitted leverage ratio was changed to measure the ratio of net senior secured debt to EBITDA (as defined in the Senior Facilities) as against new specified amounts. Our interest coverage ratio was also changed. In addition, the amendment reduced the maximum amount available under the Revolving Facility to €200 million from €250 million (€25 million of which

138

could only be used to pay or secure payment of the EU antitrust fine) and reduced the basket for certain debt incurred by us that is not incurred under the Senior Facilities (excluding the Senior Notes) to $75 million (being $33 million after giving effect to the $10 million charge relating to the EU antitrust fine recorded in July 2001 and the $32 million charge recorded in the 2003 fourth quarter) from $130 million ($1 million of which debt was outstanding at December 31, 2003).

In October 2003, the Senior Facilities were amended to, among other things, provide us additional flexibility to make investments and repurchase Senior Notes (up to a maximum of $35 million aggregate principal amount). The amendment also provides for the exclusion from the calculation of the financial covenants the impacts of providing a letter of credit (except to the extent that the letter of credit exceeds $70 million) to secure payment of the EU antitrust fine and of additional charges against results of operations in connection with antitrust investigations and related lawsuits and claims due to accrued interest on the EU antitrust fine through the date of any decision of the court on our appeal of the EU antitrust fine as well as translation of the EU antitrust fine (and accrued interest thereon) from euros into dollars.

Leverage

We are highly leveraged and, as discussed in Note 14, have substantial obligations in connection with antitrust investigations, lawsuits and claims. At December 31, 2003, we had total debt of $503 million (including $4 million of unamortized bond premium and $18 million (excluding the offsetting value of our interest rate caps of $4 million) for the fair value of the derivative on the hedged debt obligation), cash and cash equivalents of $34 million and a stockholders’ deficit of $128 million. In addition, we have historically discounted or factored a substantial portion of our accounts receivable and used the proceeds to reduce our debt. Certain of our subsidiaries sold receivables totaling $187 million in 2002 and $175 million in 2003.

We use cash and cash equivalents, funds available under the Revolving Facility, subject to continued compliance with the financial covenants under the Senior Facilities, as well as monthly or quarterly cash flow from operations as our primary sources of liquidity. At December 31, 2003 our revolving credit facility provided for maximum borrowings of up to €200 million ($253 million, based on currency exchange rates in effect at December 31, 2003). Our ability to borrow under this facility may effectively be less because of the impact of additional borrowings upon our compliance with the maximum net senior secured debt leverage ratio permitted or minimum interest coverage ratio required under the Senior Facilities. See Note 19–“Subsequent Event–Bank Amendment.”

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

Our ability to service our debt, as it comes due, including maintaining compliance with the covenants under the Senior Facilities, and to meet these and other obligations as they come

139

due is dependent on our future financial and operating performance. This performance, in turn, is subject to various factors, including certain factors beyond our control, such as changes in conditions affecting our industry, changes in global and regional economic conditions, changes in interest and currency exchange rates, developments in antitrust investigations, lawsuits and claims involving us and inflation in raw material, energy and other costs.

Even if we are able to meet our debt service and other obligations when due, we may not be able to comply with the covenants and other provisions under the Senior Facilities. These covenants and provisions include financial covenants and representations regarding absence of material adverse changes affecting us. A failure to so comply, unless waived by the lenders thereunder, would be a default thereunder. This would permit the lenders to accelerate the maturity of the Senior Facilities. It would also permit them to terminate their commitments to extend credit under the Revolving Facility. This would have an immediate material adverse effect on our liquidity. An acceleration of maturity of the Senior Facilities would permit the holders of the Senior Notes to accelerate the maturity of the Senior Notes. A breach of the covenants contained in the Senior Notes would also permit the holders of the Senior Notes to accelerate the maturity of the Senior Notes. Acceleration of maturity of the Senior Notes would permit the lenders to accelerate the maturity of the Senior Facilities and terminate their commitments to extend credit under the Revolving Facility. If we were unable to repay our debt to the lenders and holders or otherwise obtain a waiver from the lenders and holders, the lenders and holders could proceed against the collateral securing the Senior Facilities and the Senior Notes, respectively, and exercise all other rights available to them.

Equity Offerings

On July 31, 2001, we sold an aggregate of 10,350,000 shares of our common stock in a registered public offering at a public offering price of $9.50 per share. The gross proceeds from the offering were $98 million and the net proceeds were $91 million. Sixty percent of the net proceeds were used to prepay term loans outstanding under the Senior Facilities. Repayments of $23 million under the Tranche A Facility and $32 million under the Tranche B Facility were applied against scheduled maturities of each Tranche in the order in which they were due. The balance of the net proceeds were applied to reduce the outstanding balance under the Revolving Facility.

On October 7, 2003, we sold an aggregate of 25,300,000 shares of our common stock in a registered public offering at a public offering price of $8.00 per share. The gross proceeds from the offering were $202 million and the net proceeds were $190 million. $114 million of the net proceeds were used to repay Tranche B Term Loans outstanding under the Senior Facilities. $56 million of the net proceeds were used to reduce the outstanding balance under the Revolving Facility. The balance of the net proceeds was used to reduce other short-term debt.

Write-Off of Capitalized Bank Fees and Related Debt Extinguishment Costs

In February 2002, we recorded a charge of $3 million for write-off of capitalized fees associated with the term loans under Tranche A and B Facilities repaid with the net proceeds from the issuance of Senior Notes.

140

In May 2002, we recorded a charge of $1 million for write-off of capitalized fees associated with the term loans under Tranche A and B Facilities repaid with the net proceeds from the issuance of additional Senior Notes.

In the 2003 fourth quarter, we recorded a charge of $2 million for write-off of capitalized fees associated with the term loans repaid with the net proceeds from the issuance and sale of the common stock in the registered public offering described above.

These charges have been included in other (income) expense, net, on the Consolidated Statement of Operations.

(6) Income Taxes

The following table summarizes the U.S. and non-U.S. components of income (loss) before provision for income taxes, minority interest and income from discontinued operations.

	For the Year Ended
	December 31,
	2001			2002			2003
	(Dollars in millions)
U.S	$	(139	)	$	(88	)	$	(50	)
Non-U.S		66			55			30

	$	(73	)	$	(33	)	$	(20	)

Total income taxes were allocated as set forth in the following table.

	For the Year Ended
	December 31,
	2001		2002			2003
	(Dollars in millions)
Income from continuing operations	$	14	$	(16	)	$	5
Income from discontinued operations		1		1			1

	$	15	$	(15	)	$	6

Income tax expense attributable to income from operations consists of the items set forth in the following table:

		For the Year Ended December 31,
		2001			2002			2003
		(Dollars in millions)
U.S. federal income taxes:
Current	$		--		$	(12	)	$	(5	)
Deferred			(10	)		(25	)		(7	)

		$	(10	)	$	(37	)	$	(12	)

Non-U.S. income taxes:
Current	$		23		$	22		$	8
Deferred			1			(1	)		9

		$	24		$	21		$	17

We have an income tax exemption from the Brazilian government on income generated from cathode and graphite electrode production through 2005 and 2006, respectively. The exemption reduced the net expense associated with income taxes by $1 million in 2001 and 2002 and nil in 2003.

141

In 1998, we obtained an income tax exemption from the Swiss government. The exemption reduced the net expense associated with income taxes by $8 million in 2001, nil in 2002 and 2003.

Income tax expense attributable to income from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 35% to pretax income from operations as set forth in the following table.

	For the Year Ended December 31,
	2001			2002			2003
	(Dollars in millions)
Tax at statutory U.S. federal rate	$	(25	)	$	(12	)	$	(7	)
Nondeductible expenses associated with antitrust
investigations and related lawsuits and claims		5			--			8
State tax expense (benefit) (net of federal tax
benefit)		(5	)		(13	)		(5	)
Restructuring charges with no tax benefit		9			3			2
Adjustments related to investments in subsidiaries		26			--			--
Impact of dividend of foreign earnings		9			8			--
Non-U.S. net operating losses with no tax benefit		--			(1	)		--
Non-U.S. tax exemptions, holidays and credits		(9	)		--			(1	)
Adjustments to deferred tax asset valuation allowance		(3	)		16			5
Previous year's return to provision true-up		--			--			3
Tax effect of permanent differences		--			--			(2	)
Foreign withholding taxes for which no tax credit can
be claimed		--			--			2
Other		7			(17	)		--

	$	14		$	(16	)	$	5

The significant components of deferred income tax expense attributable to income from continuing operations are set forth in the following table.

	For the Year Ended
	December 31,
	2001			2002			2003
	(Dollars in millions)
Deferred tax expense (exclusive of the effects of
changes in the valuation allowance described
below)	$	(6	)	$	(42	)	$	(3	)
Increase (decrease) in beginning of the year
balance of the valuation allowance for
deferred tax assets		(3	)		16			5

	$	(9	)	$	(26	)	$	2

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2002 and December 31, 2003 are set forth in the following table.

142

	At December 31,
	2002			2003
	(Dollars in millions)
Deferred tax assets:
Fixed assets	$	38		$	10
Estimated liabilities and expenses associated with antitrust
investigations and related lawsuits and claims		1			5
Postretirement and other employee benefits		65			46
Foreign tax credit and other carryforwards		97			115
Provision for scheduled plant closings and other
restructurings		2			20
Other		38			47

Total gross deferred tax assets		241			243
Less: valuation allowance		(43	)		(25	)

Total deferred tax assets	$	198		$	218

Deferred tax liabilities:
Fixed assets	$	43		$	53
Inventory		6			6
Other		1			16

Total deferred tax liabilities		50			75

Net deferred tax asset	$	148		$	143

Deferred income tax assets and liabilities are classified on a net current and non-current basis within each tax jurisdiction. Net deferred income tax assets are included in prepaid expenses in the amount of $14 million at December 31, 2002 and $16 million at December 31, 2003 and separately stated as deferred income taxes in the amount of $171 million at December 31, 2002 and $176 million at December 31, 2003. Net deferred tax liabilities are included in accrued income and other taxes in the amount of $4 million at December 31, 2002 and $6 million at December 31, 2003 and separately stated as deferred income taxes in the amount of $33 million at December 31, 2002 and $43 million at December 31, 2003.

During the 2000 fourth quarter, we entered into an intercompany sale-leaseback transaction between two subsidiaries relating to a U.S. graphite electrode facility, which allowed for utilization of foreign tax credits. This transaction resulted in a tax effect of a book gain of $22 million being classified as a deferred charge, which was included in other assets and was to be amortized into income. In June 2001, as a result of the decision to shutdown this facility, the facility was sold back to the original subsidiary owner and impaired. Accordingly, we then recognized a deferred tax asset for the resulting tax basis in excess of the amount for financial reporting.

The net change in the total valuation allowance for 2003 was a decrease of $18 million. This change results from the write-off of approximately $20 million of foreign tax credits and the corresponding valuation allowance and a $2 million increase in valuation allowance related to other deferred tax assets.

We have total excess foreign tax credit carryforwards of $81 million at December 31, 2003. Of these tax credit carryforwards, $15 million expire in 2004, $5 million expire in 2005, $18 million expire in 2006, $37 million expire in 2007 and $6 million expire in 2008 and beyond. In addition, we have federal, state and foreign net operating losses, on a tax effected basis, of $27 million. Of these tax loss carryforwards, $1 million expire in 2007, $1 million expire in 2008, $1 million expire in 2009, $14 million expire in 2013 through 2022 and $10 million expire in 2023. On a recomputed basis, we used foreign tax credits to reduce U.S. current tax liabilities in the amount of $16 million in 2001, $2 million in 2002 and nil in 2003. Based upon the level of historical

143

taxable income and projections for future taxable income over the periods during which these credits are utilizable, we believe it is more likely than not that we will realize the tax benefits of these deferred tax assets net of the corresponding valuation allowances that exist at December 31, 2003. It is our intention to pursue tax planning strategies and one-time events in order to utilize our foreign tax credit carryforwards prior to expiration.

We intend to make distributions of earnings from our wholly-owned subsidiary in Switzerland that have been previously taxed in the U.S. and can be distributed without any additional tax cost. With the exception of our Swiss subsidiary, U.S. income taxes have not been provided on undistributed earnings of foreign subsidiaries because our intention is to reinvest these undistributed earnings indefinitely. To the extent that our circumstances change or future earnings are repatriated, we will provide for income tax on the earnings of the affected foreign subsidiaries. We believe that any U.S. income tax on repatriated earnings would be substantially offset by U.S. foreign tax credits.

(7) Other Expense (Income), Net

The following table presents an analysis of other expense (income), net.

	For the Year Ended December 31,
	2001			2002			2003
	(Dollars in millions)

Interest income	$	(2	)	$	(2	)	$	--
Currency (gains) losses		(2	)		(28	)		(35	)
Bank fees, including loss on sales of accounts receivable		5			4			5
Legal expenses and settlements		--			3			1
Employee benefit curtailment and other costs		--			1			4
Mark-to-market on interest rate caps		--			--			1
Former parent company lawsuit legal expenses		1			1			--
Amortization of goodwill		2			--			--
Non-income taxes		--			--			3
Write-off of fixed/other assets		--			--			4
Global realignment		2			3			--
Write-off of capitalized bank fees and related debt
extinguishment costs		--			4			2
Other		(3	)		5			3

Total other (income) expense, net	$	3		$	(9	)	$	(12	)

144

intercompany loan. When we replace such a loan, we record net cumulative realized translation gains or losses with respect to that loan in other expense (income), net. Those realized gains or losses are, however, non-cash gains or losses. In 2002, we had a net total of $28 million in currency gains, $21 million of which gain was due to currency translation on intercompany loans and translation of financial statements of foreign subsidiaries which use the dollar as their functional currency and $7 million of which related to transactions with third parties. In 2003, we had a net total of $35 million of currency gains, $39 million of which gains were due primarily to currency translation on intercompany loans offset by $4 million of currency losses related to transactions with third parties.

(8) Interest Expense

The following table presents an analysis of interest expense.

		For the Year Ended December 31,
		2001		2002			2003
		(Dollars in millions)

Interest incurred on debt		$	54	$	62		$	62
Interest rate swap benefit			--		(6	)		(13	)
Amortization of gain on sale of swaps			--		--			(8	)
Amortization of debt issuance costs			2		3			3
Interest imputed on antitrust fine			4		1			1

Total interest expense	$		60	$	60		$	45

(9) Supplementary Balance Sheet Detail

The following tables present supplementary balance sheet details.

	At December 31,
	2002			2003
	(Dollars in millions)
Accounts and notes receivable, net:
Trade	$	85		$	103
Other		24			27

		109			130
Allowance for doubtful accounts		(5	)		(4	)

	$	104		$	126

Property, plant and equipment:
Land and improvements	$	41		$	29
Buildings		166			155
Machinery and equipment and other		753			816
Construction in progress		35			32

	$	995		$	1,032

Other assets:
Fair value of interest rate swap	$	8		$	--
Fair value of interest rate caps		--			4
Pension assets		4			5
Long term receivables		2			5

145

	At December 31,
	2002		2003
	(Dollars in millions)
Long term investments		2		3
Capitalized bank fees		28		21
Cash surrender value of executive life insurance		3		--
Other		5		4

	$	52	$	42


Accounts payable:
Trade	$	82	$	78
Interest		23		20

	$	105	$	98

Other accrued liabilities:
Accrued accounts payable	$	14	$	17
Accrued imputed interest		5		1
Payrolls (including incentive programs)		4		16
Restructuring		14		29
Employee compensation and benefits		10		11
Liabilities and expenses associated with antitrust investigations
and related lawsuits and claims		3		82
Other		7		8

	$	57	$	164

Other long term obligations:
Postretirement benefits	$	70	$	60
Deferred and other liabilities		4		4
Pension and related benefits		59		45
Liabilities and expenses associated with antitrust investigations
and related lawsuits and claims		95		43
Long-term environmental liabilities		5		4
Fair value of interest rate swap		--		18
Unamortized gain on interest rate swap		9		32
Other		16		19

	$	258	$	225

The following table presents an analysis of the allowance for doubtful accounts.

	At December 31,
	2001			2002			2003
	(Dollars in millions)
Balance at beginning of year	$	4		$	5		$	5
Additions		2			1			--
Deductions		(1	)		(1	)		(1	)

Balance at end of year	$	5		$	5		$	4

(10) Leases and Other Long Term Obligations

Lease commitments under noncancelable operating leases extending for one year or more will require the following future payments:

146

	(Dollars in millions)
2004	$2
2005	1
2006	1
2007	--
2008	--
After 2008	--

Total lease and rental expenses under noncancelable operating leases extending one month or more were $3 million in 2001, $1 million in 2002 and $1 million in 2003.

During 2001, we outsourced our information technology function to CGI Group Inc. (“CGI”). Under this ten-year agreement, CGI will manage our data services, networks, desktops, telecommunications and legacy systems. The following schedule sets forth the future payments for base services.

	(Dollars in millions)
2004	$6
2005	5
2006	5
2007	5
2008	5
After 2008	12

In addition, we have a remaining commitment to purchase $3 million in services above the base level over the remaining term of the agreement.

In September 2002, we entered into a ten-year outsourcing contract with CGI to provide finance and accounting business process services valued at $36 million. The following sets forth the schedule of future payments for base services.

	(Dollars in millions)

2004	$3
2005	4
2006	4
2007	4
2008	4
After 2008	15

(11) Benefit Plans

Retirement Plans and Postretirement Benefit Plans

Until February 25, 1991, we participated in the U.S. retirement plan of Union Carbide Corporation (“Union Carbide”). Effective February 26, 1991, we formed our own U.S.

147

retirement plan which covers substantially all U.S. employees. Retirement and death benefits related to employee service through February 25, 1991 are covered by the Union Carbide plan. Benefits paid by the Union Carbide plan are based on final average pay through February 25, 1991, plus salary increases (not to exceed 6% per year) until January 26, 1995 when Union Carbide ceased to own at least 50% of the equity of GTI. All our employees who retired prior to February 25, 1991 are covered under the Union Carbide plan. Pension benefits under our plan are based primarily on years of service and compensation levels prior to retirement. Prior to January 1, 2002, our plan was a defined benefit plan. Effective January 1, 2002, a new defined contribution plan was established for U.S. employees. Some employees had the option to remain in the defined benefit plan for an additional period of up to five years. Those employees without the option to remain in the defined benefit plan for an additional five years began participating in the defined contribution plan and their benefits under the defined benefit plan were frozen as of December 31, 2001. Those employees with the initial option to remain in the defined benefit plan began participating in the defined contribution plan as of April 1, 2003 and their benefits under the defined benefit plan were frozen as of March 31, 2003. Effective March 31, 2003, we froze the qualified defined benefit plan for our remaining U.S. employees and closed our non-qualified U.S. defined benefit plan for the participating salaried workforce. Under the new defined contribution plan, we make quarterly contributions to each individual employee’s account equal to 2.5% of the employee’s pay up to the social security wage base ($87,000 in 2003) plus 5% of their pay above the social security wage base.

Pension coverage for employees of foreign subsidiaries is provided, to the extent deemed appropriate, through separate plans. Obligations under such plans are systematically provided for by depositing funds with trustees, under insurance policies or by book reserves.

We use a December 31 measurement date for all of our plans.

As a result of these benefit plan changes, the net pension cost for our plans was reduced from $11 million in 2001 to $7 million in 2002 and to $3 million in 2003.

The components of our consolidated net pension costs are set forth in the following table

	For the Year Ended December 31,
	2001			2002			2003
	(Dollars in millions)
Service cost	$	7		$	6		$	3
Interest cost		14			11			12
Expected return on assets		(14	)		(11	)		(11	)
Amortization		--			--			1
Special termination benefits		--			--			3
Settlement (gain) loss		4			1			(6	)
Curtailment loss		--			--			1

Net pension cost	$	11		$	7		$	3

We also provide health care and life insurance benefits for eligible retired employees. These benefits are provided through various insurance companies and health care providers. We accrue the estimated net post-retirement benefit costs during the employees’ credited service periods. In July 2002, we amended our U.S. post-retirement medical coverage. Effective March 31, 2003, we discontinued the Medicare supplement plan (for retirees 65 years or older or

148

those eligible for Medicare benefits). This change applies to all active employees except for some employees covered by a collective bargaining agreement, all current retirees who were not covered by a collective bargaining agreement when they retired and those retirees who retired under a former collective bargaining agreement.

In June 2003, we announced the termination of the existing early retiree medical plan for retirees under age 65, effective December 31, 2005. In addition, we will limit the amount of retiree’s life insurance after December 31, 2004.

The components of our consolidated net postretirement benefit costs are set forth in the following table.

	For the Year Ended December 31,
	2001			2002			2003
	(Dollars in millions)
Service cost	$	2		$	--		$	--
Interest cost		6			4			3
Amortization of prior service cost		(2	)		(8	)		(11	)

Net postretirement benefit cost	$	6		$	(4	)	$	(8	)

The reconciliation of beginning and ending balances of benefit obligations under, and fair value of assets of, all of our pension and postretirement benefit plans, and the funded status of the plans, are as follows:

	Pension Benefits At December 31,						Postretirement Benefits At December 31,
	2002			2003			2002			2003
	(Dollars in millions)
Changes in benefit obligation:
Net benefit obligation at beginning of year	$	177		$	192		$	63		$	47
Service cost		6			3			--			1
Interest cost		11			12			4			3
Impact of plan amendments		--			1			(9	)		(17	)
Foreign currency exchange rate changes		6			10			(1	)		3
Actuarial loss		14			18			(3	)		12
Divestiture		--			(1	)		--			--
Curtailment		(8	)		(13	)		--			--
Settlement		(6	)		(16	)		--			--
Special termination benefits		--			3			--			--
Gross benefits paid		(8	)		(11	)		(7	)		(5	)

Net benefit obligation at end of year	$	192		$	198		$	47		$	44

Changes in plan assets:
Fair value of plan assets at beginning of year	$	127		$	112		$	--		$	--
Actual return on plan assets		(11	)		29			--			--

149

	Pension Benefits At December 31,						Postretirement Benefits At December 31,
	2002			2003			2002			2003
	(Dollars in millions)
Foreign currency exchange rate changes		5			8			--			--
Employer contributions		5			14			7			5
Participants contributions		--			--			--			--
Settlement		(6	)		--			--			--
Gross benefits paid		(8	)		(11	)		(7	)		(5	)

Fair value of plan assets at end of year	$	112		$	152		$	--		$	--

Reconciliation of funded status:
Funded status at end of year	$	(80	)	$	(46	)	$	(47	)	$	(44	)
Unrecognized net transition asset		(1	)		(2	)		--			--
Unrecognized prior service cost		1			1			(64	)		(64	)
Unrecognized net actuarial loss		49			27			41			48

Net amount recognized at end of year	$	(31	)	$	(20	)	$	(70	)	$	(60	)

Amounts recognized in the statement of financial position
consist of:
Prepaid benefit cost	$	4		$	5		$	--		$	--
Accrued benefit liability		(60	)		(41	)		(70	)		(60	)
Intangible asset		1			--			--			--
Accumulated other comprehensive income		24			16			--			--

Net amount recognized	$	(31	)	$	(20	)	$	(70	)	$	(60	)

The accumulated benefit obligation for all defined pension plans was $186 million at December 31, 2003.

Assumptions used to determine net pension costs, pension projected benefit obligation, net postretirement benefit costs and postretirement benefits projected benefit obligation are set forth in the following table.

	Pension Benefits At December 31,									Postretirement Benefits At December 31,
	2001			2002			2003			2001			2002			2003
Weighted average assumptions as of
Discount rate		7.34	%		6.71	%		6.36	%		7.79	%		7.04	%		6.68	%
Expected return on plan assets		8.59	%		7.80	%		7.73	%		--			--			--
Rate of compensation increase		4.73	%		4.04	%		4.15	%		3.39	%		--			--
Health care cost trend on covered charges:
Initial		N/A			N/A			N/A			6.88	%		6.68	%		8.33	%
Ultimate		N/A			N/A			N/A			5.34	%		5.38	%		4.46	%
Years to ultimate		N/A			N/A			N/A			6			6			8

Assumed health care cost trend rates had a significant effect on the amounts reported for net postretirement benefits. A one percentage point change in the health care cost trend rates would change the accumulated postretirement benefits net benefit obligation by approximately $5 million at December 31, 2002 and change net postretirement benefit costs by approximately $1 million for both 2001 and 2002. For 2003, as a result of certain amendments to the U.S. postretirement benefits, healthcare cost trend rates have no material effect on the amounts reported for net postretirement benefits.

150

Other Non-Qualified Plans

Since January 1, 1995, we have established various unfunded, non-qualified supplemental retirement and deferred compensation plans for certain eligible employees. We established benefits protection trusts (the “Trust”) to partially provide for the benefits of employees participating in these plans. At December 31, 2002 and December 31, 2003, the Trust had assets of approximately $2 million, which are included in other assets on the Consolidated Balance Sheets. These assets include 426,400 shares of common stock that we contributed to the Trust in March 2001. These shares, if later sold, could be used for partial funding of our future obligations under certain of our compensation and benefit plans. The shares held in Trust are not considered outstanding for purposes of calculating earnings per share until they are committed to be sold or otherwise used for funding purposes. In March 2003, we closed our non-qualified U.S. defined benefit plan for the participating salaried workforce, which resulted in an $11 million restructuring charge in the 2003 first quarter. We started a new defined contribution plan for the salaried workforce.

Savings Plan

Our employee savings plan provides eligible employees the opportunity for long term savings and investment. Under the plan as in effect through 2001, participating employees could 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. On January 1, 2002, the plan was revised to allow employees to contribute up to 5% of pay as a basic contribution and an additional 45% of pay as supplemental contribution. For 2001 and 2002, we contributed on behalf of each participating employee an amount equal to 50% of the employee’s basic contribution. For 2003, we contributed on behalf of each participating employee, in units relating to our common stock, 100% on the first 3% contributed by the employee and 50% on the next 2% contributed by the employee. We contributed $1 million in 2001 and 2002 and 315,245 shares of our common stock in 2003.

Additional Information for U.S. Pension Plans

Plan Assets. The following table presents our U.S. retirement plan weighted average asset allocations at December 31, 2002 and 2003, as well as our target allocations for 2004, by asset category.

	Percentage of Plan Assets At December 31,				Target Allocation
	2003		2002		2004
Plan Assets
Equity Securities*		70.44%		75.07%		70-80%
Debt Securities		29.54		24.26		20-30
Other		0.02		0.67		No Target

Total		100%		100%

* Includes shares of our common stock in the amounts of nil and $16 million (17.6%) at December 31, 2002 and 2003, respectively.

Long-Term Rate of Return Assumption. The investment objective of the plan is to meet the current and future defined benefit payment obligations of the plan. The existing assets and required contributions may be invested in both fixed income and equity investments. Equity investments may include large-cap, mid-cap, and small-cap stocks. Fixed income investments may include U.S. government securities, corporate bonds, mortgages, cash, and other fixed income instruments.

The long-term rate of return assumptions were calculated by Aon Investment Consulting (“Aon”). Twenty year rolling returns net of inflation, volatility and correlations, and inflation estimates were analyzed and regressed. Target allocations from the investment policy were utilized with 2.5% inflation. The 8% assumption utilized is below the 8.37% expected result for a plan with 70% invested in equities.

Investment Policy and Strategy. The investment policy and strategy of the plan is to invest 70% (60% large cap, 25% small- and mid-cap, 15% international) in equities and 30% in short duration fixed income securities. The trust allows the plan to be 80% invested in equities, including shares of our common stock. Rebalancing is undertaken monthly. The goal is to fully fund the plan as soon as possible while investing plan assets prudently.

Aon conducted an asset/liability study for the plan in 2003. The target equity allocation of 70% does not include shares of our common stock which was contributed to the plan in 2003 in addition to the minimum required cash contribution.

The following table presents information for pension plans with an accumulated benefit obligation in excess of plan assets.

	December 31
	2002		2003
	(Dollars in millions)
Projected benefit obligation	$	132	$	125
Accumulated benefit obligation		110		121
Fair value of plan assets		64		92

Cash Flows. The following represents projected future cash flow by year.

	Pension Plan	Other Postretirement Plan
	(Dollars in millions)
Expected contributions in 2004
Expected employer contributions	$13 to $15	$4
Expected employee contributions	$--	$--
Estimated future benefit payments reflecting expected
future service for the fiscal year(s) ending
12/31/2004	$6	$4
12/31/2005	$6	$4
12/31/2006	$7	$3
12/31/2007	$7	$3
12/31/2008	$8	$3
12/31/2009-12/31/2013	$47	$15

(12) Restructuring and Impairment Charges

We have had several restructuring and impairment charges during the past few years. At December 31, 2003, the outstanding balance of our restructuring reserve was $29 million. The components of this balance consist primarily of $15 million for organizational changes, $8 million related to the mothballing of our graphite electrode manufacturing operations in Caserta, Italy, $2 million related primarily to remaining lease payments on our former corporate headquarters, and $2 million related to plant closure costs associated with the closure of our Canadian graphite electrode manufacturing operations.

In the 2003 fourth quarter, we recorded a $2 million net non-cash write-off of the remaining book value of assets of our former graphite electrode manufacturing operations in Clarksville, Tennessee. We also recorded a $5 million non-cash impairment of the remaining fixed assets in Caserta, Italy.

In the 2003 second quarter, we recorded $1 million of restructuring charges for organizational changes.

151

In the 2003 first quarter, we recorded $19 million of restructuring charges, consisting of $8 million for organizational changes and $11 million for the closure and settlement of our U.S. non-qualified defined benefit plan for the participating salaried workforce. The $8 million charge for organizational changes related to U.S. voluntary and selective severance programs and related benefits associated with a workforce reduction of 103 employees. The closure of our non-qualified U.S. defined benefit plan resulted in recognition of net actuarial losses of $11 million.

In the 2002 fourth quarter, we recorded $3 million ($2 million after tax) of impairment charges relating to our investment in our joint venture with Jilin Carbon Co. (together with its affiliates, “Jilin”). The impairment results from uncertainty about the completion and start-up of the planned graphite electrode facility in Changchun, China due to the effects that the challenging 2002 graphite electrode industry conditions have had on Jilin. We also recorded a $1 million (nil after tax) change in estimate for the restructuring charge for our graphite electrode operations in Caserta, Italy.

In the 2002 third quarter, we recorded a $1 million charge related to the impairment of available-for-sale securities.

In the 2002 second quarter, we recorded a $13 million ($8 million after tax) charge primarily related to the impairment of our long-lived carbon electrode assets in Columbia, Tennessee as a result of a decline in demand and loss of market share. The primary end market for carbon electrodes is silicon metal, which had been very depressed in the U.S. where our main customer base is located. This charge also includes $1 million related to the impairment of available-for-sale securities.

In the 2002 first quarter, we recorded a $5 million restructuring charge that related primarily to the mothballing of our graphite electrode manufacturing operations in Caserta, Italy. This charge included estimated pension, severance and other related employee benefit costs for 102 employees and other costs related to the mothballing.

In the 2001 fourth quarter, we recorded a $7 million restructuring charge and a $27 million impairment loss on long-lived and other assets. The restructuring charge related primarily to exit costs related to the mothballing of graphite electrode manufacturing operations in Caserta, Italy. $24 million of the impairment loss on long-lived assets related to assets located at our facility in Caserta, Italy. The remaining $3 million related to the impairment of available-for-sale securities.

In the 2001 third quarter, we recorded a $2 million restructuring charge related to a corporate realignment of our businesses, the relocation of our corporate headquarters and the shutdown of our coal calcining operations located in Niagara Falls, New York. The relocation was substantially completed in 2001. The charge includes severance and related benefits associated with a workforce reduction of 24 employees and impairment of leasehold improvement assets.

In 2001 third quarter, we reversed $2 million of prior restructuring charges based on revised lower estimates of workforce reductions and plant closure costs, and we reclassified

152

$4 million of prior restructuring charges related to on-site waste disposal post-monitoring costs to other long term obligations.

The fair value of the long-lived assets was calculated on the basis of discounted estimated future cash flows. Estimates of the discounted future cash flows are subject to significant uncertainties and assumptions. Accordingly, actual values could vary significantly from such estimates.

The following table summarizes activity relating to the accrued expense in connection with the restructuring charges.

	Severance and Related Costs			Plant Shutdown and Related Costs			Post Monitoring and Related Costs			Total
	(Dollars in millions)
Balance at January 1, 2001	$	13		$	9		$	4		$	26
Restructuring charges in 2001		4			8			--			12
Payments in 2001		(13	)		(5	)		--			(18	)
Non-cash write-offs in 2001		--			(4	)		--			(4	)
Reclassification of on-site disposal and
monitoring costs		--			--			(4	)		(4	)

Balance at December 31, 2001	$	4		$	8		$	--		$	12
Restructuring charges in 2002		6			--			--			6
Payments in 2002		(5	)		1			--			(4	)

Balance at December 31, 2002	$	5		$	9		$	--		$	14
Restructuring charges in 2003		20			--			--			20
Payments in 2003		(3	)		(2	)		--			(5	)

Balance at December 31, 2003	$	22		$	7		$	--		$	29

The restructuring accrual is included in other accrued liabilities on the Consolidated Balance Sheets.

153

(13) Management Compensation and Incentive Plans

Stock Options

We have adopted several stock incentive plans. The aggregate number of shares reserved under the plans since their initial adoption was 14,500,000 shares at December 31, 2002 and December 31, 2003. The plans permit options and restricted stock to be granted to employees and, in the case of one plan since March 1998, also to non-employee directors.

In 1995, we 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 at the time of our initial public offering in 1995, and the balance were performance options, one fifth of which were to vest in each of 1995 through 1999 on achievement of designated EBITDA targets. In December 1997, GTI’s Board of Directors accelerated the vesting of the 1998 performance options. We did not achieve the 1999 performance targets and, accordingly, the 1999 performance options were cancelled.

In 1996, we granted 10-year options to mid-management to purchase 960,000 shares at an exercise price of $35.00 per share, and granted additional 10-year options to mid-management to purchase 4,000 shares at an exercise price of $40.44 per share. In 1997, we granted 10-year options to mid-management to purchase 61,500 shares at an exercise price of $39.31 per share. The options vest eight years from the grant date. Accelerated vesting occurs if the market price of the common stock equals or exceeds specified amounts. At December 31, 2003, 160,000 of such options were not yet vested.

In 1997, we granted 10-year options to management to purchase 155,000 shares at an exercise price of $37.59 per share. At December 31, 2003, all such options were vested.

In 1998, we granted 10-year options to purchase shares as follows:

Options for 641,000 shares were granted to certain officers and directors at exercise prices ranging from $29.22 to $34.36 per share. Options for 320,000 shares vest one year from the grant date, options for 221,000 shares vest two years from the grant date and options for 100,000 shares vest three years from the grant date. At December 31, 2003, all of such options were vested.

Options for 1,935,000 shares were granted to certain officers and management at exercise prices ranging from $15.50 to $17.06 per share. Options for 628,000 shares vest after one year from the grant date, and all remaining options vest seven years from the grant date, subject to accelerated vesting if the market price for the common stock equals or exceeds specified amounts. At December 31, 2003, all of such options were vested.

In 1999, we granted 10-year options to purchase shares as follows:

Options for 409,000 shares were issued to certain officers, management and directors at exercise prices ranging from $14.13 to $26.50 per share. Options for 274,101 shares vest one year from the grant date, and all remaining options vest seven years from the grant date, subject to accelerated vesting if the market price for the common stock equals or exceeds specified amounts. At December 31, 2003, 6,667 of such options were not yet vested.

154

In 2000, we granted 10-year options to purchase shares as follows:

Options for 2,615,511 shares were issued to certain officers, management and directors at exercise prices ranging from $8.56 to $19.06 per share. Options for 2,070,100 shares vest two years from the grant date, options for 200,000 shares vest five years from the grant date, 175,901 shares vest one year from the grant date, options for 12,200 vested at the grant date, options for 35,040 shares vested ratably over the course of 2000 and all remaining options vest seven years from the grant date, subject to accelerated vesting if the market price for the common stock equals or exceeds specified amounts. At December 31, 2003, 223,334 of such options were not yet vested.

In 2001, we granted 10-year options to purchase shares as follows:

Options for 1,755,170 shares were issued to certain officers, management and directors at exercise prices ranging from $8.85 to $11.95 per share. Options for 1,644,300 shares vest two years from the grant date and options for 110,870 shares vested on the grant date. At December 31, 2003, all of such options were vested.

In 2002, we granted 10-year options to purchase shares as follows:

Options for 89,701 shares were issued to certain officers, management and directors at exercise prices ranging from $8.44 to $10.77 per share. Options for 8,380 shares vested on the grant date, options for 41,321 shares vest one year from the grant date and options for 40,000 shares vest two years from the grant date. At December 31, 2003, 15,000 of these options were not yet vested.

In 2003, we granted options to purchase shares as follows:

Options for 3,188,435 shares were issued to certain officers, management and directors at exercise prices ranging from $2.85 to $12.23 per share. We granted 10-year options for 91,935 shares that vest one year from the grant date and 10-year options for 25,000 shares that vest two years from the grant date. In addition, we granted options for 3,071,500 shares in connection with our long-term incentive program. These options vest five years from the grant date and expire five months later. Accelerated vesting occurs if certain cash flow performance targets are achieved in each of 2003, 2004 and 2005. At December 31, 2003, none of these options were vested.

The following table summarizes the status of our stock-based compensation plans at the dates and for the period indicated.

155

	For the Year Ended December 31,
	2001					2002					2003
	Shares			Weighted-Average Exercise Price		Shares			Weighted-Average Exercise Price		Shares			Weighted-Average Exercise Price
	(Shares in thousands)
Time vesting options:
Outstanding at beginning of
year		7,856		$	16.55		9,251		$	15.24		8,994		$	15.34
Granted at market price		1,752			8.99		507			10.55		3,188			6.59
Granted at price exceeding
market		--			--		--			--		--			--
Granted at price below market		--			--		--			--		--			--
Exercised		(188	)		7.60		(546	)		7.60		(552	)		8.45
Forfeited/canceled		(169	)		19.80		(218	)		13.56		(452	)		15.76

Outstanding at end of year		9,251		$	15.24		8,994		$	15.34		11,178		$	13.17

Options exercisable at year
end		4,975		$	18.85		6,779		$	16.16		7,582		$	15.44
Weighted-average fair value of
options granted during year:
At market					5.58					6.01				$	6.59
Exceeding market					--					--					--
Below market					--					--					--
Performance vesting options:
Outstanding at beginning of
year		401		$	7.60		378		$	7.60		378		$	7.60
Granted		--			--		--			--		--			--
Exercised		(23	)		7.60		--					(46	)		7.60
Forfeited/canceled		--			--		--			--		--			--

Outstanding at end of year		378			7.60		378			7.60		332			7.60

Options exercisable at year
end		378		$	7.60		378		$	7.60		332		$	7.60

The fair value of each stock option is estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions for grants in 2001, 2002 and 2003, respectively: dividend yield of 0.0% for all years; expected volatility of 52% in 2001, 55% in 2002 and 76% in 2003; risk-free interest rates of 4.8% in 2001, 4.3% in 2002 and 4.0% in 2003; and expected lives of 8 years in 2001 and 2002 and 6 years in 2003.

156

The following table summarizes information about stock options outstanding at December 31, 2003.

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Prices	Number Exercisable	Weighted- Average Exercise Prices
	(Shares in thousands)
Time vesting options:
$2.83-10.77	7,119	6 years	$7.62	3,936		$8.47
$11.60 to $19.06	2,522	5 years	16.48	2,238		16.86
$22.82 to $29.22	141	5 years	25.71	135		25.85
$30.59 to $40.44	1,396	3 years	34.31	1,222		34.11

	11,178		13.00	7,531		15.09

Performance vesting options:
$ 7.60	332	3 years	$7.60	332		$7.60

Incentive Compensation Plans

In 2000, we implemented global incentive programs for our worldwide salaried and hourly employees. These plans were based on our financial performance and achievement of strategic or, in the case of hourly employees, local targets. The cost for this plan was nil in 2001 and 2002. In 2003, the Incentive Compensation Program (“ICP”) replaced the former programs, creating one program for all employees. The ICP is based primarily on achieving cash flow targets and, to a lesser extent, strategic targets. The cost for the ICP was $11 million in 2003.

Other

In 1998, we entered into a five-year employment agreement with our former chairman of the board.

In 2000, we granted 100,000 restricted shares to our former chairman of the board, and we are amortizing the value of those shares as of the grant date ($2 million) over the vesting period which ended in June 2003.

In 2002, we granted 412,200 shares of restricted stock to employees. We also recorded a $5 million non-cash compensation charge associated with the accelerated vesting of those shares.

From 1998 to 2002, we maintained an executive employee loan program. No loans were made in 2001 or 2002. During 2002, all previously outstanding loans were repaid as described below. From 1998 to 2002, we maintained an executive employee stock purchase program. No purchases were made in 2001 or 2002. In 2002, management participating in these programs repaid all outstanding loans with shares of common stock valued at fair market value on the date of repayment and cash. These programs were discontinued in 2002.

157

(14) Contingencies

Antitrust Investigations

In April 1998, pursuant to a plea agreement between the U.S. Department of Justice and GTI, GTI pled guilty to a one count charge of violating U.S. federal antitrust law 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. The plea agreement was approved by the U.S. District Court for the Eastern District of Pennsylvania (the “District Court”). The payment schedule has been revised periodically at our request. In January 2002, the payment schedule for the $60 million balance outstanding at that time was revised to require a $2.5 million payment in April 2002, a $5.0 million payment in April 2003 and, beginning in April 2004, quarterly payments ranging from $3.25 million to $5.375 million, through January 2007. Beginning in 2004, the DOJ may ask the District Court to accelerate the payment schedule based on a change in our ability to make such payments. Interest will begin to accrue on the unpaid balance, commencing in April 2004, at the statutory rate of interest then in effect. At December 31, 2003, the statutory rate of interest was 1.28% per annum. Accrued interest will be payable together with each quarterly payment. The revised schedule has been approved by the District Court. Of the $110 million original aggregate amount, $90 million is treated as a fine and $20 million is treated as imputed interest for accounting purposes. All payments due have been timely paid.

In 2002, following an investigation as to whether there had been any violation of Korean antitrust law by producers and distributors of graphite electrodes, the Korean antitrust authority assessed fines against us and other graphite electrode producers. We paid the fine together with accrued interest, an aggregate of $584,000, in August 2002.

In January 2000, the EU Competition Authority issued a statement of objections initiating proceedings against us and other producers of graphite electrodes. The statement alleges that we and other producers violated antitrust laws of the European Community and the European Economic Area in connection with the sale of graphite electrodes. In July 2001, the EU Competition Authority issued its decision regarding the allegations. Under the decision, the EU Competition Authority assessed a fine of €50.4 million (about $64 million, based on currency exchange rates in effect at December 31, 2003) against us. From the initiation of its investigation, we have cooperated with the EU Competition Authority. As a result of our cooperation, the EU antitrust fine reflects a substantial reduction from the amount that otherwise would have been assessed. After an in-depth analysis of the decision, in October 2001, we filed an appeal to the Court of First Instance of the European Communities in Luxembourg (the “Court”) challenging, among other things, the amount of the EU antitrust fine, including the accrual of interest and the rate thereof. In July 2003, the Court heard oral argument on this appeal. The Court has not yet issued its decision.

During the pendency of an appeal, provisional payment of the fine or collateral security for payment thereof would typically be required to be paid or provided. Under its decision, the EU Competition Authority stated that, until paid (including a provisional payment described below), the EU antitrust fine would accrue interest at the rate of 8.04% per annum, commencing October 2001, provided, however, that if a letter of credit, sufficient to secure payment of both

158

the fine and interest accrued and accruing thereon, was delivered to the EU Competition Authority, then the rate of interest would be 6.04% per annum.

See Note 19 for developments after December 31, 2003 relating to the interim appeal and the EU antitrust fine.

In May 2001, we became aware that the Brazilian antitrust authority had requested written information from various steelmakers in Brazil. In April 2002, our Brazilian subsidiary received a request for information from that authority. We have provided that information.

Except as described above, the antitrust investigations against us in the U.S., Canada, the European Union, Japan and Korea with respect to graphite electrodes and in the European Union with respect to isostatic and extruded specialty graphite have been resolved. We are continuing to cooperate with the DOJ, EU Competition Authority and the Canadian Competition Bureau in their continuing investigations of others. 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. Under plea agreements in the U.S. and Canada, we will not be subject to prosecution by the respective antitrust authorities with respect to any other violations of their respective antitrust laws occurring prior to the date of the applicable plea agreement in connection with the sale of graphite and carbon products. It is possible that antitrust investigations seeking, among other things, to impose fines and penalties could be initiated against us by antitrust authorities in Brazil or other jurisdictions.

159

To the extent that antitrust investigations involving us have been resolved with guilty pleas or by adverse decisions, such guilty pleas and decisions make it more difficult for us to defend against other investigations as well as civil lawsuits and claims. 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.

Antitrust Lawsuits

Through December 31, 2003, except as described in the following paragraphs, we have settled or obtained dismissal of all of the civil antitrust lawsuits (including class action lawsuits) previously pending against us, certain civil antitrust lawsuits threatened against us and certain possible civil antitrust claims against us by certain customers who negotiated directly with us. The settlements cover, among other things, virtually all of the actual and potential claims against us by customers in the U.S. and Canada arising out of alleged antitrust violations occurring prior to the date of the relevant settlements in connection with the sale of graphite electrodes. One of the settlements also covers actual and potential claims against us by certain foreign customers arising out of alleged antitrust violations occurring prior to the date of that settlement in connection with the sale of graphite electrodes sourced from the U.S. Although each settlement is unique, in the aggregate they consist primarily of current and deferred cash payments with some product credits and discounts. All payments due have been timely paid.

In 1999 and 2000, we and other producers of graphite electrodes were served with three complaints commencing three separate civil antitrust lawsuits in the District Court. In March 2002, we were served with another complaint commencing a separate civil antitrust lawsuit in the District Court. These lawsuits are called the “foreign customer lawsuits.” The first complaint, entitled Ferromin International Trade Corporation, et al. v. UCAR International Inc., et al., was filed by 27 steelmakers and related parties, all but one of whom are located outside the U.S. The second complaint, entitled BHP New Zealand Ltd. et al. v. UCAR International Inc., et al. was filed by 4 steelmakers, all of whom are located outside the U.S. The third complaint, entitled Saudi Iron and Steel Company v. UCAR International Inc., et al., was filed by a steelmaker who is located outside the U.S. The fourth complaint, entitled Arbed, S.A., et al. v. Mitsubishi Corporation, et al., was filed by 5 steelmakers, all of whom are located outside the U.S. In each complaint, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of graphite electrodes sold or sourced from the U.S. and those sold and sourced outside the U.S. The plaintiffs seek, among other things, an award of treble damages resulting from such alleged violations. We believe that we have strong defenses against claims alleging that purchases of graphite electrodes outside the U.S. are actionable under U.S. federal antitrust law. We filed motions to dismiss the first and second complaints. In June and July 2001, our motions to dismiss the first and second complaints were granted with respect to substantially all of the plaintiffs’ claims. The claims not dismissed relate to sales invoiced from the U.S. Appeals have been filed by the plaintiffs and the defendants with the U.S. Court of Appeals for the Third Circuit with regard to these dismissals. The U.S. Court of Appeals for the Third Circuit heard oral argument on these appeals on March 11, 2003, and we are awaiting its decision. The third complaint was dismissed without prejudice to refile pending the resolution of such appeals. We filed a motion to stay the lawsuit commenced by the fourth complaint pending

160

resolution of appeals in the other foreign customer lawsuits, and such motion was granted in July 2002.

In 1999 and 2000, we were served with three complaints commencing three civil antitrust lawsuits (the “carbon electrode lawsuits”). The first complaint, filed in the District Court, is entitled Globe Metallurgical, Inc. v. UCAR International Inc., et al. The second complaint, initially filed in the U.S. Bankruptcy Court for the Northern District of Ohio and subsequently transferred to the U.S. District Court for the Northern District of Ohio, Eastern Division, is now entitled Cohen & Co., Distribution Trustee v. UCAR International Inc., et al. (In re Simetco, Inc.). The third complaint, filed in the U.S. District Court for the Southern District of West Virginia, is entitled Elkem Metals Company Inc and Elkem Metals Company Alloy LLP v. UCAR Carbon Company Inc., et al. SGL Carbon AG is also named as a defendant in the first complaint and SGL Carbon Corporation is also named as a defendant in the first and third complaints. In the complaints, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of carbon electrodes and seek, among other things, an award of treble damages resulting from such alleged violations. In October 2001, we settled the lawsuit commenced by the third complaint. In September 2002, we settled the lawsuit commenced by the first complaint. In January 2003, we settled the lawsuit commenced by the second complaint. The guilty pleas and decisions described above do not relate to carbon electrodes.

In the 2002 first quarter, we and other producers of cathodes were served with a complaint commencing a civil antitrust lawsuit in the U.S. District Court for the District of Oregon entitled Northwest Aluminum Company, et al. vs. VAW Aluminum A.G., et al (the “carbon cathode lawsuit”). The complaint was filed by two producers of aluminum. In the complaint, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of cathodes and seek, among other things, an award of treble damages resulting from such alleged violations. In November 2002, we settled this lawsuit. The guilty pleas and decisions described above do not relate to cathodes.

In late 2002 and early 2003, we and other producers of bulk graphite were served with three complaints commencing three civil class action antitrust lawsuits. The first complaint, filed in the U.S. District Court for the District of New Jersey (the “NJ District Court”), was entitled Industrial Graphite Products, Inc. v. Carbone Lorraine North America Corporation, et al. The second complaint, filed in the NJ District Court, was entitled Ceradyne, Inc. v. Carbone Lorraine North America Corporation, et al. The third complaint, filed in the District Court, was entitled General Refractories Company v. GrafTech International Ltd., et al. Subsequently in early 2003, the third complaint was dismissed by the District Court without prejudice, and we and other producers of bulk graphite were served with two additional complaints commencing civil class action antitrust lawsuits. The complaints were filed in the NJ District Court and were

161

entitled General Refractories Company v. GrafTech International Ltd., et al. and Midwest Graphite Co., Inc. v. SGL Carbon, LLC, et al. The lawsuits commenced by the first, second, fourth and fifth complaints, along with a lawsuit commenced by a sixth complaint filed only against SGL Carbon, LLC, SGL Carbon A.G. and SGI Carbon GmbH, were subsequently consolidated into a single class action lawsuit filed in April 2003 in the NJ District Court entitled In re: Bulk [Extruded] Graphite Products Antitrust Litigation (the “bulk graphite lawsuit”). In the bulk graphite lawsuit, the plaintiffs allege that the defendants violated U.S. federal antitrust law in connection with the sale of bulk graphite and seek, among other things, an award of treble damages resulting from such alleged violations. In the 2003 first half, we reached an agreement to settle the bulk graphite lawsuit. See Note 19 for developments after December 31, 2003 relating to the bulk graphite lawsuit.

The foreign customer lawsuits are still in their early stages. We have been vigorously defending, and intend to continue to vigorously defend, against these remaining lawsuits as well as all threatened lawsuits and possible unasserted claims. We may at any time, however, settle these lawsuits as well as any threatened lawsuits and possible claims. It is possible that additional civil antitrust lawsuits seeking, among other things, to recover damages could be commenced against us in the U.S. and in other jurisdictions.

Antitrust Earnings Charges and Payments

Despite the fact that a provisional payment of a fine is only provisional under European law, generally accepted accounting principles require a charge to be recorded to cover the full amount of a provisional payment, to the extent that payment was not already covered by a reserve. In connection with the provisional payment that we made in February 2004 as described in Note 19, we recorded a $32 million charge in the 2003 fourth quarter, which increased our estimate of the aggregate expenses for these liabilities from $350 million to $382 million. To the extent that aggregate liabilities and expenses, net, are known or reasonably estimable, as of December 31, 2003, $382 million represents our estimate of these liabilities and expenses. We believe that the amount of the EU antitrust fine will be reduced on appeal. To the extent that the actual amount of the EU antitrust fine (after all appeals and including any interest thereon) is less than the amount so provisionally paid, any excess would be refunded to us. To the extent that such actual amount exceeds the amount so provisionally paid, we will be required to make an additional payment equal to such excess. Such additional payment may require us to record an additional charge.

Through December 31, 2003, we have paid an aggregate of $257 million of fines and net settlements and expenses (of which $238 million has been applied against the reserve and $19

162

million of imputed interest (as described below) has not been applied against the reserve). In the aggregate, the fines and net settlements and expenses are within the amounts we used to evaluate the aggregate charges of $382 million. Our insurance has not and will not materially cover liabilities that have or may become due in connection with antitrust investigations or related lawsuits or claims.

At December 31, 2003, $125 million remained in the reserve. At December 31, 2003, the remaining amount of the reserve was unfunded and was available for the DOJ antitrust fine, the EU antitrust fine and other matters. The reserve does not cover interest on the DOJ antitrust fine (including interest that, for accounting purposes, is imputed on the DOJ antitrust fine for the period during which it is non-interest bearing). Such interest is recorded in interest expense on the Consolidated Statements of Operations. Interest accruing on the EU antitrust fine, if any, after the date of the Court’s decision on our appeal will be recorded in interest expense.

Other Proceedings Against Us

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

Lawsuit Initiated by Us Against Our Former Parents

In February 2000, at the direction of a special committee of independent directors of GTI’s Board of Directors, we commenced a lawsuit in the U.S. District Court for the Southern District of New York against our former parents, Mitsubishi and Union Carbide. The other defendants named in the lawsuit include two of the respective representatives of Mitsubishi and Union Carbide who served on GTI’s Board of Directors at the time of our 1995 leveraged equity recapitalization, Hiroshi Kawamura and Robert D. Kennedy. Mr. Kennedy, who was a director of GTI at the time the lawsuit was commenced, resigned as such on March 14, 2000.

In the lawsuit, we allege, among other things, that, in January 1995, Mitsubishi and Union Carbide had knowledge of facts indicating that GTI had engaged in illegal graphite electrode price fixing activities and that any determination of GTI’s statutory capital surplus would be overstated as a result of those activities. We also allege that certain of their representatives knew or should have known about those activities. In January 2000, Mitsubishi was indicted by the DOJ on a one count charge of aiding and abetting violations of U.S. federal antitrust law in connection with the sale of graphite electrodes. Mitsubishi entered a plea of not guilty. In February 2001, a jury found Mitsubishi guilty of the charge. Mitsubishi entered into a sentencing agreement with the DOJ, which was approved by the District Court, pursuant to which Mitsubishi agreed to pay a fine of $134 million and not appeal its conviction. Mitsubishi

163

has also been named as a defendant in several civil antitrust lawsuits commenced by electric arc furnace steel producers with respect to its alleged participation in those activities. In addition, we allege that, in January 1995, GTI did not have the statutory capital surplus required to lawfully authorize the payments that GTI made to its former parents. We also allege that Mitsubishi and Union Carbide were unjustly enriched by receipts from their investments in GTI and that they knowingly induced or actively and substantially assisted former senior management of GTI to engage in illegal graphite electrode price fixing activities in breach of their fiduciary duties to GTI.

Based on the allegations summarized above, we are seeking to recover from Mitsubishi and Union Carbide more than $1.5 billion in damages, including interest. Some of our claims provide for joint and several liability; however, damages from our various claims would not generally be additive to each other.

The defendants have filed motions to dismiss this lawsuit and a motion to disqualify certain of our counsel from representing us in this lawsuit. Oral hearings were held on those motions in the 2001 first and second quarters. The court approved a motion to disqualify certain of our counsel in November 2002, and denied our motion to reconsider that decision. See Note 19 for developments after December 31, 2003 relating to this lawsuit.

We expect to incur $10 million to $20 million for legal expenses to pursue this lawsuit from the date of filing the complaint through appeal and ultimately to trial. Through December 31, 2003, we had incurred about $6 million of these legal expenses. This lawsuit is in its earliest stages. The ultimate outcome of this lawsuit is subject to many uncertainties. We may at any time settle this lawsuit.

(15) Earnings Per Share

Basic and diluted earnings per share are calculated based upon the provisions of SFAS No. 128, adopted in 1997, using the following share data:


Weighted-average common shares outstanding for basic
calculation	49,719,938	55,941,878	67,980,838
Add: Effect of stock options	--	--	--
Weighted-average common shares outstanding, adjusted
for diluted calculation	49,719,938	55,941,878	67,980,838

As a result of the net loss from operations reported in 2001, 2002 and 2003, 690,992, 779,051 and 508,215 potential common shares underlying dilutive securities have been excluded from the calculation of diluted earnings (loss) per share because their effect would reduce the loss per share. The calculation of weighted average common shares outstanding for the diluted calculation excludes options for 5,243,593 shares in 2001, 5,524,535 shares in 2002 and

164

4,058,695 shares in 2003 because they were not dilutive due to the fact that the exercise prices were greater than the weighted average market price of our common stock. >

(16) Stockholder Rights Plan

Effective August 7, 1998, GTI adopted a Stockholder Rights Plan (the “Rights Plan”). Under the Rights Plan, one preferred stock purchase right (a “Right”) was distributed on September 21, 1998 to stockholders of record on August 20, 1998 as a dividend on each share of common stock outstanding on the record date. Each share of common stock issued after the record date is accompanied by a Right.

When a Right becomes exercisable, it entitles the holder to buy one one-thousandth of a share of a new series of preferred stock for $110. The Rights are subject to adjustment upon the occurrence of certain dilutive events. The Rights will become exercisable only when a person or group becomes the beneficial owner of 15% or more of the outstanding shares of common stock or 10 days after a person or group announces a tender offer to acquire beneficial ownership of 15% or more of the outstanding shares of common stock. No certificates representing the Rights will be issued, and the Rights are not transferable separately from the common stock, unless the Rights become exercisable.

Under certain circumstances, holders of Rights, except a person or group described above and certain related parties, will be entitled to purchase shares of common stock (or, in certain circumstances, other securities or assets) at 50% of the price at which the common stock traded prior to the acquisition or announcement (or 50% of the value of such other securities or assets). In addition, if GTI is acquired after the Rights become exercisable, the Rights will entitle those holders to buy the acquiring company’s common shares at a similar discount.

GTI is entitled to redeem the Rights for one cent per Right prior to the time when the Rights become exercisable. If not redeemed, the Rights will expire on August 7, 2008.

The preferred stock issuable upon exercise of Rights consists of Series A Junior Participating Preferred Stock, par value $.01 per share, of GTI. In general, each share of that preferred stock will be entitled to a minimum preferential quarterly dividend payment equal to the greater of $10.00 per share or 1,000 times the quarterly dividend declared on the common stock, will be entitled to a liquidation preference of $110,000 and will have 1,000 votes, voting together with the common stock.

(17) Financial Information About the Parent, the Issuer, the Guarantors and the Subsidiaries Whose Securities Secure the Senior Notes and Related Guarantees

On February 15, 2002, GrafTech Finance (the “Issuer”) issued $400 million aggregate principal amount of Senior Notes and, on May 6, 2002, $150 million aggregate principal amount of additional Senior Notes. The Senior Notes have been guaranteed on a senior basis by GTI (the “Parent”) and GrafTech Global, UCAR Carbon and other subsidiaries that together hold a substantial majority of our U.S. assets. The other subsidiaries are UCAR International Holdings Inc., UCAR International Trading Inc., UCAR Carbon Technology LLC, UCAR Composites Inc. and UCAR Holdings III Inc. The guarantors (other than the Parent) are collectively called the “U.S. Guarantors.” The guarantees of the Parent and the U.S. Guarantors

165

are unsecured, except that the guarantee of UCAR Carbon has been secured by a junior pledge of all of the AET Pledged Stock, subject to the limitation that in no event will the value of the pledged portion of the AET Pledged Stock exceed 19.99% of the principal amount of the then outstanding Senior Notes. All of the guarantees are full, unconditional and joint and several, and the Issuer and each of the U.S. Guarantors are 100% owned by the Parent. Our other subsidiaries, which are not guarantors, are called the “Non-Guarantors.” The following table sets forth condensed consolidating balance sheets at December 31, 2002 and December 31, 2003 and condensed consolidating statements of operations and cash flows for each of the years in the period ended December 31, 2003 of the Parent, the Issuer, the U.S. Guarantors and the Non-Guarantors. Provisions in the Senior Facilities restrict the payment of dividends by our subsidiaries to the Parent. At December 31, 2003, retained earnings of our subsidiaries subject to such restrictions were approximately $598 million. Investments in subsidiaries are recorded on the equity basis. See Note 18 for a discussion regarding discontinued operations.

166

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Balance Sheet
at December 31, 2003

			At December 31, 2003
		Parent			Issuer		U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
	(Dollars in millions)
ASSETS

Current Assets:
Cash and cash equivalents		$	--		$	13	$	--		$	21		$	--		$	34
Accounts and notes receivable, net			2			893		392			114			(1,275	)		126
Inventories:
Raw materials and supplies			--			--		2			45			--			47
Work in process			--			--		32			87			4			123
Finished goods			--			--		8			29			(3	)		34

			--			--		42			161			1			204
Prepaid expenses (including deferred
income taxes)			--			--		10			27			13			24

Total current assets			2			906		444			323			(1,287	)		388
Net fixed assets			--			--		36			307			(2	)		341
Deferred income taxes, goodwill and other assets			48			30		(84	)		138			106			238

Total assets		$	50		$	936	$	396		$	768		$	(1,183	)	$	967

LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)

Current liabilities:
Accounts payable		$	61		$	20	$	178		$	79		$	(240	)	$	98
Short-term debt			188			14		297			526			(1,024	)		1
Accrued income and other taxes			(13	)		19		--			24			1			31
Other accrued liabilities			--			--		115			51			(2	)		164
Liabilities of discontinued
operations			--			--		2			--			(2	)		--

Total current liabilities			236			53		592			680			(1,267	)		294

Long-term debt			(58	)		558		--			3			(1	)		502
Other long-term obligations			--			50		125			49			1			225
Deferred income taxes			--			1		--			56			(14	)		43
Minority stockholders' equity in
consolidated entities			--			--		--			31			--			31
Stockholders' equity (deficit)			(128	)		274		(321	)		(51	)		98			(128	)

Total liabilities and stockholders'
equity (deficit)		$	50		$	936	$	396		$	768		$	(1,183	)	$	967

167

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Balance Sheet
at December 31, 2002

			At December 31, 2003
		Parent			Issuer			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
	(Dollars in millions)

ASSETS

Current Assets:
Cash and cash equivalents		$	--		$	-		$	4		$	7		$	-		$	11
Accounts and notes receivable, net			--			752			466			255			(1,369	)		104
Inventories:
Raw materials and supplies			--			--			2			38			(1	)		39
Work in process			--			--			30			71			1			102
Finished goods			--			--			10			23			(3	)		30

			--			--			42			132			(3	)		171
Prepaid expenses (including deferred
income taxes)			--			--			8			13			--			21

Assets of discontinued
operations			--			--			14			--			--			14
Total current assets			--			752			534			407			(1,372	)		321
Net fixed assets			--			--			36			268			(4	)		300
Deferred income taxes, goodwill and other assets			47			34			(33	)		120			70			238

Total assets		$	47		$	786		$	537		$	795		$	(1,306	)	$	859

LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)

Current liabilities:
Accounts payable		$	21		$	26		$	30		$	89		$	(61	)	$	105
Short-term debt			416			--			231			668			(1,297	)		18
Accrued income and other taxes			(24	)		(3	)		36			18			(4	)		23
Other accrued liabilities			--			--			36			39			(18	)		57
Liabilities of discontinued
operations			--			--			3			--			--			3

Total current liabilities			413			23			336			814			(1,380	)		206

Long-term debt			--			711			--			2			--			713
Other long-term obligations			--			9			203			45			1			258
Deferred income taxes			--			(5	)		(1	)		36			3			33
Minority stockholders' equity in
consolidated entities			--			--			--			30			--			30
Stockholders' equity (deficit)			(366	)		48			(1	)		(132	)		70			(381	)

Total liabilities and stockholders'		$	47		$	786		$	537		$	795		$	(1,306	)	$	859
equity (deficit)

168

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003

			For the Year Ended December 31, 2003
		Parent			Issuer			U.S. Guarantors			Non- Guarantors		Eliminations			Consolidated
	(Dollars in millions)
Net sales		$	--		$	--		$	234		$	629	$	(151	)	$	712
Cost of sales			--			--			186			509		(151	)		544

Gross profit			--			--			48			120		--			168
Research and development, selling,
administrative and other expenses,
restructuring charges, impairment losses
on long-lived and other assets, restricted
stock vesting, antitrust investigations
and related lawsuits and claims, corporate
realignment and related expenses, and
other (income) expenses, net			2			(32	)		115			58		--			143
Interest income			(3	)		(60	)		--			--		63			--
Interest expense			36			45			--			27		(63	)		45

Loss from continuing operations before
provision for (benefits from) income taxes			(35	)		47			(67	)		35		--			(20	)
Provision for (benefit from) income taxes			(108	)		21			76			16		--			5

Loss from continuing operations before minority interest			73			26			(143	)		19		--			(25	)
Minority stockholders' share of income			--			--			--			1		--			1
Income from discontinued operations, net of taxes			--			--			1			--		--			1
Gain on sale of discounted operations, net of taxes			--			--			1			--		--			1
Equity in earnings of subsidiaries			97			--			(18	)		--		(79	)		--

Net income (loss)		$	(24	)	$	26		$	(123	)	$	18	$	79		$	24

169

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003
(continued)

	For the Year Ended December 31, 2002
		Parent			Issuer			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
	(Dollars in millions)
Net sales		$	--		$	--		$	211		$	529		$	(144	)	$	596
Cost of sales			--			--			175			408			(122	)		461

Gross profit			--			--			36			121			(22	)		135
Research and development, selling,
administrative and other expenses,
restructuring charges, impairment losses
on long-lived and other assets, restricted
stock vesting, antitrust investigations
and related lawsuits and claims, corporate
realignment and related expenses, and
other (income) expenses, net			7			16			(53	)		23			115			108
Interest income			--			(59	)		--			(4	)		63			--
Interest expense			21			62			5			35			(63	)		60

Loss from continuing operations before provision for			(28	)		(19	)		84			67			(137	)		(33	)
(benefits from) income taxes
Provision for (benefit from) income taxes			(10	)		(6	)		(19	)		19			--			(16	)

Loss from continuing operations before minority interest			(18	)		(13	)		103			48			(137	)		(17	)
Minority stockholders' share of income			--			--			--			2			--			2
Income from discontinued operations			--			--			1			--			--			1
Equity in earnings of subsidiaries			--			--			91			--			(91	)		--

Net income (loss)		$	(18	)	$	(13	)	$	13		$	46		$	(46	)	$	(18	)

170

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003
(continued)

	For the Year Ended December 31, 2001
		Parent			Issuer			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
	(Dollars in millions)
Net sales		$	--		$	--		$	226		$	547		$	(139	)	$	634
Cost of sales			--			--			201			372			(118	)		455

Gross Profit		$	--		$	--		$	25		$	173		$	(21	)	$	179
Research and development, selling,
administrative and other expenses,
restructuring charges, impairment losses
on long-lived and other assets, restricted
stock vesting, antitrust investigations
and related lawsuits and claims, corporate
realignment and related expenses, and
other (income) expenses, net			4			(2	)		110			93			(13	)		192
Interest income			--			(73	)		(4	)		(21	)		98			--
Interest expense			34			74			25			24			(97	)		60

Loss from continuing operations before provision
for (benefits from) income taxes			(38	)		1			(106	)		79			(9	)		(73	)
Provision for (benefit from) income taxes			(15	)		--			8			21			--			14

Loss from continuing operations before minority interest			(23	)		1			(114	)		58			(9	)		(87	)
Minority stockholders' share of income			--			--			--			2			--			2
Income from discontinued operations			--			--			2			--			--			2
Equity in earnings of subsidiaries			64			--			(47	)		--			(17	)		--

Net income (loss)		$	(87	)	$	1		$	(65	)	$	56		$	8		$	(87	)

171

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows
for the years ended December 31, 2001, 2002 and 2003

	For the Year Ended December 31, 2002
		Parent		Issuer			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
	(Dollars in millions)
Net cash provided by (used in) operating
activities from continuing operations		$	228	$	3		$	(81	)	$	40		$	(216	)	$	(26	)
Net cash provided by operating activities
from discontinued operations			--		--			1			--			--			1
Net cash provided by (used in) operating
activities			228		3			(80	)		40			(216	)		(25	)

Net cash provided by (used in) investing
activities			--		(97	)		11			121			(57	)		(22	)

Net cash provided by (used in) financing
activities			(228)		107			65			(148	)		273			69

Net increase (decrease) in cash and cash
equivalents			--		13			(4	)		13			--			22
Effect of exchange rate changes on cash and
cash equivalents			--		--			--			1			--			1
Cash and cash equivalents at beginning of
period			--		--			4			7			--			11

Cash and cash equivalents at end of period		$	--	$	13		$	--		$	21		$	--		$	34

	For the Year Ended December 31, 2002
		Parent			Issuer			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
	(Dollars in millions)
Net cash provided by (used in) operating
activities from continuing operations		$	(20	)	$	76		$	81		$	(188	)	$	(9	)	$	(60	)
Net cash provided by operating activities
from discontinued operations			--			--			--			--			--			--
Net cash provided by (used in) operating
activities			(20	)		76			81			(188	)		(9	)		(60	)

Net cash provided by (used in) investing
activities			--			127			91			77			(345	)		(50	)

Net cash provided by (used in) financing
activities			20			(219	)		(176	)		100			354			79

Net increase (decrease) in cash and cash
equivalents			--			(16	)		(4	)		(11	)		--			(31	)
Effect of exchange rate changes on cash and
cash equivalents			--			--			--			4			--			4
Cash and cash equivalents at beginning of
period			--			16			8			14			--			38

Cash and cash equivalents at end of period		$	--		$	--		$	4		$	7		$	--		$	11

	For the Year Ended December 31, 2001
		Parent			Issuer			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
	(Dollars in millions)
Net cash provided by (used in) operating
activities from continuing operations		$	(38	)	$	15		$	183		$	(63	)	$	(83	)	$	14
Net cash provided by operating activities
from discontinued operations			--			--			3			--			--			3
Net cash provided by (used in) operating
activities			(38	)		15			186			(63	)		(83	)		17

Net cash provided by (used in) investing
activities			--			18			(427	)		(71	)		441			(39	)

Net cash provided by (used in) financing
activities			38			(48	)		242			141			(358	)		15

Net increase (decrease) in cash and cash			--			(15	)		1			7			--			(7	)
equivalents
Effect of exchange rate changes on cash and
cash equivalents			--			--			--			(2	)		--			(2	)
Cash and cash equivalents at beginning of
period			--			31			7			9			--			47

Cash and cash equivalents at end of period		$	--		$	16		$	8		$	14		$	--		$	38

172

As described above, the guarantee of the Senior Notes by UCAR Carbon has been secured by a pledge of all of the AET Pledged Stock, subject to the limitation that at no time will the value of the pledged portion of the AET Pledged Stock exceed 19.99% of the principal amount of the then outstanding Senior Notes.

Rule 3-16 of Regulation S-X adopted by the SEC provides that, for each of the registrant’s affiliates whose securities constitute a “substantial” portion of the collateral for registered securities, financial statements (that would be required to be filed if the affiliate were a registrant) must be filed with an annual report on Form 10-K. Under Rule 3-16(b), securities of a person will be deemed to constitute a “substantial” portion of the collateral if the aggregate principal amount, par value, or book value of securities as carried by the registrant, or the market value of such securities, whichever is the greatest, equals 20% or more of the principal amount of the registered securities. In this case, the pledges of the AET Pledged Stock and the unsecured intercompany term notes and related guarantees have been limited such that they will never be more than 19.99% of the principal amount of the then outstanding Senior Notes. Therefore, no such financial statements are required to be included in this Annual Report on Form 10-K.

(18) Discontinued Operations

As part of our ongoing asset sale program, we sold our non-strategic composite tooling business based in Irvine, California in June 2003 for approximately $16 million. This business was previously included in “Other” for segment presentation in accordance with SFAS No. 131. As a result, under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the composite tooling business is reflected as a discontinued operation. We have reflected prior year results of the composite tooling business as a discontinued operation on the Consolidated Statements of Operations and reclassified the assets and liabilities of the business separately on the Consolidated Balance Sheets.

The following table sets forth the results of the discontinued operation.

	For the Year Ended December 31,
	2001		2002		2003
		(Dollars in millions)
Net sales	$	20	$	17	$	9
Income before provision for income taxes		3		2		1

173

The following table sets forth the assets and liabilities of the discontinued operation.

	For the Year Ended December 31,
	2002		2003
		(Dollars in millions)

Current assets	$	6	$	--
Property, plant and equipment, net		8		--

Total assets	$	14	$	--

Current liabilities	$	2	$	--
Long-term liabilities		1		--

Total liabilities	$	3	$	--

(19) Subsequent Events

Debenture Offering

On January 22, 2004, GTI issued $225 million aggregate principal amount of Debentures. Interest on the Debentures is payable semi-annually on January 15 and July 15 of each year, commencing July 15, 2004, at the rate of 1.625% per annum. The Debentures mature on January 15, 2024, unless earlier converted, redeemed or repurchased. The net proceeds from the offering were approximately $217 million. We used the net proceeds to repay the remaining $21 million of term loans outstanding under the Senior Facilities and to make a provisional payment of $72 million to the EU Competition Authority against the EU antitrust fine. We intend to use the balance for general corporate purposes, including replacement of financing previously provided by factoring of accounts receivable and strategic acquisitions that are complementary to our businesses. Pending use for a specific corporate purpose, we intend to initially use the net proceeds to reduce the outstanding balance under the Revolving Facility, if any, and, to the extent that at the time there is no such amount outstanding, to invest in short-term, investment quality, interest-bearing securities or deposits.

A holder of Debentures may convert its Debentures into shares of our common stock at a conversion rate of 60.3136 shares per $1,000 principal amount (equal to a conversion price of approximately $16.58 per share), subject to adjustment upon certain events, only under the following circumstances:

prior to January 15, 2019, in any fiscal quarter after the fiscal quarter ending March 31, 2004, if the last reported sale price of our common stock for at least 20 trading days during the 30 consecutive trading days ending on the first trading day of such fiscal quarter is greater than 125% of the then current conversion price;

on or after January 15, 2019, at any time after the last reported sale price of our common stock on any date is greater than 125% of the then current conversion price;

during the 5 business days after any 10 consecutive trading days in which the trading price per $1,000 principal amount of Debentures for each such trading day was less than 98% of the product of the last reported sale price of our common stock and the then current conversion rate;

if the credit rating or ratings on the Debentures are reduced by two rating categories below those initially assigned to the Debentures by S&P and Moody’s;

if the Debentures are called for redemption; or

upon the occurrence of certain corporate transactions.

174

Upon conversion, GTI will have the right to deliver, in lieu of shares of our common stock, cash or a combination of cash and shares of our common stock.

Prior to January 15, 2011, GTI may redeem the Debentures, in whole or in part, at any time, for cash at a redemption price equal to 100% of principal amount, plus accrued and unpaid interest and liquidated damages, if any, only if the last reported sale price of our common stock has exceeded 125% of the then current conversion price for at least 20 trading days during the 30 consecutive trading days ending on the trading day prior to the date on which we mail the notice of redemption. If GTI so redeems the Debentures, GTI will make an additional “make whole” payment in cash, shares of our common stock or a combination thereof on the redeemed Debentures equal to the present value of all remaining scheduled payments of interest on the redeemed Debentures through January 15, 2011. On or after January 15, 2011, GTI may redeem the Debentures, in whole or in part, at any time, for cash at a redemption price equal to 100% of principal amount, plus accrued and unpaid interest and liquidated damages, if any.

A holder may require GTI to repurchase some or all of its Debentures on (i) January 15, 2011, January 15, 2014 or January 15, 2019, or (ii) if we experience a “fundamental change” at a repurchase price equal to 100% of principal amount, plus accrued and unpaid interest and liquidated damages, if any. For this purpose, a fundamental change occurs on:

the date on which any person beneficially owns more that 35% of the total voting power of GTI;

the date on which individuals, who on the issuance date of the Debentures were directors of GTI (or individuals nominated or elected by a vote of two-thirds of such directors previously so elected and nominated) cease to constitute a majority of GTI’s Board of Directors then in office;

the date on which a plan relating to the liquidation or dissolution of GTI is adopted;

the date on which GTI ceases to own, directly or indirectly, all of the voting power of GrafTech Global, UCAR Carbon or GrafTech Finance; or

subject to certain exceptions, the date on which our common stock ceases to be listed on a U.S. national or regional securities exchange or approved for trading on the NASDAQ National Market or similar system of automated dissemination of quotations of securities prices.

We may, at our option, pay the repurchase price in cash, shares of our common stock or a combination thereof, except that we will pay accrued and unpaid interest and liquidated damages, if any, in cash.

175

The Debentures are general unsecured senior obligations of GTI and rank equally with present and future senior debt of GTI. The Debentures rank senior to any subordinated debt of GTI and are effectively subordinated to any secured debt of GTI, to the extent of the value of the assets securing such debt.

GrafTech Finance, GrafTech Global and UCAR Carbon and other U.S. subsidiaries that together hold a substantial majority of our U.S. assets have guaranteed the Debentures on a senior unsecured basis. Each subsidiary guarantee is a general unsecured senior obligation of the subsidiary guarantor and ranks equally with any present and future senior debt of the subsidiary guarantor. Each subsidiary guarantee ranks senior to any subordinated debt of the subsidiary guarantor and is effectively subordinated to any secured debt of the subsidiary guarantor, to the extent of the value of the assets securing such debt. The Debentures and each subsidiary guarantee are structurally subordinated to present and future debt and other obligations of each subsidiary of GTI that is not a subsidiary guarantor.

Each of the guarantees of the Debentures is full, unconditional joint and severable. Payment under the Debentures could be required immediately upon the occurrence of any event of default under the Debentures. If a guarantor makes a payment under its guarantee, it would have the right under certain circumstances to seek contribution from the other guarantors.

In addition to the failure to pay principal and interest (including liquidated damages, if any) on the Debentures when due or to repurchase the Debentures when required, events of default under the Debentures include: failure to deliver shares of our common stock, cash or other property upon conversion of the Debentures; failure to pay at maturity or upon acceleration of indebtedness exceeding $10 million to the extent not covered by insurance; and certain events involving bankruptcy.

We have agreed to file a shelf registration statement under the Securities Act covering resales of the Debentures and the shares of common stock issuable upon conversion, redemption or repurchase thereof (including upon payment of any “make whole” payment). If the registration statement is not filed by April 21, 2004 or has not become effective by July 20, 2004, we have agreed to pay liquidated damages to holders of Debentures. Liquidated damages will be paid semi-annually in arrears on each January 15 and July 15 and will accrue at a rate per annum not to exceed 0.50% of principal amount or the then current conversion price, as applicable. Under certain circumstances, GTI has the right to suspend resales under the registration statement.

Bank Amendment

In January 2004, the Senior Facilities were amended to, among other things:

permit the issuance and sale of the Debentures and the related subsidiary guarantees;

permit use of the net proceeds from the issuance and sale of the Debentures without any otherwise required reduction in funds available under the Revolving Facility (except that the €25 million of availability under the Revolving Facility reserved for use solely to pay or secure payment of the EU antitrust fine was eliminated, which reduced our availability under the Revolving Facility from €200 million to €175 million); and

176

provide additional flexibility to make investments (including repurchases in 2004 of up to $50 million aggregate principal amount of Senior Notes with the net proceeds).

EU Antitrust Fine

In February 2004, we posted a $72 million provisional payment with the EU Competition Authority against the EU antitrust fine. The provisional payment included $9 million for accrued interest for the period from October 2001 to the date of the provisional payment at the rate of 6.04% per annum. The EU Competition Authority has advised us that its position is that the provisional payment should have included accrued interest at the rate of 8.04% per annum. We have advised the EU Competition Authority that we disagree with its position and will file an interim appeal challenging its position, if necessary.

A provisional payment constitutes the furnishing of cash collateral intended to secure payment to the EU Competition Authority of a fine and any interest thereon that is ultimately determined to be due, is not an admission of or acquiescence to any liability and will not prejudice our appeal challenging, among other things, the amount of the EU antitrust fine. We will earn interest on the amount paid at an annual rate of 2.1% until the Court’s decision on our main appeal challenging, among other things, the amount of the EU antitrust fine, including the accrual of interest and the rate thereof is issued and becomes final. Such payment does not reflect a change in our assessment of the outcome of our appeal.

In connection with our provisional payment, we withdrew the interim appeal that we had filed in September 2003 to the Court to waive the requirement for provisional payment of the EU antitrust fine or delivery of a letter of credit as collateral security for payment thereof or to allow us to provide alternative security for payment during the period prior to the Court’s decision on our main appeal.

Bulk Graphite Lawsuit

In March 2004, the NJ District Court approved the agreement that we had reached in the 2003 first half to settle the bulk graphite lawsuit.

Antitrust Earnings Charges and Payments

At December 31, 2003, after giving effect to our provisional payment of $72 million to the EU Competition Authority against the EU antitrust fine, $53 million remained in our reserve for potential liabilities and expenses in connection with antitrust investigations and related lawsuits and claims. The remaining amount of the reserve is unfunded and is available for the DOJ antitrust fine and other matters.

Lawsuit Initiated by Us Against Our Former Parents

Parent Litigation

In January 2004, the U.S. District Court for the Southern District of New York granted the defendants’ motion to dismiss the lawsuit we commenced against our former parents, Mitsubishi and Union Carbide. We have appealed the grant of the motion to dismiss as well as the grant in November 2002 of a motion to disqualify certain of our counsel to the U.S. Second Circuit Court of Appeals.

Financial Information About the Issuer Parent and the Guarantors Relating to the Debentures

On January 22, 2004, GrafTech International Ltd. (the “Issuer Parent”) issued $225 million aggregate principal amount of Debentures. The Debentures have been guaranteed on a senior basis by GrafTech Finance, GrafTech Global, UCAR Carbon and other subsidiaries that together hold a substantial majority of our U.S. assets. The other subsidiaries are UCAR International Holdings Inc., UCAR International Trading Inc., UCAR Carbon Technology LLC and UCAR Holdings III Inc. The guarantors are collectively called the “U.S. Guarantors.” The guarantees of the U.S. Guarantors are unsecured. All of the guarantees are full, unconditional and joint and several, and the U.S. Guarantors are 100% owned by the Issuer Parent. Our other subsidiaries, which are not guarantors, are called the “Non-Guarantors.” The following table sets forth condensed consolidating balance sheets at December 31, 2002 and December 31, 2003 and condensed consolidating statements of operations and cash flows for each of the years in the period ended December 31, 2003 of the Issuer Parent, the U.S. Guarantors and the Non-Guarantors. Provisions in the Senior Facilities restrict the payment of dividends by our subsidiaries to the Issuer Parent. At December 31, 2003, retained earnings of our subsidiaries subject to such restrictions were approximately $598 million. Investments in subsidiaries are recorded on the equity basis. See Note 18 for a discussion regarding discontinued operations.

177

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Balance Sheet
at December 31, 2003

		At December 31, 2003
		Issuer Parent			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
	(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents		$	--		$	13		$	21		$	--		$	34
Accounts and notes receivable, net			2			1,285			114			(1,275	)		126
Inventories:
Raw materials and supplies			--			2			45			--			47
Work in process			--			32			87			4			123
Finished goods			--			8			29			(3	)		34

			--			42			161			1			204
Prepaid expenses and deferred income taxes			--			10			27			13			24
Current assets of discontinued operations			--			--			--			--			--

Total current assets			2			1,350			323			(1,287	)		388
Net fixed assets			--			36			307			(2	)		341
Deferred income taxes and other assets			48			(54	)		138			106			238

Total assets		$	50		$	1,332		$	768		$	(1,183	)	$	967

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable		$	61		$	198		$	79		$	(240	)	$	98
Short-term debt			188			311			526			(1,024	)		1
Accrued income and other taxes			(13	)		19			24			1			31
Other accrued liabilities			--			115			51			(2	)		164
Current liabilities of discontinued operations			--			2			--			(2	)		--

Total current liabilities			236			645			680			(1,267	)		294

Long-term debt			(58	)		558			3			(1	)		502
Other long-term obligations			--			175			49			1			225
Deferred income taxes			--			1			56			(14	)		43
Minority stockholders' equity in consolidated
entities			--			--			31			--			31
Stockholders' equity (deficit)			(128	)		(47	)		(51	)		98			(128	)

Total liabilities and stockholders' equity
(deficit)		$	50		$	1,332		$	768		$	(1,183	)	$	967

178

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Balance Sheet
at December 31, 2002

	At December 31, 2002
	Issuer Parent			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
		(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	--		$	4		$	7		$	--		$	11
Accounts and notes receivable, net		--			1,218			255			(1,369	)		104
Inventories:
Raw materials and supplies		--			2			38			(1	)		39
Work in process		--			30			71			1			102
Finished goods		--			10			23			(3	)		30

		--			42			132			(3	)		171
Prepaid expenses and deferred income taxes		--			8			13			--			21

Current assets of discontinued operations		--			14			--			--			14
Total current assets		--			1,286			407			(1,372	)		321
Net fixed assets		--			36			268			(4	)		300
Deferred income taxes and other assets		47			1			120			70			238

Total assets	$	47		$	1,323		$	795		$	(1,306	)	$	859

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	21		$	56		$	89		$	(61	)	$	105
Short-term debt		416			231			668			(1,297	)		18
Accrued income and other taxes		(24	)		33			18			(4	)		23
Other accrued liabilities		--			36			39			(18	)		57
Current liabilities of discontinued operations		--			3			--			--			3

Total current liabilities		413			359			814			(1,380	)		206

Long-term debt		--			711			2			--			713
Other long-term obligations		--			212			45			1			258
Deferred income taxes		--			(6	)		36			3			33
Minority stockholders' equity in consolidated
entities		--			--			30			--			30
Stockholders' equity (deficit)		(366	)		47			(132	)		70			(381	)

Total liabilities and stockholders' equity
(deficit)	$	47		$	1,323		$	795		$	(1,306	)	$	859

179

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003

	For the Year Ended December 31, 2003
	Issuer Parent			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
		(Dollars in millions)
Net sales	$	--		$	234		$	629		$	(151	)	$	712
Cost of sales		--			186			509			(151	)		544

Gross profit		--			48			120			--			168
Research and development, selling, administrative
and other expenses, restructuring charges,
impairment losses on long-lived and other
assets, restricted stock vesting, antitrust
investigations and related lawsuits and claims,
corporate realignment and related expenses, and
other (income) expenses, net		2			83			(60	)		--			143
Interest income		(3	)		(60	)		--			63			--
Interest expense		36			45			27			(63	)		45

Income (loss) before provision for (benefits
from) income taxes		(35	)		(20	)		35			--			(20	)
Provision for (benefit from) income taxes		(108	)		97			16			--			5

Income (loss) of consolidated entities		73			(117	)		19			--			(25	)
Minority stockholders' share of income		--			--			1			--			1
Income from discontinued operations, net of taxes		--			1			--			--			1
Gain on sale of discounted operations, net of taxes		--			1			--			--			1
Equity in earnings of subsidiaries		97			(18	)		--			(79	)		--

Net income (loss)	$	(24	)	$	(97	)	$	18		$	79		$	(24	)

180

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003
(continued)

	For the Year Ended December 31, 2002
	Issuer Parent			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
		(Dollars in millions)
Net sales	$	--		$	211		$	529		$	(144	)	$	596
Cost of sales		--			175			408			(122	)		461

Gross profit		--			36			121			(22	)		135
Research and development, selling, administrative
and other expenses, restructuring charges,
impairment losses on long-lived and other
assets, restricted stock vesting, antitrust
investigations and related lawsuits and claims,
corporate realignment and related expenses, and
other (income) expenses, net		7			(37	)		23			115			108
Interest income		--			(59	)		(4	)		63			--
Interest expense		21			67			35			(63	)		60

Income (loss) before provision for (benefits
from) income taxes		(28	)		65			67			(137	)		(33	)
Provision for (benefit from) income taxes		(10	)		(25	)		19			--			(16	)

Income (loss) of consolidated entities		(18	)		90			48			(137	)		(17	)
Minority stockholders' share of income		--			--			2			--			2
Income from discontinued operations		--			1			--			--			1
Equity in earnings of subsidiaries		--			91			--			(91	)		--

Net income (loss)	$	(18	)	$	--		$	46		$	(46	)	$	(18	)

181

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003
(continued)

	For the Year Ended December 31, 2001
	Issuer Parent			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
		(Dollars in millions)
Net sales	$	--		$	226		$	547		$	(139	)	$	634
Cost of sales		--			201			372			(118	)		455

Gross profit		--			25			175			(21	)		179
Research and development, selling, administrative
and other expenses, restructuring charges,
impairment losses on long-lived and other
assets, restricted stock vesting, antitrust
investigations and related lawsuits and claims,
corporate realignment and related expenses, and
other (income) expenses, net		4			108			93			(13	)		192
Interest income		--			(77	)		(21	)		98			--
Interest expense		34			99			24			(97	)		60

Income (loss) before provision for (benefits		(38	)		(105	)		79			(9	)		(73	)
from) income taxes
Provision for (benefit from) income taxes		(15	)		8			21			--			14

Income (loss) of consolidated entities		(23	)		(113	)		58			(9	)		(87	)
Minority stockholders' share of income		--			--			2			--			2
Income from discontinued operations		--			2			--			--			2
Equity in earnings of subsidiaries		64			(47	)		--			(17	)		--

Net income (loss)	$	(87	)	$	(64	)	$	56		$	8		$	(87	)

182

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Statements of Cash Flows
for the years ended December 31, 2001, 2002 and 2003

	For the Year Ended December 31, 2003
	Issuer Parent		U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
		(Dollars in millions)
Net cash provided by (used in) operating activities
from continuing operations	$	228	$	(78	)	$	40		$	(216	)	$	(26	)
Net cash provided by operating activities from
discontinued operations		--		1			--			--			1
Net cash provided by (used in) operating activities		228		(77	)		40			(216	)		(25	)

Net cash provided by (used in) investing activities		--		(86	)		121			(57	)		(22	)

Net cash provided by (used in) financing activities		(228)		(7	)		(148	)		273			69

Net increase (decrease) in cash and cash equivalents		--		9			13			--			22
Effect of exchange rate changes on cash and cash
equivalents		--		--			1			--			1
Cash and cash equivalents at beginning of period		--		4			7			--			11

Cash and cash equivalents at end of period	$	--	$	13		$	21		$	--		$	34

	For the Year Ended December 31, 2002
	Issuer Parent			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
		(Dollars in millions)
Net cash provided by (used in) operating activities
from continuing operations	$	(20	)	$	157		$	(188	)	$	(9	)	$	(60	)
Net cash provided by operating activities from
discontinued operations		--			--			--			--			--
Net cash provided by (used in) operating activities		(20	)		157			(188	)		(9	)		(60	)

Net cash provided by (used in) investing activities		--			218			77			(345	)		(50	)

Net cash provided by (used in) financing activities		20			(395	)		100			354			79

Net increase (decrease) in cash and cash equivalents		--			(20	)		(11	)		--			(31	)
Effect of exchange rate changes on cash and cash
equivalents		--			--			4			--			4
Cash and cash equivalents at beginning of period		--			24			14			--			38

Cash and cash equivalents at end of period	$	--		$	4		$	7		$	--		$	11

	For the Year Ended December 31, 2001
	Issuer Parent			U.S. Guarantors			Non- Guarantors			Eliminations			Consolidated
		(Dollars in millions)
Net cash provided by (used in) operating activities
from continuing operations	$	(38	)	$	198		$	(63	)	$	(83	)	$	14
Net cash provided by operating activities from
discontinued operations		--			3			--			--			3
Net cash provided by (used in) operating activities		(38	)		201			(63	)		(83	)		17

Net cash provided by (used in) investing activities		--			(409	)		(71	)		441			(39	)

Net cash provided by (used in) financing activities		38			194			141			(358	)		15

Net increase (decrease) in cash and cash equivalents		--			14			7			--			(7	)
Effect of exchange rate changes on cash and cash
equivalents		--			--			(2	)		--			(2	)
Cash and cash equivalents at beginning of period		--			38			9			--			47

Cash and cash equivalents at end of period	$	--		$	24		$	14		$	--		$	38

183

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Report, and, based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that these controls and procedures are effective. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of that evaluation.

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

A control system is subject to inherent limitations and, as a result, can provide only reasonable, not absolute, assurance that the system’s objectives will be achieved. In the first instance, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, decision-making in connection with system design or operation can be faulty, and breakdowns can occur because of simple error or mistake. In addition, controls can be circumvented by the acts of single individuals, by collusion of two or more individuals, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. In light of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

184

PART III

Items 10 to 14 (inclusive).

Except as set forth below, the information required by Items 10, 11, 12, 13 and 14 will appear in the GrafTech International Ltd. Proxy Statement for the Annual Meeting of Stockholders to be held on May 26, 2004, 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 and the listing standards of the NYSE.

Executive Officers and Directors

The following table sets forth information with respect to our current executive officers and directors, including their ages, as of March 1, 2004. There are no family relationships between any of our executive officers.

Name	Age	Position

Craig S. Shular	51	Chief Executive Officer, President and Director
Scott C. Mason	45	President, Synthetic Graphite Line of Business
John J. Wetula	45	President, Natural Graphite Line of Business
Corrado F. De Gasperis	38	Vice President, Chief Financial Officer and Chief Information Officer
Karen G. Narwold	44	Vice President, General Counsel, Human Resources and Secretary
Gilbert E. Playford	56	Chairman of the Board
R. Eugene Cartledge	74	Director
Mary B. Cranston	56	Director
John R. Hall	71	Director
Harold E. Layman	57	Director
Ferrell P. McClean	57	Director
Michael C. Nahl	61	Director

Executive Officers

Craig S. Shular became Chief Executive Officer and a director in January 2003 and has served as President since May 2002. From May 2002 through December 2002, he also served as Chief Operating Officer. From August 2001 to December 2002, he served as Executive Vice President of our former Graphite Power Systems Division. He served as Vice President and Chief Financial Officer from January 1999, with the additional duties of Executive Vice President, Electrode Sales and Marketing from February 2000. From 1976 through 1998, he held various financial, production and business management positions at Union Carbide, including the Carbon Products Division, from 1976 to 1979. We are the successor to the Carbon Products Division of Union Carbide.

185

Scott C. Mason became President of our synthetic graphite line of business in January 2003. From February 2001 through December 2002, he was Executive Vice President of our former Advanced Energy Technology Division. He served as Chief Financial Officer and Vice President of AET and our Director of Mergers and Acquisitions from April 2000 to March 2001. Prior to joining us, Mr. Mason was Vice President-Supply Chain Logistics for Union Carbide. From 1996 to 1999, Mr. Mason served as Director of Operations and then as Business Director for the Unipol Polymers Business of Union Carbide. Mr. Mason served from 1981 to 1996 in various financial, sales and marketing, operations and mergers and acquisition management positions at Union Carbide. He began his career in 1981 in the Chemicals and Plastics Division of Union Carbide.

John J. Wetula became President of our natural graphite line of business in January 2003. From July 1999 to December 2002, he served as President of AET. From July 1998 to June 1999, he served as our Director of Export Sales. From October 1996 to June 1998, he was General Manager of our GRAFOIL® product line. He is a chemical engineering and MBA graduate of Cleveland State University.

Corrado F. De Gasperis became Chief Financial Officer in May 2001 in addition to his duties as Vice President and Chief Information Officer, which he assumed in February 2000. He served as Controller from June 1998 to February 2000. From 1987 through June 1998, he was with KPMG LLP, most recently as Senior Assurance Manager in the Manufacturing, Retail and Distribution Practice. KPMG had announced his admittance into their partnership effective July 1, 1998.

Karen G. Narwold became Vice President, General Counsel and Secretary in September 1999 and also assumed responsibility for the human resources department effective January 2002. She joined our Law Department in July 1990 and served as Assistant General Counsel from June 1995 to January 1999 and Deputy General Counsel from January 1999 to September 1999. She was an associate with Cummings & Lockwood from 1986 to 1990.

Directors

Gilbert E. Playford has been a director since 1998. Mr. Playford has served as the Chairman of the Board since September 1999. Mr. Playford served as Chief Executive Officer from June 1998 through December 2002 and as President from June 1998 until May 2002. From January 2003 until his retirement in June 2003, Mr. Playford served as Chairman of the Board in an executive capacity. Mr. Playford joined Union Carbide in 1972 and held various management positions, including Treasurer and Principal Financial Officer, until he resigned in January 1996. In his capacity as Principal Financial Officer of Union Carbide, he also served as a nominee of Union Carbide on GrafTech’s Board of Directors from 1992 until our leveraged equity recapitalization in January 1995. Mr. Playford is currently a director and non-executive Deputy Chairman of LionOre Mining International Ltd.

R. Eugene Cartledge has been a director since 1996. From 1986 until his retirement in 1994, Mr. Cartledge was the Chairman of the Board and Chief Executive Officer of Union Camp Corporation. Mr. Cartledge retired as Chairman of the Board of Savannah Foods & Industries Inc. in December 1997, and retired as a director of Delta Airlines, Inc. and Sunoco, Inc. in May 2002. He is currently a director of Formica Corporation and Blount International, Inc., and President of the Cartledge Foundation.

186

Mary B. Cranston has been a director since 2000. Ms. Cranston is a partner and has served since 1999 as Chairperson of Pillsbury Winthrop LLP, an international law firm. Ms. Cranston is based in San Francisco, California. Ms. Cranston has been practicing complex litigation, including antitrust, telecommunications and securities litigation, with Pillsbury Winthrop LLP since 1975. She is a director of the San Francisco Chamber of Commerce, the Bay Area Council and the Commonwealth Club, and a trustee of the San Francisco Ballet and Stanford University.

John R. Hall has been a director since 1995. Mr. Hall was Chairman of the Board and Chief Executive Officer of Ashland Inc. from 1981 until his retirement in January 1997 and September 1996, respectively. Mr. Hall had served in various engineering and managerial capacities at Ashland Inc. since 1957. He retired as Chairman of Arch Coal Inc. in 1998. He served as a director of Reynolds Metals Company from 1985 to 2000. Mr. Hall currently serves as a member of the Boards of Bank One Corporation, Humana Inc. and USEC Inc. Mr. Hall graduated from Vanderbilt University in 1955 with a degree in Chemical Engineering and later served as Vanderbilt’s Board Chairman from 1995 to 1999. Mr. Hall also serves as Chairman of the Blue Grass Community Foundation and the Commonwealth Fund for Kentucky Educational Television, and as President of the Markey Cancer Center Foundation.

Harold E. Layman has been a director since 2003. From 2001 until his retirement in 2002, Mr. Layman was President and Chief Executive Officer of Blount International, Inc. Prior thereto, Mr. Layman served in other capacities with Blount International, including President and Chief Operating Officer from 1999 to 2001, Executive Vice President and Chief Financial Officer from 1997 to 2000, and Senior Vice President and Chief Financial Officer from 1993 to 1997. From 1981 through 1992, he held various financial management positions with VME Group/Volvo AB. From 1970 to 1980, Mr. Layman held various operations and financial management positions with Ford Motor Company. He is currently a director of Blount International, Grant Prideco, Inc., Infinity Property and Casualty Corporation and Von Hoffman Holdings Inc.

Ferrell P. McClean has been a director since 2002. Ms. McClean was a Managing Director and Senior Advisor to the head of the Global Oil & Gas Group in Investment Banking at J.P. Morgan Chase & Co. from 2000 through the end of 2001. She joined J.P. Morgan & Co. Incorporated in 1969 and founded the Leveraged Buyout and Restructuring Group within the Mergers & Acquisitions Group in 1986. From 1991 until 2000, Ms. McClean was a Managing Director and co-headed the Global Energy Group within the Investment Banking Group at J.P. Morgan & Co. Ms. McClean is currently a director of Unocal Corporation.

Michael C. Nahl has been a director since 1999. Mr. Nahl is Senior Vice President and Chief Financial Officer of Albany International Corporation, a manufacturer of paper machine clothing, which are the belts of fabric that carry paper stock through the paper production process. Mr. Nahl joined Albany International Corporation in 1981 as Group Vice President, Corporate and was appointed to his present position in 1983. Mr. Nahl is currently a director of Lindsay Manufacturing Co.

187

NYSE Certification

Mr. Shular, Chief Executive Officer and President, has certified to the NYSE, pursuant to Section 303A.12 of the NYSE’s listing standards, that he is unaware of any violation by us of the NYSE’s corporate governance listing standards as of the date of this Report.

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1) Financial Statements

See Index to Consolidated Financial Statements at page 110 of this Report.

(2) Financial Statement Schedules

None.

(b) Reports on Form 8-K

The following report on Form 8-K was filed during the 2004 fourth quarter.

(1) Current Report on Form 8-K dated October 1, 2003, filed with the SEC on October 2, 2003.

The exhibits listed in the following table have been filed with this Report.

Exhibit
Number

Description of Exhibit

2.1.0(1)

Recapitalization and Stock Purchase and Sale Agreement dated as of November 14, 1994 among Union Carbide Corporation, Mitsubishi Corporation, GrafTech International Ltd. and GrafTech International Acquisition Inc. and Guaranty made by Blackstone Capital Partners II Merchant Banking Fund L.P. and Blackstone Offshore Capital Partners II L.P.

2.2.0(2)

Amended and Restated Stockholders' Agreement dated as of February 29, 1996 among Blackstone Capital Partners II Merchant Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., Blackstone Family Investment Partnership II L.P., Chase Equity Associates and GrafTech International Ltd.

2.3.0(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 GrafTech International Ltd.

2.4.0(1)

Stock Purchase and Sale Agreement dated as of November 9, 1990 among Mitsubishi Corporation, Union Carbide Corporation and UCAR Carbon Company Inc.

188

Exhibit
Number

Description of Exhibit

2.5.0(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.

2.6.0(1)

Settlement Agreement dated as of November 30, 1993 among Mitsubishi Corporation, Union Carbide Corporation and UCAR Carbon Company Inc.

2.7.0(1)

Transfer Agreement dated January 1, 1989 between Union Carbide Corporation and UCAR Carbon Company Inc.

2.7.1(1)

Amendment No. 1 to such Transfer Agreement dated December 31, 1989.

2.7.2(1)

Amendment No. 2 to such Transfer Agreement dated July 2, 1990.

2.7.3(1)

Amendment No. 3 to such Transfer Agreement dated as of February 25, 1991.

2.8.0(1)

Amended and Restated Realignment Indemnification Agreement dated as of June 4, 1992 among Union Carbide Corporation, Union Carbide Chemicals and Plastics Company Inc., Union Carbide Industrial Gases Inc., UCAR Carbon Company Inc. and Union Carbide Coatings Service Corporation.

2.9.0(1)

Environmental Management Services and Liabilities Allocation Agreement dated as of January 1, 1990 among Union Carbide Corporation, Union Carbide Chemicals and Plastics Company Inc., UCAR Carbon Company Inc., Union Carbide Industrial Gases Inc. and Union Carbide Coatings Service Corporation.

2.9.1(1)

Amendment No. 1 to such Environmental Management Services and Liabilities Allocation Agreement dated as of June 4, 1992.

2.10.0(4)

Trade Name and Trademark License Agreement dated March 1, 1996 between Union Carbide Corporation and UCAR Carbon Technology Corporation.

2.11.0(1)

Employee Benefit Services and Liabilities Agreement dated January 1, 1990 between Union Carbide Corporation and UCAR Carbon Company Inc.

2.11.1(1)

Amendment to such Employee Benefit Services and Liabilities Agreement dated January 15, 1991.

2.11.2(1)

Supplemental Agreement to such Employee Benefit Services and Liabilities Agreement dated February 25, 1991.

2.12.0(1)

Letter Agreement dated December 31, 1990 among Union Carbide Chemicals and Plastics Company Inc., UCAR Carbon Company Inc., Union Carbide Grafito, Inc. and Union Carbide Corporation.

3.1.0(3)

Amended and Restated Certificate of Incorporation of GrafTech International Ltd.

3.1.1(9)

Certificate of Designations of Series A Junior Participating Preferred Stock.

3.1.2(17)

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of GrafTech International Ltd.

3.1.3(21)

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of GrafTech International Ltd.

3.2.0(19)

Amended and Restated By-Laws of GrafTech International Ltd. dated December 13, 2002.

189

Exhibit
Number

Description of Exhibit

4.1.0(16)

Indenture dated as of February 15, 2002 among GrafTech Finance Inc., GrafTech International Ltd., GrafTech Global Enterprises Inc., UCAR Carbon Company Inc., and the Subsidiary Guarantors from time to time party thereto and State Street Bank and Trust Company, as Trustee.

4.1.1(17)

First Supplemental Indenture, dated as of April 30, 2002, among UCAR Finance Inc., GrafTech International Ltd. (formerly known as UCAR International Inc.), UCAR Global Enterprises Inc., UCAR Carbon Company Inc., UCAR Composites Inc., UCAR Carbon Technology LLC, UCAR Holdings III Inc. and UCAR International Trading Inc. and State Street Bank and Trust Company.

4.2.0(16)

Registration Rights Agreement dated as of February 15, 2002 among GrafTech International Ltd., each of the Subsidiaries listed therein, Credit Suisse First Boston Corporation, J.P. Morgan Securities Inc., ABN AMRO Incorporated, Fleet Securities Inc. and Scotial Capital (USA) Inc.

4.2.1(17)

Registration Rights Agreement dated as of May 6, 2002 among GrafTech International Ltd. (formerly known as UCAR International Inc.), each of the Subsidiaries listed therein, Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc.

4.3.0

Indenture dated as of January 22, 2004 among GrafTech International Ltd., GrafTech Finance Inc., GrafTech Global Enterprises Inc., UCAR Carbon Company Inc., UCAR International Trading Inc. and UCAR Carbon Technology LLC and U.S. Bank National Association.

4.5.0*

Resale Registration Rights Agreement dated January 22, 2004 among GrafTech International Ltd., the guarantors listed therein, and J.P. Morgan Securities Inc.

4.4.0(9)

Rights Agreement dated as of August 7, 1998 between GrafTech International Ltd. and The Bank of New York, as Rights Agent.

4.4.1(16)

Amendment No. 1 to such Rights Agreement dated as of November 1, 2000.

4.4.2(18)

Amendment No. 2 to such Rights Agreement dated as of May 21, 2002.

4.5.0*

Resale Registration Rights Agreement dated January 22, 2004 among GrafTech International Ltd., the guarantors listed therein, and J.P. Morgan Securities Inc.

10.1.0(11)

Credit Agreement dated as of February 22, 2000 among GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc., the LC Subsidiaries from time to time party hereto, the Lenders from time to time party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent.

10.1.1(12)

First Amendment to such Credit Agreement dated as of October 11, 2000.

10.1.2(13)

Second Amendment to such Credit Agreement dated as of April 25, 2001.

10.1.3(13)

Third Amendment to such Credit Agreement dated as of July 10, 2001.

10.1.4(16)

Forth Amendment to such Credit Agreement dated as of December 6, 2001.

10.1.5(16)

Fifth Amendment to such Credit Agreement dated as of January 18, 2002.

10.1.6(17)

Sixth Amendment to such Credit Agreement dated as of February 22, 2000.

10.1.7*

Seventh Amendment to such Credit Agreement dated as of September 19, 2003.

10.1.8*

Eighth Amendment to such Credit Agreement dated as of January 12, 2004.

190

Exhibit
Number

Description of Exhibit

10.2.0(16)

Reaffirmation Agreement dated as of February 15, 2002 among GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance, Inc., each Subsidiary Loan Party named therein, each LC Subsidiary named therein and JPMorgan Chase Bank as Administrative Agent and Collateral Agent under the Credit Agreement.

10.2.1(17)

Reaffirmation Agreement, dated as of May 6, 2002, among UCAR Finance Inc., GrafTech International Ltd. (formerly known as UCAR International Inc.), UCAR Global Enterprises Inc., UCAR Carbon Company Inc., UCAR Composites Inc., UCAR Carbon Technology LLC, UCAR Holdings III Inc. and UCAR International Trading Inc. and State Street Bank and Trust Company.

10.3.0(11)

Guarantee Agreement dated as of February 22, 2000 made by GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc. and each Domestic Subsidiary party thereto in favor of Morgan Guaranty Trust Company of New York, as Collateral Agent for the Secured Parties.

10.4.0(11)

Security Agreement dated as of February 22, 2000 made by GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc. and the subsidiaries of GrafTech from time to time party thereto, in favor of Morgan Guaranty Trust Company of New York, as Collateral Agent for the Secured Parties.

10.5.0(11)

Indemnity, Subrogation and Contribution Agreement dated as of February 22, 2000 among GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc., each of the Domestic Subsidiaries party thereto and Morgan Guaranty Trust Company of New York, as Collateral Agent for the Secured Parties.

10.6.0(11)

Domestic Pledge Agreement dated as of February 22, 2000 by GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc. and the direct and indirect subsidiaries of GrafTech that are signatories thereto in favor of Morgan Guaranty Trust Company of New York, as Collateral Agent for the Secured Parties.

10.7.0(11)

Intellectual Property Security Agreement dated as of February 22, 2000 made by GrafTech International Ltd., GrafTech Global Enterprises Inc., GrafTech Finance Inc. and the subsidiaries of GrafTech from time to time party thereto in favor of Morgan Guaranty Trust Company of New York, as Collateral Agent for the Secured Parties.

10.8.0(16)

Pledge Agreement dated as of February 15, 2002, by UCAR SA in favor of GrafTech Finance Inc.

191

Exhibit
Number

Description of Exhibit

10.9.0(20)

GrafTech International Ltd. Management Stock Incentive Plan (Original Version) as amended and restated through July 31, 2003.

10.10.0(1)(9)(20)

Forms of Non-Qualified Stock Option Agreement.

10.11.0(20)

GrafTech International Ltd. Management Stock Incentive Plan (Senior Version) as amended and restated through July 31, 2003.

10.12.0(19)(20)

Forms of Restricted Stock Agreement.

10.13.0(20)

GrafTech International Ltd. Management Stock Incentive Plan (Mid-Management Version) as amended and restated through July 31, 2003.

10.14.0(20)

GrafTech International Ltd. 1995 Equity Incentive Plan as amended and restated through July 31, 2003.

10.15.0(20)

GrafTech International Ltd. 1996 Mid-Management Equity Incentive Plan as amended and restated through July 31, 2003.

10.16.0*

GrafTech International Ltd. Compensation Deferral Program effective March 31, 2003.

10.17.0(11)

GrafTech International Ltd. Management Incentive Plan amended and restated as of January 1, 1999.

10.18.0(9)

GrafTech International Ltd. Executive Employee Stock Purchase Program (Senior Management Version).

10.18.1(19)

GrafTech International Ltd. Executive Employee Stock Purchase Program (Mid-Management Version).

10.19.0(9)

GrafTech International Ltd. Executive Employee Loan Program.

192

Exhibit
Number

Description of Exhibit

10.20.0(14)

Forms of Severance Compensation Agreement for senior management (U.S. Version and International Version).

10.21.0*

UCAR Carbon Company Inc. Equalization Benefit Plan amended and restated as of March 31, 2003.

10.22.0*

UCAR Carbon Company Inc. Supplemental Retirement Income Plan amended and restated as of March 31, 2003.

10.23.0*

UCAR Carbon Company Inc. Enhanced Retirement Income Plan amended and restated as of March 31, 2003.

10.24.0*

UCAR Carbon Company Inc. Benefits Protection Trust amended and restated as of August 1, 2003.

10.25.0(8)

Employment Agreement dated as of June 22, 1998 between GrafTech International Ltd. and Gilbert E. Playford.

10.25.1(14)

Restricted Stock Agreement dated as of January 1, 2000 between GrafTech International Ltd. and Gilbert E. Playford.

10.25.2(15)

Amendment to such Employment Agreement and Restricted Stock Agreement dated as of August 25, 2001.

10.25.3(18)

Letter amending such Employment Agreement and Restricted Stock Agreement dated as of July 22, 2002.

10.26.0(7)

Plea Agreement between the United States of America and GrafTech International Ltd. executed April 7, 1998.

193

Exhibit
Number

Description of Exhibit

10.27.0(13)

Outsourcing Services Agreement, dated as of March 30, 2001, effective April 2001, between CGI Information Systems and Management Consultants, Inc. and GrafTech International Ltd. (Confidential treatment requested as to certain portions.)

10.28.0(13)

Joint Development and Collaboration Agreement, effective June 5, 2001, among UCAR Carbon Company Inc., Advanced Energy Technology Inc., and Ballard Power Systems Inc. (Confidential treatment requested as to certain portions.)

10.29.1(13)

Master Supply Agreement, effective June 5, 2001 between UCAR Carbon Company Inc. and Ballard Power Systems Inc. (Confidential treatment requested as to certain portions.)

10.30.0(13)

Agreement, effective as of January 1, 2001, between ConocoPhillips Limited and UCAR S.A. (Confidential treatment requested as to certain portions.)

10.31.0(13)

Agreement, effective as of January 1, 2001, between Cononco Inc. and UCAR Carbon Company Inc. and UCAR S.A. (Confidential treatment requested as to certain portions.)

21.1.0*

List of subsidiaries of GrafTech International Ltd.

23.1.0*

Consent of Deloitte & Touche LLP.

24.1.0*

Powers of Attorney (included on signature pages).

31.1*

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Craig S. Shular, Chief Executive Officer and President.

31.2*

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Corrado F. De Gasperis, Vice President, Chief Financial Officer and Chief Information Officer.

32.1*

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Craig S. Shular, Chief Executive Officer and President.

32.2*

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Corrado F. De Gasperis, Vice President, Chief Financial Officer and Chief Information Officer.

* Filed herewith.

(1)	Incorporated by reference to the Registration Statement of GrafTech International Ltd. and GrafTech Global Enterprises Inc. on Form S-1 (Registration No. 33-84850). 31, 1995 (File No. 1-13888).

194

(2)	Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 1995 (File No. 1-13888).

(3)	Incorporated by reference to the Registration Statement of the registrant on Form S-1 (Registration No. 33-94698).

(4)	Incorporated by reference to the Quarterly Report of the registrant on Form l0-Q for the quarter ended March 31, 1996 (File No. 1-13888).

(5)	Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended June 30, 1996 (File No. 1-13888).

(6)	Incorporated by reference to the Quarterly Report of the registrant on Form l0-Q for the quarter ended September 30, 1997 (File No. 1-13888).

(7)	Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended March 31, 1998 (File No. 1-13888).

(8)	Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 1997 (File No. 1-13888).

(9)	Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 1998 (File No. 1-13888).

(10)	Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended September 30, 1999 (File No. 1-13888).

(11)	Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 1999 (File No. 1-13888).

(12)	Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended September 30, 2000 (File No. 1-13888).

(13)	Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended June 30, 2001 (File No. 1-13888).

(14)	Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 2000 (File No. 1-13888).

(15)	Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended September 30, 2001 (File No. 1-13888).

(16)	Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 2001 (File No. 1-3888).

(17)	Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended March 31, 2002 (File No. 1-13888).

(18)	Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended June 30, 2002 (File No. 1-13888).

(19)	Incorporated by reference to the Annual Report of the registrant on Form 10-K for the year ended December 31, 2002 (File No. 1-13888).

(20)	Incorporated by reference to the Registration Statement of the registrant on Form S-3 (Registration No. 333-108039).

(21)	Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-13888).

195

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GRAFTECH INTERNATIONAL LTD.

Date:

March 15, 2004                                                                              By:/s/ Corrado F. De Gasperis
                                                                                                              Corrado F. De Gasperis
                                                                                                              Title: Vice President, Chief Financial Officer
                                                                                                                         and Chief Information Officer

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below hereby constitutes and appoints Craig S. Shular, Corrado F. De Gasperis and Karen G. Narwold, and each of them individually, his or her true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments to this Report together with all schedules and exhibits thereto, (ii) act on, sign and file with the Securities and Exchange Commission any and all exhibits to this Report and any and all exhibits and schedules thereto, (iii) act on, sign and file any and all such certificates, notices, communications, reports, instruments, agreements and other documents as may be necessary or appropriate in connection therewith and (iv) take any and all such actions which may be necessary or appropriate in connection therewith, granting unto such agents, proxies and attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing necessary or appropriate to be done, as fully for all intents and purposes as he or she might or could do in person, and hereby approving, ratifying and confirming all that such agents, proxies and attorneys-in-fact, any of them or any of his, her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signatures

Title

Date

/s/ Craig Shular

Craig Shular

Chief Executive Officer and
President and Director (Principal
Executive Officer)

March 15, 2004

/s/ Corrado F. De Gasperis

Corrado F. De Gasperis

Vice President, Chief Financial
Officer and Chief Information
Officer (Principal Accounting
Officer)

March 15, 2004

196

Signatures

Title

Date

/s/ Gilbert E. Playford

Gilbert E. Playford

Director

March 15, 2004

/s/ R. Eugene Cartledge

R. Eugene Cartledge

Director

March 15, 2004

/s/ Mary B. Cranston

Mary B. Cranston

Director

March 15, 2004

/s/ John R. Hall

John R. Hall

Director

March 15, 2004

/s/ Harold E. Layman

Harold E. Layman

Director

March 15, 2004

/s/ Ferrell P. McClean

Ferrell P. McClean

Director

March 15, 2004

/s/ Michael C. Nahl

Michael C. Nahl

Director

March 15, 2004

197

EXHIBIT INDEX

Exhibit
Number

Description of Exhibit

4.3.0

Indenture dated as of January 22, 2004 among GrafTech International Ltd., GrafTech Finance Inc., GrafTech Global Enterprises, Inc., UCAR Carbon Company Inc., UCAR International Trading Inc. and UCAR Carbon Technology LLC and U.S. Bank National Association.

4.5.0

Resale Registration Rights Agreement, dated January 22, 2004 among GrafTech International Ltd., the guarantors listed therein, and J.P. Morgan Securities Inc.

10.1.7

Seventh Amendment to such Credit Agreement dated as of September 19, 2003.

10.1.8

Eighth Amendment to such Credit Agreement dated as of January 12, 2004.

10.16.0

GrafTech International Ltd. Compensation Deferral Program amended and restated as of March 31, 2003.

10.21.0

UCAR Carbon Company Inc. Equalization Benefit Plan amended and restated as of March 31, 2003.

10.22.0

UCAR Carbon Company Inc. Supplemental Retirement Income Plan amended and restated as of March 31, 2003.

10.23.0

UCAR Carbon Company Inc. Enhanced Retirement Income Plan amended and restated as of March 31, 2003.

10.24.0

UCAR Carbon Company Inc. Benefits Protection Trust amended and restated as of August 1, 2003.

21.1.0

List of subsidiaries of GrafTech International Ltd.

23.1.0

Consent of Deloitte & Touche LLP.

24.1.0

Powers of Attorney (included on signature pages).

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Craig S. Shular, Chief Executive Officer and President.

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Corrado F. De Gasperis, Vice President, Chief Financial Officer and Chief Information Officer.

32.1

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Craig S. Shular, Chief Executive Officer and President.

32.2

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Corrado F. De Gasperis, Vice President, Chief Financial Officer and Chief Information Officer.

(21)	Incorporated by reference to the Quarterly Report of the registrant on Form 10-Q for the quarter ended June 30, 2003 (File No. 1-13888).

198

GRAPHIC 3 clip_image002.gif GRAPHIC begin 644 clip_image002.gif M1TE&.#EA0`+E`'<`,2'^&E-O9G1W87)E.B!-:6-R;W-O9G0@3V9F:6-E`"'Y M!`$`````+!L`#``*`M(`AP``````````,P``9@``F0``S```_P`S```S,P`S M9@`SF0`SS``S_P!F``!F,P!F9@!FF0!FS`!F_P"9``"9,P"99@"9F0"9S`"9 M_P#,``#,,P#,9@#,F0#,S`#,_P#_``#_,P#_9@#_F0#_S`#__S,``#,`,S,` M9C,`F3,`S#,`_S,S`#,S,S,S9C,SF3,SS#,S_S-F`#-F,S-F9C-FF3-FS#-F M_S.9`#.9,S.99C.9F3.9S#.9_S/,`#/,,S/,9C/,F3/,S#/,_S/_`#/_,S/_ M9C/_F3/_S#/__V8``&8`,V8`9F8`F68`S&8`_V8S`&8S,V8S9F8SF68SS&8S M_V9F`&9F,V9F9F9FF69FS&9F_V:9`&:9,V:99F:9F6:9S&:9_V;,`&;,,V;, M9F;,F6;,S&;,_V;_`&;_,V;_9F;_F6;_S&;__YD``)D`,YD`9ID`F9D`S)D` M_YDS`)DS,YDS9IDSF9DSS)DS_YEF`)EF,YEF9IEFF9EFS)EF_YF9`)F9,YF9 M9IF9F9F9S)F9_YG,`)G,,YG,9IG,F9G,S)G,_YG_`)G_,YG_9IG_F9G_S)G_ M_\P``,P`,\P`9LP`FZG`G39,R%&'.*+%BQ MYT6/"D^R%!IR:$N.-S.B++GQ&DZ/#1DFA2F5X4"'3PDF!'D3:DZ0/<&*A`AQ M[$:4*V5R),C4J5ND)U]&#:HR:U69*A-RW`LU*%2M$=6.93DR\-F8B"WJY7D0 MKT^<"NO6=?E0[DNQ1B\*G#Q2,5&^(\L:/@D3P+4`J%.K7LVZM>O7L&/+GDV[ MMNW;N'/KWLV[M^_?P(,+'TZ\^.]H`>"FI%JS)FB;?=5Z37O58V&@+1,[_WPP M<46YS=/6_ZP.WBI8\7^G!S8(N.CYY]I7OG<:?7S4BMNSFS3H<&A_ZC,=-9U? MH)4T6F`"DK0>0X99915-0#4GE6=Z!2B=00=ZYE.!"'J%5DR9/;6@3^%M1>%< M%&94$H;0L0@BA'N1]9Q^&@5P6D8XLH*02CI&E..//?(H9)`^%IDC14J9XM&0 M1Q(Y)))$0@GDE$Y62>6514K9(Y1:+CG2DU96J26380+)I8[]8:EFE&)NZ294 MID`$)IEJ_E?FG5B.Z62:;M*999^!*0GHF6;>J>>:/_+I)Y5Z-MHFCUXVB6,` MT%`JV4*0>;>06W:12!]_I'DED6B?=>0<2JBRI]2(/W7:ZJ<:VO]TS:R;IB+E%ZUL`8D0@6FPI6%2H2"EU6*DM:677 M=J`>VYU\9V'*Z4_K0=A>3SM)*Z!6UWXYZH0Y_315BPX>!2VG]0:UKH9H[=K9 MO^BQ8J.-5BKJ)$X[[HDCPF]VV+"D1@***)X4XVAPHG4NW*1ZA/ZYJ,0%3XSH MQ0A?;*C#TPDZ9\4L)RQRQ26_#*G#,W?LJ,PMEVFRQFA.F2;#-2,X,\1C4DKI MB72M^^F$28F+(:\R6C=CA+&.-QE=F!J+WJGX[0>=M^7YZ#2/,J;[F8$#(DW3 MA.*F!-Z2R%958E0OT??8TM7%J#>J>Z'_/5I\X5WE($%+O\@?2);)3;=;#MGG M++GNZ2U?:"_RM=W-(!$T6>9!CA55UB=3_];]2$)4B:5`$@Q^3..:_I MU)`_]Q[RW#7CO.N?M,_/(]YWQ\Q+0+S_NCS3,_ M\?,W9YE6-^J--=Q45NLMK*,AOR&(A%1ZU<'A(RX9L4YG*PH+Q',B_JP MHK5Y>6G1]6AL4&.N=!TLF:?%[VQ/M*)$>%&%RIO MA2^.^>%7"&5"+!>A<&X9`B5T]"8W>,FJ/&$]3I&-"#> M&P"IL2$J3P?-7&)M?0E%D_F)2D2<89K7^3Z%_]/_UFH M/_P\C.+2B4BJH:\KIRO7_G`E'6"1)2EW&^,'3230^8&/G2-\($(AN!P#4N6, MHN&*`.VGE'>>$5Z1B5?B=)+1@WHH7"75H$IEBAGU=;13Z9N(M=XGP*Q@BR*T MA)224C.IU/1(-;YK9NX<% M*0?+KE5NA4,B#26(!M.0AS*(*P^5D:D:RAU+V@U`,B$LN&P260Y9R"B2;:F< M8.+8O<6(@X=39+(NE]G6"HZ3I-4(WQZZRLW_[JU=+=Q*9P\K6=2^=$"N5$@K M&D/8AY3H5T*A8VV["%G9AH6/2.FMYBH[25<.9+CD\1I)2^1-$TARBE-[JSA?8P;-B#;K#TCD:S$K(H^8O,1E6E\6 MU:V2$YO(1+!6I;E>!4^5P3D$9Y!:@0T*MX),V%@"'#1\X?DB:GL*#&QJ%H(: MA^QUKWP]'V])6*T6(_=[[,1MYF1LW,CJA;;QVM+]%$-`_:E%NK3DDY<`84Q+Y^"G#Q:Y,S5*4G>XO5O\;,D;SV=C3SG-UI0QN3Q-HW"]' M]UT4M6T#Q83922N_6D%1I>0BMPVXH-;Q@;+IYAXQ)VGZ`& M2;WH+6]@3S->]1)I-1:NL*0C3>E)6[K2F+ZTIC/-Z4U[NM.@_K2H0TWJ49NZ MU*@^M:I3S>I5N[K5L'ZUK&--ZUG[N=-YAD.LG;2]5L=,O29<1!",ZR M8B.+GGUC$.&XC^$.98=4&5NQZ%>A\-2/7%CUM\E!UMN\S59M:61L\\6VL65) M7[?B#3ETL0+/&]XS:;YA$+J>PLC?!.O^B MM(25V>"'J35X.8)&I+?IX+92J>0#MBHW:U?-'N'\Y01N:\YOODL/5^GG?LIY M]IX7]$557-=#@DB&;[W5LH+86(H^,?>&?33TZBAO'6D=NNM\3PSJQ58IN4:& ME[`$0-^'LW,T+7%5%;\N3D1;N/+5M>@,<3WK6'^,B;NRQ!SH<]XQ@&!;7>HL MM.-JQ:W>,-W7M]JG,#.Z3Y+O/F$YE$1>))!)IO;Q#_?:O*_=X!#:Z^BP;U:\Y$ M]Y+_BM]?"/8!-74.+ZJ(=LVLX\U83S3%GSY;A&RF-2K;E6^3PS$R9W%C(Q!/ MYW>C)5(AIF8S9$&4I%&A%5(/9W&8TRQ;$T]9`U*!-BZ6Q']'X11W!X"*T5D$ M2(#)-E#+Q7B7TD:B]$^P$A]U]AXK\7_,IENAM8+EXDEI44CF@B\CJ%HEI'^C M18(K@1`G&`VS!W`@9+LS)F M6P1G*.5SIOA0FDAGA_6$^G,OE"(W==]9EA,.M.'2$),5\*//0*,/P*0;0AA#P957FAT/+.0UL.03D)I!WEK M6$6/;)54^3\YE$JTPE$.)DRPY-MBHC>("(O@2.B&)-1J$>KO36U2Y M&!C7$*SH+->`?;4B+D19E(G#(CFY9=G11H/S;ZO2?_W'@M!56_B$E-<8EUC! M(#@I@LRH;T^X([,R*D"Y6U(8&B-D95WF-:Y#,&6X)B775WL1=:;HANPWB/97 M)?383!1)));FD%MR?;=64K&Z$87FH]L=V$7!0W`F$)YN3<%VG9U)T/G MU!A8V)!;*)OVB&"?F7*[F2.3B4.NZ2,OFIKVQU^0"77TEV>;*)D^.I"P69F7 M:47JES"3%E4:RJ.K29W9!YI!VI!HA8=+5SSO5Z/,%Z,[6H\)*8;!B7*G(3`S M*8-4L3FW,D;)>5B4"'GTF1VL&)99R6-2Z!?ALR!CPY6AB!4N>5F-`XYGAI4: MN%G"^#G"174O]$G354&4`8L2_\)!@XJ"SL&68-&76\23G_@@A6I_G).I4)== MB6>G"?IV2XF"CW.?Y]E9^W%'H^=1Q45),KFH=%-<^8&CA]@M>\HMK*A[.JP&MDI"ULA M'AJD/X83<2H7RAI/7`F#Q3F,`FNIT?EU*H%]'$HVV)SJ[?_/BGBJQETN:LNS3L)>2 MEW.9$.((<,(B0EAW(U:",!:YE1/I3")WI,HW5E'"CPCSF1=;K=QJK3YZ,1AILF72M>^Z M*GW8KBOKF--3I/*(K6WG?&>KFEQ+JQ?&KJ8PHV*%1286II2ALTBYJ)R8(F)G M1AWHDQ0!E$?YNC&92+1ZJ7>JD4[K%GCJ-BX9'4YH<:GDI^?1?!<$D[7:E"(I MDM>(NK\;<3G)NUGOBRG>BR]#&:C;L:LN:[U2LR(I*G]5-5XSESPZRB74 M:J\RZJ7G>C!;>:T(B233>R3"*"@>X:UX:WPM!IY%8/+&)V8N(83M)4!*I^AV+RVF['`B+TMJUVVMZ%C M]JA36UP4.GCC*[\6]Z\LB;+$%853+!C.&:A?$A0-.Q/:>;S'@J,&>E%L^VT?X1D\PQ5IW%I/^_Y.*\G,0=>ROR"O$9)R)/@J7+L&N533M=<_NVCJ@^^^:] MF>44>^HC_\J]G-2Q3M.71R$1O?LXD?LV8-P8>1E)5AR=M*+*ANJ$Q"6,F7Q= M8GB`Y>EWB_]TTEKY$KE*H!H)E=)7;U++/AK6RE)IU:1HGC"I=EC MRKGZ[DC-=^W=8'+M\"KL*:Z[:=6K?1_'5L'=]F+57T+=9X.-V. M"89`$\Q5S:-2M+D]P\YUV<>3`9=]?!`VHMW\[-`;K8`L"1,%311_J4:<.]%> M2:X\KMQ"3>.0?<0T;=EVO-H3WC@0`=M[YC;=.;LBJ=K"[=/C\K'7!=,]":LG M;8TUFS@URQ=;3H18?JFT&[_+7:MSQ^3;&.9?AY.PNSDEK;)4-Y<]_K8)JMQF M''&Y:[PT_7!V&KN?4YC64X\8_(4!0&&!_WW:=]W?4PW@BL[*"DXE%U[H4KW@ MCJ[?#B[A=ZV95EWI\LVED][H]=@?(HSA#OS,RZS`BL[7>SV'NUF0#>[I'(XQ M:;OHL2[A"3[BA#UA256PK;.<.K&7*X*@YWTCDESL9DZR3'O=2NQV2?&P\6+E M=#S%PU[:D73%!V3L'CL*"30XI$13!Y!TXD-`?O&X>TNV0NPH?C(5=R2 M,0FP`P&U7CG%S)+)Z?ED]+XIE[Q80LSCO&U_.[SME-W(Q8/6%=>W>7P??MK[JBOO?_LWH MY6K?KQS.#X[K7O]+\K?NWL&,$Z5NZ^)HZ:-LRV(3X#,OV"$>HYG;UEA*ZH%M MX/&XUFU+SI@NR*T^V*(^]3$OUK@#AK(LLXJ+V!,9RH>&'&/Z2"DNL%XI$Q?V MXA,KV?0A[07QYG(3YS6QJT%-Y09!SULYYDYL]GC//IEUT&;OX][2Y0"HYB1E MT[$[TU/X?\Y]O*[UOD$>WD@IT171Y76IW5=1TBD.E!<4L=MMYS..T?">Y2J% M^=F2TW5?\%.^G48AT9]?Y!C/[3ULTFL\V7E5?3(\,28?UZO.U!MNUV]]SA@> MZ;(N\SS_%L*?Z3NJ\W]-_,A__&8]])W.],$/USQO,ZDNZ3[JWSL_WZC_WOU& MS\$13J.^'^^VU6[+RX=(" M:_D)'YT`T2I:M&L"HV%;`F<)-E8#KS4D&*U5PB4"'SH]6I M5YM1G1)Y?JQ;U*L]8D^Y!NVY]"%^YLR=C@W*:%`UR[S.JA M5K'JI_]JOJU-OUOF0-6>3V&+CWOR; MM'#.NV7?1AE\(]/2#8EK!CDXMT[C:S6WJN[YN7*QQ]^6IGX[-'>UL'UZ#A\S MM_;LY!\W=]T=_O;KYWF[?>\]?VGIO.O+OTZWM$;C#S[5G,(LF@`B^PFBNQA$ MK"T)QR+H,JJ`DE`ZL"2BJ)6&]BILK@Y!8LRYY9`**3[:?@(QK!5;*JA#R:[R MBJ^V%F/+18&VNFNO"W;R4PUV!Q MXQ0U3V/]+BE0YSL/5?*&-?776H]]UCI@#^0+IIP+$`MG0S!_;1X='_ M7(XHKY*N7@Q0A_$%LR1#>9874?\^"R#1LLON[.Q$6V,%4ENGI;7:K:XEK5Z+ M&S568VQO6V_94/VFN[EB=^N;5?-D_0]73-]>/-G`A=UUJ\$93QQ:N06GG%?2 M\;'?*_/==/U];Z/G!!<$&TZENT9:_0]K;0SQXR@&A_@\&N"R,L'D1182N;9"EJ5P+A"*/D+^9""(>NA244Y89B3>/(U_P.*K35G,TUFRH:9TY!P M.,%Q6TP8U;BXH8Y9ETH/XB:GPA>J[G$WC-;<=,@IP]5P6+FA3\HZ0Y2\3.=R MPD(5JF;80L`ARW)YDY82#S,VPSD+=59TWN%LF,.]42LZE7(6<6*XQ6T92$%M MD]?0&F*[VK6Q;`-Y8[YH9J'XR1%/(B'2B)SRD2K-K&LG&MCOJG*2J-SQ8C6: MUT"*.#0)'7!0C7D-EERFI;4H[$P;,XP*"T47($DLD?,3V,\D6)L'I=)2Q"JWOU9J\BL[RAK. MD&YO/`7-T)SCAN4YUQC.=[5SG/3EB3W;R4YS>Y.=R_$F5@=83G?.T)T++ MB<^`,O2@`,VG0L]IT'A25)X032A&%ZK1B3JTHA[=:#[[*5*K-72?(K7H/T$Z MT'"2QG7C"]M>RB;3T^!.=B89X9W@&*8R;6]GM7$?G%I2L>A]+U"=!"7PEO8C M"G%IE#G*GYJ.%DR(<4Z#:(GDQHA:$1*!#9%CJB,C\009"7Y-7N[KD4\I-#1* MYFNK"`12\?1(R"^&DD'!+)+-%W08.\ MSW?_PH335J;I&;6A;835)"%(T`8FT*20.4/D(G2.>"W697CDK@=)HD. MBJA]&X(&NZ@FSDIU5BPC9=%8)>"@#7=NO%T<3^80WNG,)6FEY/O0:JB]%"U" M/<.@N08[+M&P+$]^PID:%7D8-@4&L?-*B=2<$A>(M961>B4D5NZ%L/NN%W_I M,Y]]SX*TY#ESOV_ABO(F\K1PQ>=AN[SPJ7KJR`$O56K\DDR2YF5+`N]WP>^+ MK(-AQ!K_!D7"#/O/NDYYL(0]U5`>%G$TWU6ER$9VLJY*_YO9S@8=M0%'-9Y% MV#5,<=OH#I.V3F9:_)Z9EQ5R<87],=UY75C,O>12:`"98@3`OY5E-;-8%)'8U7I:HTN4(),/#C,,TTM"98O@RQRJZC*GWV MZ0"&"$0.+@Q<$%G+@J5HL&!;4@2'ZM3U3?BH;;&V7-I4)?\>F6W4W7-VH;SF MUPYQN(QV[A)_%3I82=>YA&9-!/_)7$,FTB>+;SXTGSU3USDO:\KU-C2>?9AH M+R-\2ZF,`Z5.P=HB2^'#0ZIMUA`:<;KML$SD7?"62 M;P[K`Y?_'+LY#O.!4SS@4&+:PY>9NX-&%&'K5\BA_GHS+Q^(9N\8,6!'Y2]P MT;::`@/3KTX]7@G$*V>D\;%%)/XT"$NEC8L^%CF*_$JP(NF9G:$82$J[L[BUM'*D[8,U+J&P M"7J*4%(F7R._9IN.*3$VYCNUF(&.M/H([)LU-OD+=].6=^.];9FW1PN],KN) M9C$]?),/WN.4WK.]WKHW&W2)[*BS'O0BV,/!A..RD_.70:.\B.LB(NR(V3O" MV7,\FE"S7?$+'>H7-ZN\U]H4-&.M%RPT4[FN08,Q,^,6U\&U_XU1G[4B)(\! MM_+BJG4#/+^PM@N4E[UPE6MPKW,!)+(;OW]AJQN#C*/#.Q7R+SXBL:R#F9;Y MOP7\EW_Q'J1RK]@9H*)RN?01()$@1/_BI"+C0:VPB4EB&?&;NG6AQ+Q[GK&[ MJQ-CC+]@N)(X+`3;([MYL5E;N62@QA\$F8Q#O45I M#X:#0BR+Q1;4M](+(ZB(O-83Q]_C-S)JQ])217JKO4#+(CA!0^%SK6X>O,!D!*!]V4`]Y_2\!9P^:2+R*_7!,2O"+4*^4==TC]%W$@O M@<4R\2/$*#7_%-NTGAH,V!R[5#2FP*/*M=01\5DW7\,U,R&YH2DFC4&WIC.9 M"#&D@:&D6:02M/P+M[.)P.B/2?.7!N0QF.,[[-20KJH^.RH9DE/!YZ*7`E(@ MK4RP7]()/62Z8W*ZFOBEID0L5EHF.I0D7]GY/\OI5$'KCROP*50.;\B+8TU$JB1M1TT'=4 MPLI\YK*@H&NA[JN;Y-NUDF8$-2F&"B_^`6[^5":5Q<4!4!`MDC<2SZI"F M!"54U$,'H2I%9+&^*AKLJT5\)3\^S#MPVS"?(4]7U"\_X_-LY5[Q,LLZ3A?_3AF_8Q?C=#]:,`JO!PB59P[.UJE31R,JU9=^5#2!-MG MS3/-XPV_5!MZW(@`.(9CJ"D=0A"G1=+36!!!!->2U-21W$0%P9.#Y4E&?*O' ME9-1,ZH_;$5?Y$^[RK^_JL5B$\E=^XA&%2`[[$ECY+PVM9@M`!0%*R[7*GF3!!D7-"DT;N1U1P"P/D/-0 M%C([=-30%>W0(G7?8/N]'9JB7-$;KSW1L1W6JC555J&W6P!W<$I*,WB\S#B36/>`5E=\1&B_Y4- M4!M9I*:DU-]1&R"6T`#+%5*[*OQN18N7S)!5^JP_YY0!]X?_9&$K*+UV$0)7D9:I:88U5$>XY:'LX.<6I41K\Y"Q.RL6=[>?\Y$G!XV?D;%?J M=&P*(^K#CF@0JD.1J2Q5XMZ'KL55'ES"Y4Z%H.,"VQJA-N*KKFP^'IO,*Z/7 MXSUKM-$NQ&M^M!@Q7*3_U*NRIQW(8D751KE"J$W(8"7,?5SIF3;D#[8SCOX- M`)Y@CB[;6]&;,(/ET>YCH:!E6\X;HMZRB+[CH3Z&8/!>\6;H(80#.O[C%5K- MYG/+M+[FL[=X3'3G-35[(V3\:1>E1G>*"&LO;,_.K'KKJ0? MYZU'2:4JY02/Q'0"]=91%WA M"*0VE33=DKGL^`-O[WWFA"#JXJ7C77/H#OZ_'%^0WC7MAPXUP(#A.X=.QHU0GS M_Y!^#PCUY+/=:$'>VEGM;>U^X[?3;NR^E:,V%>]F(:$F#Z*N2QKOX)&SJ85BS/L=^&3LZC:^+R;HS\/YSU/-D3\:"&HW4SACF&.K!;"M^SH". MQ)<\9IZ,YDB'XI!`:Z,C(("Y\,I`I9J,W=ED8D=]H''=.$WULXU5:[)6*[V# M3!,4DC=&]1@G;0++<<)U2]'VWKN><]#>'O5N.V*'2/()8=2.*VWP#FZ13=1XH3 M^,G7W%!VL]\\N[ST?[_+V-S\/;X1GZ/\\)^^'O_.&3YP:%ZUF MY^Y9'F_N[N6E7M(S*M,R1LIHYO6N;FJ_4TJK[#RK5(9'G_!MBL6EV9 M-/6Q?,3+'?F4?V*,-/KT_G-)E/8)=W'L'N,?7_9GQ^ZMYG%I)W(S864B MMV-D?_MVKLY]-G*,EC=_)V`U!SAOA.2-3G/;YGLJ'V7";R*;EM#(K'=H6?CH MI$M%5N[;IM^8^-L\UVSWT/.*3WLW]WJ*5Y%`[VZRSW/0;_:#YWR)MR[1]_MW M:^]V/O173%<(TM2=D$.:OT/_?"[K;-OGA`4+O[,(@F;=P3Z)&5Z8M,SU M0,*VX=O(8R&32#$@A*A1>,(K17&B`<7;.F4"'[@S`ZJ)#;#QWJD2Z1&E/G";AM%()S91* MF%-;16V*D6K/GT.)5UW=?'@AFU&U)C;SM!P18\S/X+W"!VDPU9YU\_LB'Z)^H[R7?^-SSTA MV^WM?\*%QG'^>_'I1U*`YIG'2H`MF;?5>.SE-9A_SWWT554L[5>@A%9-F-Y_ M.954GDL6YM<11>YAI-Y^)&X(GUL-DB=052VU]-IT/VT78$(>25A@>!7)9I!\ M'PH'I'P,&6<0=RNRQIZ2N'&'X&XCE?AC:0OZME%X[[%FH/^61,IWFDCMD023 M=F*ZV)Q-DDF'TYK2*>3FFC;EIE=;1C6&5W%\$?4=C$0)U9END?5%&9Z)E:43 MGV!AI99?,%8F5Y_$N76G0GI1VAM9@?5'E&""(FIHH7D"QNE@C](89Z`06;>4 M4R*9MIIUB)Z:FZA+MM4JD)@ZY*JNL/6*VZM#AF;;KDX2BUIL5Z84U(^Y>76E M46U)VU==1E&7EW^LY*62=,LY)QUV,X&KWW;:>C>BA4+2E:Y*/&K;(C1W1=CA M:16N5"E;V(ZG;BL1Z@LEARZ5&V^F'&4(,'PLQ?0B6-AJR'!5V[VT(E@ZKB1O MM@T6F.*#X#DL$X,2YXBCP$7BRIO_?PS#)G&S"5V\6VC^M1NES.KZ&F&S'[\W M$)`P$5PLDC(CO*6&)]_T$I7,B:6R0>2>'+-;7::D'YBYOB3C?-KNRVV:;DWK M+4TW=;LFV--:%T`K:*6]-C9LD\4VW(:U/7?<,-)]-X5WNYT4W'CSK7?;] MMN"`;V6XVHB_;?A?B!\^>.!V0[[XY'\/7OCEPJ+M-T2D2=1WE'HK&X#HFH,. M-&VGHU8ZT*37S3-IKM,].NLBJ1Z`YYOOO?KKK-5ND.JPZ^[XW,HQ1QVY5JT9 MMG]M,A=VR1^?"YYVW8W8(L(HOBMF@BGR5U^'5CJ:;4?C0>B@N^;>>.*]$F=O MH$L,.JAU_[Y;4\Q5]2.?F./6V7]LOL?*Y[7Z*4A+UOG/S%K7(`2-#CJ)$DF. M3`0T+*U':D8!V>B$QD#->(J,CD(,H2H%QH5@Y5<&"18+C6(I MF,WI,V]T(V\@%4=6T9$XIC#:8CH5I2P*:UE621I0'HBD8RV)D7?\T^AD!2W1 M3/)1DEJ,F:R5O+RLZ3_@\A9V.M*M`:ED6\PQ2<*V52E^9:V"[/^;B;FP=9&' M*$5KV!)D>B(X0(]ID#\/H8J9UA>P]10M4S&)28(T5$I4]@N'_MF*+6.YL\-< M;3(G48K0A);,_T&(E""!D9@`1$>%_0PU+OHF"S>RG@TBBTQ/DZ,PS4DUAXCP M.C9#DC2/E)(0S;*>[TJ@/TMIQRI11#"_W-(\'P+!8DXP6BRQX+8Z=A((/JF5 M#1*HN+I6+6=!#XAQ0A5RC*@G-!J3B(F*42(;11=3L`*+J8HB'T>:DS:F45>' M(549EZA%K_VQI"DE%#1*`4FR8`8SI2*,$R75JE4!9:D_#$XZI42?(=$FI@'5 M5D];YQE<$B1V@T6Y\M&:\I4J6/4Z1@)"6!)<56NM7+2K>BJ1]8D,F=Q'=9$1F]B-'(7B<-YKVD(MISGEZF"1,N.R MB2F67#Z1V4$(6#+.;B]["DO794"+'_!%#V*E-,^2^Y0_A;BKFN7$)BG?)][@ M@NC()\W+P::96$/5Z)8OE-(]K8:0G&FSCP(U6HG2C"5\X59@8IUNZZJ97(=E M%Z#.78]8)R;=EVGXMFF-R0;CF".*W%F[X(W?=Y<5R_'"4F1OLDE=,+->:N%) MTR)5#(/=:U)`B;%A3Z009F7@I#`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`<"G@5:U>[YU>*Q27-(#Y0= M#(E,7G<@$`)A'EV(_PS!Y1OV1%;T,*%WG8A:Z,B(P(\3=43'"5P;8AP8JID%A@]T:8@9WMPQL6%S M#4?K\=QY]!'W4!<+@I<7:@[%15^(W&'5K-VD==Z!-,_1;9HE(8A=@B,ELEV1W<18O:<5ARN14%AMT# MEM.T99NXN2((SB!%[=T+QJ'>":,J>MTK/IL--ML@7F`KPD0FA@I3',\/_@2[ MC%Z)6-SSE8P1YEN\05/G:=F3^`=E6-[8)0R9Z!%7=$CUS,I/7(-/Z);(!/\: MS=5>B>&>0U&9/NDI&W2?,R?TJV7RVQ58"P' M_Q'1I4#5)L+13+[4*#X=2[8*"9)>VY'BQC5@WL6@");:!#;8!^KBL(C%AP7; MVO7=,';86'D;B!G>!M9B7`EE1HJDU1B;746@4[*B*3)E"!HD!U+E#`J/7W$* M_K&;AL29Z9'3-3X'UKQ606UC(\J,-S96;#T)R;2/B,'A2;5']22DCND679H< MD@B4!863\.6('!!)BP&EYN=847:R&+:G/"E86(:'_(8UZ.I5K5!!_R9EH&8%X/57](E MG4L22G=D5:YIHEIRU73@H.`Y56HH)5DRH%?NV3(B(U`6GE%%V@+>H%EBIR_Z M'3%^IPDB(UA&U?^1FPR:9WJRF`M&X,V9);*!W2E6Y5>2ITT:!+HQ'K58RXXM MVG^NTG,`Z#6&B,]@&C,U%EY2#YEX7I;QWD3)X2HJEG!5A$&1W$L@9DH\WYV] M(0I-53T]&4>JB&KNV%BP7TWT8YY%T$/BQ_+!$VXVS8`F'UZ.G\Z5'P2Y$R(R M),@%1SV=8\M89"M"*/O%_XQM_B>9TB=-)=MY%N7;E:#:8279 M42>;SD9X*MM0)B`)(N6>CB4*JNF9*B.>;I5LT,9\^M-4CB"AJB>,*1N7\H0T M*A>_)=:E/B(Q4:/13:%;]D=W$!<6HH\@!N0@8>;+V2._P2.)1M^.&&0A$EM" MQ9'-$9=SO98,K2I=X9XZ76>0U.%#=1=$`@N]U%FP-A27["HQBA<;/E,^)BNR M[AS1N$S%/4=RA5QMQB@%D18_>J8_YL\0^@QT:.G4[2#252)_"2\9B*:)GB]%I+]KBH\II,\9AH,)B*LYK3]9BA-%G+)[8X?%KXJ%BX5G; MG=XGPP;L#0XLHQ9LO2*L)PH>)?8G361921Z,P4B>E:U2C6U%C>28K,U>*R#6 MD^;9O4SH&M;9/X$5CVZ7."*B:TKI(%Z7]?6AHNDHRWY<9RYKP^W1O!CF-=*H MG-THE[DKA((=T'YH?*;,'`YDS^ZCK=AF!XE@K(H<;6[$C+H9M4;)0M!91@:H MC&13ED9BL65:7`AGQGY:1-@I#5JGGYYEF^[FFPYJ=#IL69+IF`9E;>3M"DH@ MWR4J+`XKO"JL3CXJQ(*5M'F;Q/[BH?[DGLIMX7(GHJ[_*5K1*^(R8^?P::%& M$B]2G;D-9V-EQ0X1$?S%6_LH61:"EA$BU-;**-8&HOJ=E@(=)`]ZFNN M6?3M2\J9:E2=T\MQ*ZT^;?MQJ^_YR&>JZNPMR;8`WZQJ',X(I(<22?;BW%>" MT(C>[$1JX;50)H1E2Q=V;6F`)M.*[Y%UH;H$W99-9GBE+0]MJ?WFWWI&KGT^ MI%6^:QTE7Z/V[7NV!E26I_X^Y2I>`RW^;?_>JV<`,)X"+.@2K$^$'_H2\)RN M9P!K93**K@#WKP9.<+SR;0.3;F+&UZ3:A.,U*.1UUHY9&N19V+L&JF?#4>#[#!O@!GP61Y` M&@D'J0^KKNQN^E):75230@U&?F38-F02OR#Q0ISYYB.\0+&1XN-'ODN28I>- M9BB?F!-#!=08RU/YH!*+!5-;6HR_D.O]#G)[+24$YJEXSN'%[)B4?+W>R2V&Z/ZF:8^'*J$F;'3:L;\YSP M4A>OJE77WB;%C"1WK>BOGJKS.AST9F_NX3#+(FZ5;+.V'B[PM6P](NR%J'$Z M1ZMM#O]Q;^WQ.7_O."N,S]4<[N[FQ[@E_)27T1$R-"(=W$(8Q>9L=V9PI,;= MPF[P*9?8=98GB,UK'Y?PF(9P=O9I?#K;`2.T"()S)(,GOCX/47QEOCL%O]ETQ"3<)GF M%2?SR=UQ,-,<:`$D:NZ$:NX$18Z8A=;S`C6;#1-M.]M91B9M$#(-&.,BA,WL MAR::MO%D\36Q]M9L11YKB*Z2UEZPZ>FA1_J3N2!FS7EK[H*>@1(=2PAR"G,: M2^)O)GONY3IT>'I@!1IT'YW_8@HB)>.*,%FI M<@>GU6-CX)X6="D?]F:O3[SX=(#\N\3U&LUIH*(R*+ZFJWS-O;HYZ\PTO,V#:]>M=:^<('V&7-GZ/DR#.W! M3[S-KRA%HOTA!DM/74`S"-D:;-,4F^,/*%46/=B5+;O=V.&HW^,2B*4D;XUYEWZ1*R_&8:)$$DL7H MMLS0LP"ES"G1<-UMRR_/\W!!<4U8_^B$4J,B2^&+'N)ZJS4>QZC2OLB/FK,A MWG*)ZBB*GN,4_YA5E\2+Z@MPC^]#TRTHNYTQ]N)*?CEC0WB*NC8#0_9)>W#=IG)MN$R2FG9'._0HAW@B M\^]"4Y4GL[91-OHB(W2+LXEWQ!F-S[)N>TNW/)^XICKFR M=IB%\*NNLG-XP]"[*.)GIE"4XVH^ZE*UHOD;O2R&P_/NLO=V"??S:"1HTV7+ M6?L;`Z]SF_^UU3P3]B*O$X.[>).F]PU7M6IVD%/[FPMWF3MK0][S2"K3M@C, MO54'?]_O1U6@I"3Z;J&X8Q=XI3]XI(/ZB+>55[^ZPQ-NB6.L9:]W(_>M:QOQ MIV-XR*==*M))`E,ZR3=V"1ORQ*_\F*KTG\6VF%+J"L>PV0:A*.G6X M-K/[NLQ?"]]C/%HU3:M5(.D/\*U?"F> M6,NH%CC.Y\<*J M3--T!_D$H:=PPO<%816^X1\^XB>^XB\^XS>^XS\^Y$>^Y$\^Y5?_ON5?/N9G MON9O/N=O?@"Z]-__I[QE!G8`OEJ]\',\SWAIB#ZF3/+86([!3Y"3B"X=UBW3 M<5^S[G?/]FT;C-'!^+MY1\:LD[[<=;;\6,88?^R+4OC0<9;>2X!RA/+/99H$ M_^\ACV=DA7;SN>NW7 MF(K M/WT&%1C`9P"B0'L>%;IT)TVF$QT^32HU_ZA!I4B+8L68E>K,JU25&L1ZU938 MI6&EZNQ:U.S8M5Y]MD+:4*U6KCW-6H5:]>Q;BF_K=@T\5J%0N6<;"I[9EF_4 MQ4_1:AT,V>]7I),O\TP,U#)ENQTU/_XYF.A`GM<67DQHDK71A*X5QC9(TV'B MD-=DJG2Y\67!:$1K'BQ\46?$K1=IZO2-&_EKX:EC8_R->O7BX6H56D]-\O9R MFK;5IN3HDN1JEA.1FX[^$>%OFJR9OVXN6W9QU/%Q+R1Z\GC$_>^9D^BW]ESZ M[K:!1#+OI8.44PVCD7`2$#Z*)FP.N^C@L^^YZBB<*;B3"/*H-YA8$LBW[P+< M#2<,I3,Q,9CXN_\0/^&.0DVC%CNB#[_7H/,P0;IN&T^FF!9[T:2_3M(),Y\* MVRJ_HHXRBDG-S#JJ(5-^H@LAQ?;*TDJ[KMI,J"5'U+.,4/S24S+U$1S2J;('+.M,]?D:Z7'OF),3SDWZS,_,@O#T\E`)F6 M$JLL2"NET\XZ:U?>70O<,KAZF84ONG7G:WAVN6I%5:WY::Q?BMHGF&^.:A!5]Z9IX%,@Y6Z^QXF5UGD M:)-678XG6JFEPG0].F*(*QPV8+0CS@XCZI#C6\>!`20<9(F"[9APCNDV4KMO M09R5H;X%C\:BLS'/R$'4-@01/F;0USW2]G\,;/YF.I7QPM%OD?'/M M;@Q)2(.#5'S!MF&4D,#4(Y^QH-6#3SNZL]-5_YM#MNT\T=UXZ^UX5EX-5E*K MIYD*>F:A7NRZ:*^OY]3G4*'>\U%T>9IY>S:]QTMGK,S^&6/4T'#7LGR5S_]-:9]?`'@_J1R*O'-17Y`P]]/[L>UH75) M733V.1JBYUW)&X\,S36PUN%+7')AT8URZ!N(\/`XU>K5QW[G.8*%:UPS M9)T/'21"'35Q7ZMQ(:Q$%[WS3.N(!?O6@YC31KTA2XH@_)?F**:1'&['=-O* M&'GFQ<(C6H\IZS,D^_\0J4$&\J]IX!O@U=Y"/PA",FKI:+17]+B$4ZIRZ0X2MSP'/8 MO?H6,2GBREDG[,_>9FFC^^"28&M\%XDD@_]4G*G6=OQ ME-4*9G;S/-HQ&W1>N$1SWHV=="L,;89'PS'"3B%._!="Y*)'PY%S=KEI81E] M.:-V6FG_ M4O+A5'XJ/=]'<^H06VVK8LJ[)Q/[P\9IS1.$)82(04T',8X\J(5W!*<.G4HQ M)F:Q@YT;8_!BN)TXWBM>;)TA59^U1['V:*R$DVJQK`DP%$&.;ENMEDBXRB*F MEDN)7L4(%,O(S`[:\W6@N]@_60,OAM3$.$7$45B1Z=75,/8B-RHK-N>:O^FH3>0:L.1+9BG/MJJ/+T?4^ M9LUL-=W:3H,AISO7-&-@BY3$$CW'(HPE[USK&4SI_U(3OMBDEO#T9EW9(%0T MO#H([3#K-P4W-;\*!2U\O!,D$/E.=6]$W?`ZR,^SBK6&8L0C0E`#&N70+(`; M52!1?RL5WV(0:ZQZJ?EJ^L!(FMA)QOVMC5_VIZR5[;@SMJU137M2F@[W+34E M\DY6W-&CLCC%%?RIT+KBLZ`!ZF89W&224XI2IFAI/PYVRH/1*2K7V+=8YHU- MK08BQ&Z^\5VUFNK$F,4>*-EG)"L,[1C=S-]BU;>&M.Q=E&IAJ:C:;BL75FQ\[VBP=+(VUK)\7;B7P9LCTI M;2'_K-CJAK*YH\UM#G*FW*:,=KJ15%A>F_F8K5!/GN$Z)5$1YW1\5)V0T%PV M]VYDA2S9#YJ'PYZ$:JXX$)^N.J>C']AH>+LBPJA`0QPY;,TFX0`V];XJ\FB% M)^^L%<]S%PN>Z,0`'%WI/9)[&(3A@49'+M1)^!/5YLN'*SIUK6!2P5O5D9?[ MD8NI^T^KS7-,\]JG)-S=L'6B9.FH=NXF37DR^1ZV[:`46X/^5DN4%D@S9[O; M5,/_%?:CI8PN;&POX=+&+9^40G;>-AM-(C/WV"DB:]=>4-B!Y_'=FYWP=0LF M[V3J%F3.?A>>*63M%8%V:0ROR+H?9QBVMGH+G<%:@'FVQP4H]CA@E)&0#^`W%3/F2*/U6=_2YRTNV<72:ET:N MT8]CI?IE!JUJ*`AB:YEC7?TNX_JKM*HTI,W%YP9;A>JRGQ+UK%BKFX1]L'RD M/$;6'B#YN_[YMKZZL%;59=Q/S#R'(_]#G$^&=N3/8@_[)N[]4"/^,&[VY(/\ M:$ESY&*80L3K)H^C6FW87&Q,4,_P`H-_,+#=Y.U\9`T#_VDFGX8M\`ZE,ER# M!+,-+P2/`T])61(/],(M!G6J^F;0Z^YNV$8/4^#--3*/`L-'Z;X"W0##*.8. M!]VMR33P[(Q"+C*0_!HO!4UF!*7-Q69.VAKE!:MP`\<&VCJ$KTB'B]0)!4OB MYW`(BH;"/5YCT[*JF59B!3LES8[IA,SE[1(/-LQ,-=J-U%[NG*`(!%5N^^Q* MB**M#8M-P+YI!8=.P$#+1FC%[*00-CQK=LQ0)[2O.%H/7NJ.`R/DN$,.X\BNR.PA>5+*EL#Y2XPDW2Z[NB4(4O;T"*K29?,NS5TPJG<>4"5I[R8; M1B5W\2#RB249!"=>KIJ@RS=P3]%D!%G4;`UQ<`%O*=9,P\THK9G8"`BUKJI: M[B.?Y0&W:O1(XBFA:_R"KPT)1`T%:2JK\=UB"0CYSC!N*@>AI'U>\"#7X@2- MC9$290/_Y5++TD+QJ-`96\8]7@6.UJPF M%:\BI8E<5E$LE>4]#*<3VY">G`,M'W+*?+EJ]W M7O'A)$V=NA(RE4/V("Q)///A-(+36.0YG<-R0`N7XE`E6^6<6F?SRF;E3LXW M89$HQHGV`E$ERP-UL@,]T)-&`LIOFL\ERS/J]NWSZJY39J6ASM/WC/)TFNF[ M_DH8[=$S@M#Y?JPT]W(#/9`&"=.X!-()F<8]$D_XM`9=W+'D_U3S+NY3+P&/ M'%,M3NAB\YR&\]#3]!;#"GE,R4[T01/11+U.1IWFXW2TQ_!Q+YELDS(4-2NC M'HTP2,>./>G2M@3C-^SEB*8(.;M2^*B.]9:E.!^-1G3H<`K&^6P/_(BHBV!# M_9[/1PPJ/LZ%&E,-TJS40:1D%IDS6S*L(CN338=CC29'31G1`(=R3!G1L&A/ M*>LTPQX#9(K3\$:OEL;E.=YT'TV#J9R%*',Q'.FO=8@/[C9.WT;N)Z>35FI1 MTM1%[WAO.BR,_X1O"P4T.I]**4?/^J(%H+AT(@C)!L$$,M,E?,"1;(@-,BUH M>\!M'_?.2#M"X!#2AC;S\BB322'I6/]1R3-9+.P@[P)-$Y.<%>RH35J1U1M= M"EHE$U@U:2YY=?"4,1Z1RT(/Y4QB`QM&9MB&]>^B1I9@XG&X-`!Q;SK*T#^! MT/NL@C[C)F[>U%,MLONR"P6[DD9RX\`B["=1E4<6[*Q6=`M7Q3A]I$"D1&'W M=6_V*SGTKR0&)&^63U1QPB$2+#U'T%4+=I+.R0\'^3^D(3L.VZ/.4 MSF#OH_V.!60KS7`<9YBH$B3#0SAY<_-2-1CEQ26?^T5LGHAP?= M\NN`M&UK#&K_XK(Q$PGJYJS*:.QN(].DX%;PI%$=48]*6PPO\58Q:[#DB/$2 M/1&H!E<#GS'A2BR4C,8CF)-#!J6'($[C;@W3.##_>*4Y=NTZC-)6AM=X(.XG.PAA`.L\KK=VWXM?_DU++VMR!)`.JQ2_ MH$/_ZN.N:#+WMD1;9G52``5SKU:#UHZWB"8TQ3;U=B)LCXL>Z;(?5TM_LT8? MB3"H"-C>YK8P8U`!B2T(%=A_+9=0B#""&#@K)/C(6L4-O]5NE_%O_^E-+[Q. MJ"[C@ZMB9%:I?V(T1\RIO5IC4CUV=.S*3SFVH[WCRJVU9@WLV)R'171EPC&2^NU%27P5)>RCUYHK\93=;/% M8].&BJONBM=)5JN3&AV&JQ+$8F5M/@!I2(9'3],,-R-&#=EP0*#.8R.L01QX MCHJX4Y*4Z-P81:3X/38U?L5QRS2#3/>WD;_6DAR(@T"39%1+\*BV@-16\Q*W M90;E33)XJ,H6MC;T'@%R990JI M"_GQ;,MVQ&#LR59TDR'9;EQ&24H59V.%Q__XJJOP*F)1R":":)JXZ>93^DZ)EI39J3XZKV;-2<[JO M>2->MYK%XIEM)X@HBW0H0@B5590=6946"6E469,>J?-$F1@%>/%`26H>*)5; M,'Z,J^V*[$D9)2)FD80\>"ZY)-RE#&1Y16TV90.3AB\*0E\TS0-:6\ MT*5(F#`[F&I(^BERY%%=YRLOBW-ZHPZ!18A4."`[S_KD5..^:9`<:8""RLR>OUWHASRHLZ&B+$<@U`/M69L*NM MV(71RBDELMF)NXLY",QETSC4HO,D>"?`^H^(HC1W$(?1&F='7*<]@`.P`!N< M%/']JI>KN)JPR">AII"J3`VG*8A7N"?KFX M+SC'+'A:?<6D@UN6$QE1D&)FHKI<>TQ2`*B3?1HMFSO*>!FJ1WFJW=57_.=J MIGNE:0O%>L:Y1UJ#>>)25)EL/,QXQK=9Y&J+M;A7=&5AEONNJXB=>VB-V_?Z M#(L,BV2M`PV>.5OWR$-W,EJKK(K`7>A_NDF=\4LBKQ.O8:)>I.J'SD-W_U#D M5;DE=GLGM@44 M(U;HKA&9J"(J-,;-J%=+:FJ+O&G+.)IL>VO+I1D(NX-KN"W8.*0;F`MXO4U3 MRIEFW(@Q[`YHNG=+RW$ZO573R/1JDP"KR*E[I''91-0SM?GFK2,;-PC4K4,E88]R&1&QCK%_=ZE;G9O\8 MJJ*8 M*XTQ_=84]?4>'ITS.2,,5OD#$@V'LQ6'=2JT;%HXNG3=[R`[QY78`?+DS M!K:E[ZYO_,)1E[)[A(LH_L]J;B:/-G4_V[[CYJ\4I^'A2[[1]SK5^>9!`E]J M$8RF!^9E>U>$_3N"_-LK!MJ37,OWSKR3^]U"Z+F-G*IW^VML:LA:^2/4E>J3 M&W^Q7LM+NLM'>=MO-:;_6WKMP_N\TWO:B?RPZGW*P_YJ,/=.5=6O!WG")'O% MX0;/;V>__XKG"[S][/RJMHKY#FS!*+Z[X-`XN/K7,3)W^A7F"?E<\I,_!'#0 M12Z^!7U0Y+QQ<*?G#?GE?47/-;NM-5>/!S_7S1KTAX>,=8C163R-Y-3%1?)Q M:'VZJNLXMBK70R[I:4@X.1WQ/5]A$&?Q1C5VW<_O-^7UGQGU$Y03'MCYR M\P/Q:MIJR-R!*A?86LD:G43\8Q#P7>;\R3^IG8R[VWT;]9+=RSS^%ZEQ\_ZC MF#I(`2+:-58#"Q(\:+`@M(2LHB%L"-&A08?13$E\6#``JP#1.EY;>.VC1X$D M_Z]UA!8-I4J3*2DV["B0%;2(*BFBI#DS94YH,W?R;+FP)LF1-C^:/#KTID>4 M,$,6#%DR:=7G4&G&^"U6K5:LZM9'LJ/>N6:.*(4>$*G5OR;6.F-HG6?`G3[V&; M8,MZ-@PTM%NU'L=*ODOUI5JG31O'#+TVL&F1.#?3Y#QVZT]H`:[UQK@08TR& MJ8ECA,CPHO+CRXL?-THPN$*C01-*E_X\N_'M#R]";X[\XGHI5%@[A[S1EZASC6HWW'6%2A>I@I8RA^FC_Q5(Z:2%`GJH MH9P*Z*>?QOFIT:!YDDE0I8@^IZ>ABB9DGX&D:L<11UTZQJ)0;3X&DV!J\E79 M61'U:):)F+ M&HEY`19B6I01=EM-\N;%V*'*PG;HKL[V"%FZS,(&D[I=^JK5Z\"_1DSPN(#YFN:VD9EUYZ>)FLKHG[9J)]^`_HVJ MLLO<87A0JN&A[*B#.6\J:Z.QIESAA9G&K*G,DK+<:,LS`STTS01"9_/*[$T- M:M5/1^@RSD1;39!&&[966L%\L336QQ$3]NZ/6HG%;9F?E1A68I.1U25%8S:5 MME]EQ03C93_I*F)>:0UI-D2IREVG5V[^ZM1"O2TK%>$L:6CD4G)&9!*=A(^= M]FN/_P])K]B."<:3XO`>N1^1K5).Y.0FH:Z:Z;N1#;J:B&.F*^%K$TNGZSQQ MY)FP'/=[E8PJA@EVB,''QEAE(9NV\>XQ1L_F1K[U+'/%2->:_78PF^IJ0N&# MVN>LQ]E<$T>'MQT?0]ID,.0C$6OV`DRCTN>=G.Q/.U8I3H%CU1VM%\PUO1N:C:AT,8&4[V(Z" ME1IJ649+NW'>KMX"PV(-KS7_DC0RQ=$`,P M/\)MI'5%$DB15'+$BE'N*$<$71(Y@A(@`L^*2FRB%P%7I/^&"/%Q/_H=DFX" MNJ3X)E=8I!S<2**[-;(.BTW,(AOME+L\5O&.5Z3(&->$1-W89CP@)--E$G:: M$>TH=(_Y5@U;2)F.T49+KF/+5DJ6O5(QK8+?<5]JQD.T`NV/:^_1VD5LAHTE MP$&5K,1&<$#'1*_]IG9=9",;:U;`-78M56-<(YYVF80&+" M3XS'5)T"+WF,:$H33PTT""QM]LP')E.7R<2C+E5'.6`.DYN]7"(>95DAC8!2 MDQ?TY"A7YI(*M?-D6T+BAF(WE3,!!25NJPJ[7K2E2'(H9&%Z5\.\TA-V,0M' M3>G=B=`2M@^=B44$W5@68=**5:[_<@FJ;(5'M)B2(]K1CC+1W_R0J9HP!$":TXP)[-8X/S\.,7:U M"V=3]>=&GLYOFU#EBNZBJ%.H2LXM&TDOG*QF MX0=;!7YVG*"EE00YZ4Z]7E"P5$O:J1"2*^@U4C2"RPS9_+DNB)TU6"'[RI9T M0Q-ZL0:B__H4X;+:I2E2*Q/(GAP+*-`Z8<7<6MR]A'C$:%+;O\[E3XVM#GK/Q:2@E.9. M#F[2@0,2Y5^QQQU4?O>P5-WL-FM+I'!V$YF?_28Q.5M-RP*YF(I%)Y&/24XG M/]-.`CX&-0D,7&Q.-H#QXR8RDSK&S4J9F(K],6U3H\X9W]B3,'Z4C$GE-;4F M#KG.S9BQV@*PLSX4KF%[V&<@TC=^SDNA-WHHW,"%3[<,1DYIS?^60+QK6#AX M-*>U+'!-K6A&]`+/CJJ#<)!?]U.KMM=-<5SB>>48Q_S.4:GF9&:%@2J[H0HX MS;"SHG^_9J;:432FJRZI35E=RYBJ>JE+9&;(-BU(+9TM82$9J^_Z'+BXQL4P MQ266"/4;FHKBTS8N1MJ>P(.A-@]M0I2TT*MTV[VCF7(CT<%&*]P-[WM-3:N6Q\;Q=EJ2^SC/=\E1SUMQG,U"FD)2PZB",G09`=GK2GGZ& MJ)?R69B'(4SC"8-7L>QU+`UK6-ER.>2'KLMAOU$H-F]J&,F=]T&.[T79S6/N MHB])I)O'97$K+EATT$(=TC&T-"T"BY___R(:X7G\+*4#$G1!8SN1[9QS^-); MBBGC]QTSBWMN9*29?^8*O.R&E4'C*E,,]JG%^QG8Z?2B7UOF#F-[TFN=[!4=_ MLW%3O.BRT\Q'QNXBN%]EPV4Q:/.:"U!J#W_.5)=;Z,IZFZ?'R2]IA?K(`F:K;P+S$W:JBRHM\V&BW$;)%G8^[2+R/JFL3[5J>]">"#QM'FNQV\&0H(2\7E;LV;;DH$CN#58!GDPN#1" MDSZY=1\BZ((HR'J`1X(U&'@E>"FE%(0_V!#<(WA"(D(4WQK,G-FLX5:TO^%F&A_ M$.B"(H.'P3)ST@>*N2(@M%>"6&B$52AZ+UB%NXB#!H%X@D<5II!,6(*,R:B, MR\B,S>B,S_@D'N=Z/^AOM9<=N(@R6/B$V_A<0.(U````,@&.X@@`/#&.T`". MYAB.Z!B.T7".X\@*[QB.\;B.X^B.[6B/\"B/5Z&/\[B/]-@0Z7B/'2&0^5B/ M!TF.!+&/[)B0]\B/",F0#NF0$6F0#YF0`,F0&=F/`5F.]X@2"PF2!TF0$%F1 M&DF2^(B2"4F1_HB0&!F2%NF1$KF1)LF1-4F3[*B.%_F/^RB3*)E5FIE5O)E5WIE5^Y %C`$!`#L_ ` end EX-4 4 gtechindenture_jan04.txt EXHIBIT 4.3.0 Exhibit 4.3.0 EXECUTION COPY - ------------------------------------------------------------------------------- 1 5/8% Convertible Senior Debentures Dated as of January 22, 2004 ------------------------------------------------------ Among GrafTech International Ltd., as Issuer, GrafTech Finance Inc., GrafTech Global Enterprises Inc. UCAR Carbon Company Inc. UCAR International Trading Inc. UCAR Carbon Technology LLC as Guarantors, and U.S. Bank National Association, as Trustee ------------------------------------------------------ INDENTURE - ------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- PAGE ---- ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions....................................................2 ARTICLE 2 ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES SECTION 2.01. Amount of Debentures..........................................15 SECTION 2.02. Form and Dating...............................................15 SECTION 2.03. Execution and Authentication..................................16 SECTION 2.04. Debenture Registrar and Paying Agent..........................16 SECTION 2.05. Paying Agent to Hold Money in Trust...........................17 SECTION 2.06. Holder Lists..................................................17 SECTION 2.07. Transfer and Exchange.........................................17 SECTION 2.08. Replacement Debentures........................................18 SECTION 2.09. Outstanding Debentures........................................19 SECTION 2.10. Temporary Debentures..........................................19 SECTION 2.11. Cancelation...................................................19 SECTION 2.12. Defaulted Interest............................................19 SECTION 2.13. CUSIP and ISIN Numbers........................................20 ARTICLE 3 REDEMPTION AND REPURCHASE OF DEBENTURES SECTION 3.01. Provisional Redemption........................................20 SECTION 3.02. Optional Redemption...........................................21 SECTION 3.03. Notice of Redemption; Selection of Debentures.................21 SECTION 3.04. Payment of Debentures Called for Redemption by the Company....23 SECTION 3.05. Conversion Arrangement on Call for Redemption.................23 SECTION 3.06. Repurchase of Debentures by the Company at Option of Holders upon a Fundamental Change...................................24 SECTION 3.07. Repurchase of Debentures by the Company at Option of Holders on Specified Dates..........................................27 SECTION 3.08. Company's Right to Elect Manner of Payment of Repurchase Price and Make Whole Payment................................29 SECTION 3.09. Conditions and Procedures for Repurchase at Option of Holders.32 ARTICLE 4 PARTICULAR COVENANTS OF THE COMPANY SECTION 4.01. Payment of Principal and Interest.............................34 SECTION 4.02. Maintenance of Office or Agency...............................35 SECTION 4.03. Appointments to Fill Vacancies in Trustee's Office............35 SECTION 4.04. Provisions as to Paying Agent.................................35 SECTION 4.05. Existence.....................................................36 SECTION 4.06. Rule 144A Information Requirement.............................36 SECTION 4.07. Stay, Extension and Usury Laws................................37 SECTION 4.08. Compliance Certificate........................................37 SECTION 4.09. Liquidated Damages Notice.....................................37 SECTION 4.10. Future Guarantors.............................................38 ARTICLE 5 DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE SECTION 5.01. Debentureholders' Lists.......................................38 SECTION 5.02. Preservation and Disclosure of Lists..........................39 SECTION 5.03. Reports by Trustee............................................39 SECTION 5.04. Reports by the Company........................................39 ARTICLE 6 REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS ON AN EVENT OF DEFAULT SECTION 6.01. Events of Default.............................................40 SECTION 6.02. Payments of Debentures on Default; Suit Therefor..............42 SECTION 6.03. Application of Monies Collected by Trustee....................44 SECTION 6.04. Proceedings by Debentureholder................................45 SECTION 6.05. Proceedings by Trustee........................................45 SECTION 6.06. Remedies Cumulative and Continuing............................46 SECTION 6.07. Direction of Proceedings and Waiver of Defaults by Majority of Debentureholders.........................................46 SECTION 6.08. Notice of Defaults............................................46 SECTION 6.09. Undertaking to Pay Costs......................................47 ARTICLE 7 THE TRUSTEE SECTION 7.01. Duties of Trustee.............................................47 SECTION 7.02. Rights of Trustee.............................................48 SECTION 7.03. Individual Rights of Trustee..................................49 SECTION 7.04. Trustee's Disclaimer..........................................49 SECTION 7.05. Reports by Trustee to Holders.................................50 SECTION 7.06. Compensation and Indemnity....................................50 SECTION 7.07. Replacement of Trustee........................................51 ii SECTION 7.08. Successor Trustee by Merger...................................52 SECTION 7.09. Eligibility; Disqualification.................................52 SECTION 7.10. Preferential Collection of Claims Against Company.............52 ARTICLE 8 THE DEBENTUREHOLDERS SECTION 8.01. Action by Debentureholders....................................52 SECTION 8.02. Proof of Execution by Debentureholders........................53 SECTION 8.03. Who Are Deemed Absolute Owners................................53 SECTION 8.04. Company-owned Debentures Disregarded..........................53 SECTION 8.05. Revocation of Consents, Future Holders Bound..................54 ARTICLE 9 MEETINGS OF DEBENTUREHOLDERS SECTION 9.01. Purpose of Meetings...........................................54 SECTION 9.02. Call of Meetings by Trustee...................................54 SECTION 9.03. Call of Meetings by Company or Debentureholders...............55 SECTION 9.04. Qualifications for Voting.....................................55 SECTION 9.05. Regulations...................................................55 SECTION 9.06. Voting........................................................56 SECTION 9.07. No Delay of Rights by Meeting.................................56 ARTICLE 10 SUPPLEMENTAL INDENTURES SECTION 10.01. Supplemental Indentures Without Consent of Debentureholders..56 SECTION 10.02. Supplemental Indenture with Consent of Debentureholders......58 SECTION 10.03. Effect of Supplemental Indenture.............................59 SECTION 10.04. Notation on Debentures.......................................60 SECTION 10.05. Trustee to Sign Supplemental Indentures......................60 ARTICLE 11 CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE SECTION 11.01. Company and Specified Guarantors May Consolidate on Certain Terms.....................................................60 SECTION 11.02. Successor to Be Substituted..................................61 SECTION 11.03. Opinion of Counsel to Be Given Trustee.......................62 ARTICLE 12 SATISFACTION AND DISCHARGE OF INDENTURE SECTION 12.01. Discharge of Indenture.......................................62 iii SECTION 12.02. Paying Agent to Repay Monies Held............................63 SECTION 12.03. Return of Unclaimed Monies...................................63 ARTICLE 13 IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 13.01. Indenture and Debentures Solely Corporate Obligations........63 ARTICLE 14 DEBENTURE GUARANTEES SECTION 14.01. Debenture Guarantees.........................................64 SECTION 14.02. Limitation on Liability......................................66 SECTION 14.03. Successors and Assigns.......................................66 SECTION 14.04. No Waiver....................................................66 SECTION 14.05. Modification.................................................67 SECTION 14.06. Execution and Non-Impairment.................................67 SECTION 14.07. Contribution.................................................67 ARTICLE 15 CONVERSION OF DEBENTURES SECTION 15.01. Right to Convert.............................................67 SECTION 15.02. Exercise of Conversion Privilege; Issuance of Common Stock on Conversion; No Adjustment for Interest or Dividends; Settlement of Cash or Common Stock upon Conversion.........70 SECTION 15.03. Cash Payments in Lieu of Fractional Shares...................74 SECTION 15.04. Conversion Rate..............................................74 SECTION 15.05. Adjustment of Conversion Rate................................74 SECTION 15.06. Effect of Reclassification, Consolidation, Merger or Sale....81 SECTION 15.07. Taxes on Shares Issued.......................................82 SECTION 15.08. Reservation of Shares, Shares to Be Fully Paid; Compliance with Governmental Requirements; Listing of Common Stock....82 SECTION 15.09. Responsibility of Trustee....................................83 SECTION 15.10. Notice to Holders Prior to Certain Actions...................84 SECTION 15.11. Shareholder Rights Plan......................................84 ARTICLE 16 MISCELLANEOUS PROVISIONS SECTION 16.01. [Intentionally Omitted.].....................................85 SECTION 16.02. Provisions Binding on Company's Successors...................85 SECTION 16.03. Official Acts by Successor Corporation.......................85 SECTION 16.04. Addresses for Notices, Etc...................................85 SECTION 16.05. Governing Law................................................86 iv SECTION 16.06. Evidence of Compliance with Conditions Precedent, Certificates to Trustee................................................86 SECTION 16.07. Legal Holidays...............................................86 SECTION 16.08. Company Responsible for Making Calculations..................86 SECTION 16.09. Trust Indenture Act..........................................87 SECTION 16.10. No Security Interest Created.................................87 SECTION 16.11. Benefits of Indenture........................................87 SECTION 16.12. Table of Contents, Headings, Etc.............................87 SECTION 16.13. Authenticating Agent.........................................87 SECTION 16.14. Execution in Counterparts....................................88 SECTION 16.15. Severability.................................................88 Appendix A Provisions Relating to Debentures.................................A-1 Exhibit A Form of Debenture.................................................E-1 Schedule I Schedule of Increases or Decreases in Global Security.............S-1 Exhibit B Form of Supplemental Indenture for Future Guarantors..............B-1 v CROSS-REFERENCE TABLE TIA Indenture Section Section 310(a)(1)..................................................... 7.09 (a)(2)..................................................... 7.09 (a)(3)..................................................... N.A. (a)(4)..................................................... N.A. (b)........................................................ 7.07; 7.09 (c)........................................................ N.A. 311(a)........................................................ 7.10 (b)........................................................ 7.10 (c)........................................................ N.A. 312(a)........................................................ 2.06; 5.01 (b)........................................................ 5.02(b) (c)........................................................ 5.02(c) 313(a)........................................................ 7.05; 5.03(a) (b)(1)..................................................... N.A. (b)(2)..................................................... 7.05 (c)........................................................ 16.04 (d)........................................................ 7.05; 5.03(b) 314(a)........................................................ 5.04; 16.04 (b)........................................................ N.A. (c)(1)..................................................... 16.06 (c)(2)..................................................... 16.06 (c)(3)..................................................... N.A. (d)........................................................ N.A. (e)........................................................ 16.06 (f)........................................................ N.A. 315(a)........................................................ 7.01 (b)........................................................ 6.08; 16.04 (c)........................................................ 7.01; 7.02 (d)........................................................ 7.01 (e)........................................................ 6.09 316(a)(last sentence)......................................... 8.04 (a)(1)(A).................................................. 6.04; 6.07 (a)(1)(B).................................................. 6.07 (a)(2)..................................................... N.A. (b)........................................................ 6.04 317(a)(1)..................................................... 6.05 (a)(2)..................................................... 6.05 (implied) (b)........................................................ 2.05 318(a)........................................................ 16.09 N.A. means Not Applicable. Note: This Cross-Reference Table shall not, for any purpose, be deemed to be part of this Indenture. vi INDENTURE INDENTURE dated as of January 22, 2004, among GRAFTECH INTERNATIONAL LTD., a Delaware corporation (hereinafter called the "COMPANY"), having its principal office at Brandywine West, 1521 Concord Pike, Suite 301, Wilmington, DE 19803, GRAFTECH FINANCE INC., GRAFTECH GLOBAL ENTERPRISES INC., UCAR CARBON COMPANY INC., UCAR INTERNATIONAL TRADING INC. and UCAR CARBON TECHNOLOGY LLC, (each a "GUARANTOR" and collectively, the "GUARANTORS"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States (hereinafter called the "TRUSTEE"). WITNESSETH: WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issue of its 1 ?% Convertible Senior Debentures (hereinafter called the "DEBENTURES"), in an aggregate principal amount limited to $225,000,000, and the Guarantors have duly authorized the Debenture Guarantees (as hereinafter defined), and, to provide the terms and conditions upon which the Debentures and the Debenture Guarantees are to be authenticated, issued and delivered, the Company and the Guarantors have duly authorized the execution and delivery of this Indenture. WHEREAS, the Debentures, the Debenture Guarantees, the certificate of authentication to be borne by the Debentures, a form of assignment, a form of fundamental change repurchase election, a form of Company repurchase election and a form of conversion notice to be borne by the Debentures are to be substantially in the forms hereinafter provided for. WHEREAS, all acts and things necessary to make the Debentures and the Debenture Guarantees, when executed by the Company and the Guarantors, as applicable, and authenticated and delivered by the Trustee or a duly authorized authenticating agent, as in this Indenture provided, the valid, binding and legal obligations of the Company and the Guarantors, as applicable, and to constitute this Indenture a valid agreement according to its terms, have been done and performed, and the execution of this Indenture and the issue hereunder of the Debentures and the Debenture Guarantees have in all respects been duly authorized; and in addition, all things necessary to duly authorize the issuance of the Common Stock (as hereinafter defined) of the Company initially issuable upon the conversion of the Debentures, and to duly reserve for issuance the number of shares of Common Stock initially issuable upon such conversion, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: That in order to declare the terms and conditions upon which the Debentures and the Debenture Guarantee are, and are to be, authenticated, issued and delivered, and in consideration of the premises and of the purchase and acceptance of the Debentures by the holders thereof, the Company and the Guarantors covenant and agree with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Debentures (except as otherwise provided below), as follows: ARTICLE 1 DEFINITIONS ----------- SECTION 1.01. Definitions. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. All other terms used in this Indenture that are defined in the Trust Indenture Act or which are by reference therein defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires) shall have the meanings assigned to such terms in the Trust Indenture Act and in the Securities Act as in force at the date of the execution of this Indenture. The words "herein", "hereof", "hereunder" and words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other Subdivision. The terms defined in this Article include the plural as well as the singular. "ADJUSTMENT EVENT" has the meaning specified in Section 15.05(l). "AET" means Advanced Energy Technology Inc., a Delaware corporation, and its successors. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "CONTROL", when used with respect to any specified Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "BANKRUPTCY LAW" means Title 11, United States Bankruptcy Code of 1978, as amended, or any similar United States federal or state law relating to the bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, successor to or change in any such law. "BOARD OF DIRECTORS" means, with respect to a Person, the Board of Directors of such Person or any committee of such Board duly authorized to act on behalf of such Board, or, if such Person is not a corporation, the equivalent governing or managing body, authority or individual. Unless otherwise indicated, references to the Board of Directors shall mean the Board of Directors of the Company. "BOARD RESOLUTION" means a resolution duly adopted by the Board of Directors of a Person, a copy of which, certified by the Secretary or an Assistant Secretary of such Person or, if such Person is not a corporation, the equivalent officer, to be in full force and effect on the date of such certification, shall have been delivered to the Trustee. Unless otherwise indicated, references to a Board Resolution shall mean a Board Resolution of the Board of Directors of the Company. "BUSINESS DAY" means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banking institutions are authorized or required by law, regulation or executive order to close in The City of New York or St. Paul, Minnesota. 2 "CAPITAL STOCK" of any Person means any and all shares (including ordinary shares or American Depositary Shares), interests, participations or other equivalents, however designated, of capital stock or other equity participations, including partnership interests, whether general or limited, of such Person (collectively an "equity interest") and any and all rights (other than debt securities convertible or exchangeable into an equity interest), warrants or options to acquire an equity interest in such Person. "CASH" has the meaning specified in Section 3.08(a). "CASH AMOUNT" has the meaning specified in Section 15.02(h)(iii). "CASH SETTLEMENT AVERAGING PERIOD" has the meaning specified in Section 15.02(h)(ii)(B). "CASH SETTLEMENT NOTICE PERIOD" has the meaning specified in Section 15.02(g)(i). "COMMISSION" means the Securities and Exchange Commission, as from time to time constituted under the Exchange Act, or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "COMMON STOCK" means any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. Subject to the provisions of Section 15.06, however, shares issuable on conversion of Debentures shall include only shares of the class designated as common stock of the Company at the date of this Indenture (namely, the Common Stock, par value $0.01) or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable on conversion shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "COMPANY" means the corporation named as the "Company" in the first paragraph of this Indenture, and, subject to the provisions of Article 11 and Section 15.06, shall include its successors and assigns. "COMPANY REPURCHASE DATE" has the meaning specified in Section 3.07(a). "COMPANY REPURCHASE ELECTION" has the meaning specified in Section 3.07(c)(i). "COMPANY REPURCHASE NOTICE" has the meaning specified in Section 3.07(b). 3 "COMPANY REPURCHASE PRICE" has the meaning specified in Section 3.07(a). "CONSOLIDATED ASSETS" of any Person at any date means the consolidated total assets of such Person and its subsidiaries at such date as determined on a consolidated basis in accordance with GAAP. "CONVERSION AGENT" means the Trustee or such other office or agency designated by the Company where Debentures may be presented for conversion. "CONVERSION DATE" has the meaning specified in Section 15.02(c). "CONVERSION OBLIGATION" has the meaning specified in Section 15.02(g)(i). "CONVERSION PRICE" as of any day means $1,000 divided by the Conversion Rate as of such date and rounded to the nearest cent. The Conversion Price shall initially be approximately $16.58 per share of Common Stock. "CONVERSION RATE" has the meaning specified in Section 15.04. "CONVERSION RETRACTION PERIOD" has the meaning specified in Section 15.02(g)(i). "CORPORATE TRUST OFFICE" or other similar term means the designated office of the Trustee at which at any particular time its corporate trust business as it relates to this Indenture shall be administered, which office is, at the date as of which this Indenture is dated, located at One Federal Street, Third Floor, Boston MA 02110, Attention: Corporate Trust Services. "CUSTODIAN" means U.S. Bank National Association, a national banking association, as custodian with respect to the Debentures in global form, or any successor entity thereto. "DEBENTURE" or "DEBENTURES" means any Debenture or Debentures, as the case may be, authenticated and delivered under this Indenture, including any Global Debenture. "DEBENTURE GUARANTEE AGREEMENT" means a supplemental indenture, substantially in the form attached hereto as Exhibit B, pursuant to which a Guarantor guarantees the Company's obligations with respect to the Debentures on the terms provided for in this Indenture. "DEBENTURE GUARANTEE" means each Guarantor's Guarantee of the obligations with respect to the Debentures issued by the Company pursuant to the terms of this Indenture. "DEBENTURE REGISTER" has the meaning specified in Section 2.04. "DEBENTURE REGISTRAR" has the meaning specified in Section 2.04. 4 "DEBENTUREHOLDER" or "HOLDER" as applied to any Debenture, or other similar terms (including the term "HOLDER OF RECORD" but excluding the terms "BENEFICIAL HOLDER" and "BENEFICIAL OWNER" ), means any Person in whose name a particular Debenture is registered at the time on the Debenture Registrar's books. "DEFAULT" means any event that is, or after notice or passage of time, or both, would be, an Event of Default. "DEFAULTED INTEREST" means any interest on any Debentures which is payable, but is not punctually paid or duly provided for, on any January 15 or July 15. "DEPOSITARY" has the meaning specified in Appendix A. "DETERMINATION DATE" has the meaning specified in Section 15.05(l). "EVENT OF DEFAULT" has the meaning specified in Section 6.01. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as in effect from time to time. "EX-DIVIDEND DATE" means, with respect to any issuance or distribution on shares of Common Stock, the first date on which a sale of shares of Common Stock does not automatically transfer the right to receive the relevant distribution from the seller of the shares to the buyer. "EXPIRATION TIME" means the last time tenders or exchanges may be made pursuant to a tender or exchange offer. "FAIR MARKET VALUE" means, with respect to any asset or property, the sale value that would be obtained in an arm's-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy. Unless otherwise indicated, Fair Market Value shall be determined in good faith by the Board of Directors. "FINAL NOTICE DATE" has the meaning specified in Section 15.02(g). "FORM OF CONVERSION NOTICE" has the meaning specified in Section 15.02(a). "FUNDAMENTAL CHANGE" means the occurrence after the Original Issuance Date of any of the following: (a) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause (a) such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total voting power of the voting stock of the Company (for the purposes of this clause (a), such person shall be deemed to beneficially own any voting stock of a person (the 5 "specified person") held by any other person (the "parent entity"), if such other person is the beneficial owner (as defined in this clause (a)), directly or indirectly, of more than 35% of the voting power of the voting stock of such parent entity); or (b) individuals who on January 22, 2004, constituted the Board of Directors of the Company (together with any new directors whose election by the Board of Directors of the Company, as the case may be, or whose nomination for election by the stockholders of the Company was approved by a vote of 66?% of the directors of the Company then still in office who were either directors on January 22, 2004 or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office; (c) the adoption of a plan relating to the liquidation or dissolution of the Company; or (d) the merger or consolidation of the Company with or into another Person, or the merger of another Person with the Company, or the sale of all or substantially all the assets of the Company (in each case, determined on a consolidated basis) to another Person, other than a transaction following which (A) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the voting stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) hold directly or indirectly at least a majority of the voting power of the voting stock of the surviving Person in such merger or consolidation transaction immediately after such transaction and in substantially the same proportion as before such merger or consolidation transaction and (B) in the case of a sale of assets transaction, (i) the transferee Person(s) become(s) a Guarantor in respect of the Debentures and (ii) either (x) the transferee Person(s) constitute(s) a subsidiary of the transferor(s) of such assets or (y) holders of securities that represented 100% of the voting stock of the Company immediately prior to such sale of assets transaction hold, directly or indirectly, at least a majority of the voting power of the voting stock of the transferee Person(s) in such sale of assets transaction immediately after such sale of assets transaction and in substantially the same proportion as before such sale of assets transaction; or (e) the Company ceases to own, directly or indirectly, all of the voting power of the voting stock of any Specified Guarantor; or (f) the capital stock of the Company or other capital stock into which the Debentures are convertible is neither listed for trading on a United States national or regional securities exchange nor approved for listing on the Nasdaq National Market or any similar United States system of automated dissemination of quotations of securities prices, and no American Depository Shares or similar instruments for such capital stock are so listed or approved for listing in the United States. 6 A Fundamental Change will not be deemed to have occurred in respect of the occurrence of an event described in clause (a), (b), (c), (d) or (e) above, however, if either: (a) the Last Reported Sale Price of the Common Stock for any five Trading Days within the 10 consecutive Trading Days ending immediately after the later of the Fundamental Change or the public announcement thereof, equals or exceeds 105% of the Conversion Price of the Debentures immediately before the Fundamental Change or the public announcement thereof; or (b) at least 80% of the consideration, excluding cash payments for fractional shares, in the transaction or transactions constituting the Fundamental Change consists of shares of capital stock traded on a United States national or regional securities exchange or quoted on the Nasdaq National Market or any similar United States system of automated dissemination of quotations of securities prices, or which will be so traded or quoted when issued or exchanged in connection with a Fundamental Change (these securities being referred to as "PUBLICLY TRADED SECURITIES") and as a result of the transaction or transactions the Debentures become convertible into such Publicly Traded Securities, excluding cash payments for fractional shares, such Publicly Traded Securities to be valued as of the date on which the transaction or transactions constituting the Fundamental Change are publicly announced. "FUNDAMENTAL CHANGE REPURCHASE DATE" has the meaning specified in Section 3.06(a). "FUNDAMENTAL CHANGE REPURCHASE ELECTION" has the meaning specified in Section 3.06(c)(i). "FUNDAMENTAL CHANGE REPURCHASE NOTICE" has the meaning specified in Section 3.06(b). "FUNDAMENTAL CHANGE REPURCHASE PRICE" has the meaning provided in Section 3.06a). "GAAP" means generally accepted accounting principles in the United States of America as in effect as of January 22, 2004, including those set forth in: (a) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) statements and pronouncements of the Financial Accounting Standards Board, (c) such other statements by such other entities as approved by a significant segment of the accounting profession, and (d) the rules and regulations of the Commission governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including 7 opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the Commission. All computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP. "GLOBAL DEBENTURE" means a Debenture in global form registered in the name of the Depository or the nominee of the Depository. "GRAFTECH FINANCE" means GrafTech Finance Inc., a Delaware corporation, and, subject to Article II and Section 15.06, its successors and assigns. "GRAFTECH GLOBAL" means GrafTech Global Enterprises Inc., a Delaware corporation, and, subject to Article II and Section 15.06, its successors and assigns. "GUARANTEE" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (a) to purchase or pay (or advance or supply funds for the purchase or payment of) Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, to maintain financial statement conditions or otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business, and the term "Guarantee" used as a verb has a correlative meaning. "GUARANTEED OBLIGATIONS" has the meaning specified in Section 14.01(a). "GUARANTOR" means each of GrafTech Finance, GrafTech Global, UCAR Carbon, UCAR Trading, UCAR Carbon Technology and each other subsidiary of the Company that hereafter guarantees the Debentures pursuant to the terms of this Indenture. "INCUR" means issue, assume, Guarantee, incur or otherwise become liable for, and the term "Incurrence" when used as a noun shall have a correlative meaning. "INDEBTEDNESS" means, with respect to any Person, on any date of determination (without duplication): (a) obligations of such Person for borrowed money, or evidenced by bonds, debentures, notes or similar instruments, for which such Person is responsible or liable; 8 (b) obligations of such Person for the reimbursement of obligors on letters of credit, bank guarantees or bankers' acceptances (other than obligations with respect to letters of credit, bank guarantees or bankers' acceptances securing entered into in the ordinary course of business of such Person, in each case, to the extent such letters of credit, bank guarantees or bankers' acceptances are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following payment of such letters of credit, bank guarantees or bankers' acceptances); (c) obligations of such Person in respect of leases required in conformity with GAAP to be accounted for as capitalized lease obligations; (d) obligations and other liabilities of such Person under any lease or related document in connection with the lease of real property that provides that such Person is contractually obligated to purchase or cause a third party to purchase the leased property and thereby guarantee a minimum residual value of the leased property to the lessor; (e) obligations of such Person with respect to an interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect such Person against fluctuations in interest rates, or foreign exchange contract, currency swap agreement; or other similar agreement designed to protect such Person against fluctuation in currency values; (f) obligations of other Persons of the type described in paragraphs (a) to (e) above in respect of which such Person is liable or responsible, directly or indirectly, including by means of any Guarantee; and (g) obligations of another Person of the type described in paragraphs (a) to (e) above secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by such Person; in each case other than any account payable or other accrued current liability or obligation of such Person incurred in the ordinary course of business connection with the obtaining of materials or services. For purposes of determining the amount of Indebtedness under Section 4.10 and Section 6.01, the principal or notional amount thereof (as determined in accordance with GAAP) shall be used. "INDENTURE" means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented. "INTERCOMPANY INDEBTEDNESS" means Indebtedness of the Company to any of its subsidiaries or Indebtedness of any of the Company's subsidiaries to the Company or any other of the Company's subsidiaries. "INITIAL PURCHASERS" means J.P. Morgan Securities Inc., CIBC World Markets Corp., RBC Dain Rauscher Inc., Jefferies & Company, Inc. and ABN AMRO Rothschild LLC. 9 "INTEREST" means, when used with respect to the Debentures, any interest payable under the terms of the Debentures and Liquidated Damages, if any, payable under the terms of the Registration Rights Agreement. "INTEREST PAYMENT DATE" means January 15 and July 15 of each year, commencing July 15, 2004. "LAST REPORTED SALE PRICE" of the Common Stock on any date means the closing sale price per share (or, if no closing sale price is reported, the average of the bid and asked prices or, if more than one in either case, the average of the average bid and the average asked prices) on that date as reported in composite transactions for the principal United States national or regional securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, as reported by the Nasdaq National Market. If the Common Stock is not listed for trading on a United States national or regional securities exchange and not reported by the Nasdaq National Market on the relevant date, the "LAST REPORTED SALE PRICE" will be the last quoted bid price for the Common Stock in the over-the-counter market on the relevant date as reported by the National Quotation Bureau Incorporated or any similar United States system of automated dissemination of quotation of securities prices. If the Common Stock is not so quoted, the "LAST REPORTED SALE PRICE" will be the average of the mid-point of the last bid and asked prices for the Common Stock on the relevant date from each of at least three independent nationally recognized investment banking firms selected by the Company for this purpose. "LAST REPORTED SALE PRICE" of any other security shall have a correlative meaning. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset given to secure Indebtedness, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction, in each case other than relating to any account payable or other accrued current liability or obligation incurred in the ordinary course of business in connection with the obtaining of materials or services. "LIQUIDATED DAMAGES" has the meaning specified in Section 3(a) of the Registration Rights Agreement. "LIQUIDATED DAMAGES NOTICE" has the meaning specified in Section 4.09(a). "MAKE WHOLE PAYMENT" has the meaning specified in Section 3.01(b). "MARKET PRICE" means, with respect to any Repurchase Date or other date of determination and for purposes of Section 3.01(b), the average of the Last Reported Sale Price of the Common Stock for the twenty (20) consecutive Trading Days ending on the third Business Day prior to the applicable Repurchase Date or date of determination, as the case may be (or, if such third Business Day prior to the applicable Repurchase Date or date of determination, as the case may be, is not a Trading Day, then ending on the last Trading Day prior to such third 10 Business Day), appropriately adjusted to take into account the occurrence, during the period commencing on the first Trading Day during the period of twenty (20) consecutive Trading Days and ending on the applicable Repurchase Date or date of determination, as the case may be, of any event described in Section 15.05 or Section 15.06. "NON-ELECTING SHARE" has the meaning specified in Section 15.06. "NOTICE DATE" has the meaning specified in Section 3.01(a). "OFFICER" means the Chairman of the Board, the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the President, any Vice President (whether or not designated by a number or numbers or word or words added before or after the title "Vice President"), the Treasurer or the Secretary or an Assistant Secretary of the Company. "OFFICER" of any of the Guarantors has a correlative meaning. "OFFICERS' CERTIFICATE", when used with respect to the Company, means a certificate signed by any two of the Chairman of the Board, the Chief Executive Officer, the Chief Operating Officer, the President, the Chief Financial Officer, any Vice President (whether or not designated by a number or numbers or word or words added before or after the title "Vice President"), the Treasurer or the Secretary of the Company. "Officers' Certificate" of any of the Guarantors has a correlative meaning. "OPINION OF COUNSEL" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company or a Guarantor. "OPTIONAL REDEMPTION" has the meaning specified in Section 3.02. "OPTIONAL REDEMPTION DATE" has the meaning specified in Section 3.02. "OPTIONAL REDEMPTION PRICE" has the meaning specified in Section 3.02. "ORIGINAL ISSUANCE DATE" means the date on which the Debentures are first authenticated and delivered under this Indenture. "OUTSTANDING", when used with reference to Debentures and subject to the provisions of Section 8.04, means, as of any particular time, all Debentures authenticated and delivered by the Trustee under this Indenture, except: (a) Debentures theretofore canceled by the Trustee or delivered to the Trustee for cancelation; (b) Debentures, or portions thereof, (i) for the redemption of which monies in the necessary amount shall have been deposited in trust with the Trustee or with any Paying Agent (other than the Company or a Guarantor or Wholly Owned Subsidiary) or (ii) which shall have been otherwise discharged in accordance with Article 12; (c) Debentures in lieu of which, or in substitution for which, other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.08; and 11 (d) Debentures converted into Common Stock pursuant to Article 15 and Debentures deemed not outstanding pursuant to Article 3. "PAYING AGENT" has the meaning specified in Section 2.04. "PERSON" means any corporation, association, partnership, limited liability company, individual, joint venture, joint stock company, trust, unincorporated organization or government, or any agency or political subdivision thereof. "PRINCIPAL VALUE CONVERSION" has the meaning specified in Section 15.01(a). "PROVISIONAL REDEMPTION" has the meaning set forth in Section 3.01(a). "PROVISIONAL REDEMPTION DATE" has the meaning set forth in Section 3.01(a). "PROVISIONAL REDEMPTION PRICE" has the meaning specified in Section 3.01(a). "REDEMPTION DATE" means the Optional Redemption Date in the case of an Optional Redemption and the Provisional Redemption Date in the case of a Provisional Redemption. "REDEMPTION NOTICE" has the meaning specified in Section 3.03(a). "REDEMPTION PRICE" means the Optional Redemption Price in the case of an Optional Redemption and the Provisional Redemption Price in the case of a Provisional Redemption. "REFINANCE" means, in respect of any Indebtedness, to refinance, extend, replace, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness and the terms "Refinanced" and "Refinancing" shall have correlative meanings. "REGISTRATION RIGHTS AGREEMENT" means the Resale Registration Rights Agreement, dated as of January 22, 2004, among the Company, the Guarantors and the Initial Purchasers, as amended from time to time in accordance with its terms. "REGULAR RECORD DATE" means, with respect to each Interest Payment Date, the close of business on the January 1 or July 1 preceding such Interest Payment Date (whether or not a Business Day). "REPURCHASE DATE" means the Fundamental Change Repurchase Date or the Company Repurchase Date, as the context requires. "REPURCHASE ELECTION" means the Fundamental Change Repurchase Election or the Company Repurchase Election, as the context requires. "REPURCHASE NOTICE" means the Fundamental Change Repurchase Notice or the Company Repurchase Notice, as the context requires. 12 "REPURCHASE PRICE" means the Fundamental Change Repurchase Price or the Company Repurchase Price, as the context requires. "RESTRICTED SECURITIES" refers to every Debenture or Common Stock that bears or is required under Section 2.07 to bear the legend set forth in Appendix A. "RULE 144A" means Rule 144A as promulgated under the Securities Act. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SENIOR FACILITIES" means the Credit Agreement dated as of February 22, 2000, among the Company (formerly UCAR International Inc.), GrafTech Global (formerly UCAR Global Enterprises Inc.), GrafTech Finance (formerly UCAR Finance Inc.), certain of the other subsidiaries of the Company, the lenders referred to therein, JPMorgan Chase Bank, as Administrative Agent, J.P. Morgan Securities Inc. and Credit Suisse First Boston, as Joint-Lead Arrangers, and Chase Securities Inc. and Credit Suisse First Boston, as Syndication Agents, together with the related documents thereto (including the term loans and revolving loans thereunder, any guarantees and any security documents), as amended, extended, renewed, restated supplemented or otherwise modified (in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time, and any agreement or agreements (and related documents) governing Indebtedness incurred to Refinance, in whole or in part, the borrowings and commitments then outstanding or permitted to be outstanding under such Credit Agreement or a successor Credit Agreement, whether by the same or any other lender or group of lenders. "SENIOR NOTES" means the 10 1/4% Senior Notes due 2012 issued by GrafTech Finance. "SENIOR NOTE INDENTURE" means the Indenture dated as of February 15, 2002, as supplemented by the first supplemental indenture, dated as of April 30, 2002, among GrafTech Finance, the guarantors party thereto and U.S. Bank National Association, successor-in-interest to State Street Bank and Trust Company, as trustee, relating to the Senior Notes. "SIGNIFICANT SUBSIDIARY" means any subsidiary of the Company that would be a "significant subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the Commission. "SPECIFIED GUARANTOR" means each of GrafTech Finance, GrafTech Global and UCAR Carbon. "STATED MATURITY" means January 15, 2024. "STOCK RECORD DATE" means, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of stockholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise). 13 "SUBSIDIARY" means, with respect to any Person, (a) any corporation, association or other business entity of which more than 50% of the total voting power of shares of capital stock or other equity interest entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other subsidiaries of that Person (or a combination thereof) and (b) any partnership (i) the sole general partner or managing general partner of which is such Person or a subsidiary of such Person or (ii) the only general partners of which are such Person or of one or more subsidiaries of such Person (or any combination thereof). "SUCCESSOR COMPANY" has the meaning specified in Section 11.01(a). "TRADING DAY" means a day during which trading in securities generally occurs on the New York Stock Exchange or, if the applicable security is not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which the applicable security is then listed or, if the applicable security is not listed on a national or regional securities exchange, on the National Association of Securities Dealers Automated Quotation System or, if the applicable security is not quoted on the National Association of Securities Dealers Automated Quotation System, on the principal other market on which the applicable security is then traded (provided that no day on which trading of the applicable security is suspended on such exchange or other trading market will count as a Trading Day). "TRADING PRICE" means, as of any date of determination, the average of the secondary market bid quotations obtained by the Trustee for $5,000,000 principal amount of Debentures at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers (none of which shall be the Company or an Affiliate thereof) in The City of New York (or such other place that may be determined from time to time by the Company) selected by the Company; provided, however, if at least three such bids cannot reasonably be obtained by the Trustee, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Trustee, that one bid shall be used. If the Trustee cannot reasonably obtain at least one bid for $5,000,000 principal amount of Debentures from an independent nationally recognized securities dealer or, in the reasonable judgment of the Company, the bid quotations are not indicative of the secondary market value of the Debentures, then the Trading Price per $1,000 principal amount of Debentures will be deemed to be less than 98% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate. "TREASURY YIELD" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two business days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source for similar market data)) most nearly equal to the then remaining term to January 15, 2011; provided, however, that if the then remaining term to January 15, 2011, is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Yield shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the then 14 remaining term to January 11, 2011, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended, as it was in force at the date of this Indenture, except as provided in Sections 10.03 and 15.06; provided that if the Trust Indenture Act of 1939 is amended after the date hereof, the term "TRUST INDENTURE ACT" shall mean, to the extent required by such amendment, the Trust Indenture Act of 1939 as so amended. "TRUST OFFICER" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "TRUSTEE" means U.S. Bank National Association, a national banking association, and its successors and any corporation resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at the time serving as successor trustee hereunder. "UCAR CARBON" means UCAR Carbon Company Inc., a Delaware corporation, and, subject to Article 11 and Section 15.06, its successors and assigns. "UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code as in effect from time to time. "VOTING STOCK" of a Person means all classes of capital stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "WHOLLY OWNED SUBSIDIARY" means a subsidiary of the Company all the capital stock of which (other than directors' qualifying or other legally required shares) is owned by the Company or another Wholly Owned Subsidiary. ARTICLE 2 ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES ---------------------------------------------------------------------- SECTION 2.01. Amount of Debentures. The aggregate principal amount of Debentures which may be authenticated and delivered under this Indenture shall not exceed $225,000,000 (except for Debentures authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Debentures pursuant to Sections 2.07, 2.08, 2.09, 2.10, 3.04, 15.02 or Appendix A). SECTION 2.02. Form and Dating. Provisions relating to the Debentures are set forth in Appendix A, which is hereby incorporated in and expressly made a part of this Indenture. The Debentures and the Trustee's certificate of authentication shall each be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Debentures may have notations, legends or endorsements 15 (including the Debenture Guarantee) required by law, stock exchange rule, agreements to which the Company or any Guarantor is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Debenture shall be dated the date of its authentication. The Debentures shall be issuable only in registered form without interest coupons and only in denominations of $1,000 and integral multiples thereof. SECTION 2.03. Execution and Authentication. Two Officers shall sign the Debentures for the Company by manual or facsimile signature. If an Officer whose signature is on a Debenture no longer holds that office at the time the Trustee authenticates the Debenture, the Debenture shall be valid nevertheless. A Debenture shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Debenture. The signature shall be conclusive evidence that the Debenture has been authenticated under this Indenture. The Trustee shall authenticate and make available for delivery Debentures as set forth in Appendix A. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Debentures. Any such appointment shall be evidenced by an instrument signed by a Trust Officer, a copy of which shall be furnished to the Company. Unless limited by the terms of such appointment, an authenticating agent may authenticate Debentures whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Debenture Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.04. Debenture Registrar and Paying Agent. (a) The Company shall maintain an office or agency where Debentures may be presented for registration of transfer or for exchange (the "DEBENTURE REGISTRAR") and an office or agency where Debentures may be presented for payment (the "PAYING AGENT"). The Debenture Registrar shall keep a register of the Debentures and of their transfer and exchange (the "DEBENTURE REGISTER"). The Company may have one or more co-debenture registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent, and the term "Debenture Registrar" includes any co-debenture registrars. The Company initially appoints the Trustee as (i) Debenture Registrar and Paying Agent in connection with the Debentures and (ii) the Custodian with respect to the Global Debentures. (b) The Company shall enter into an appropriate agency agreement with any Debenture Registrar or Paying Agent not a party to this Indenture, which shall incorporate the terms of the Trust Indenture Act. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Debenture Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.06. The Company may change the Paying Agent or Debenture Registrar without prior notice to the holders of the Debentures. The Company, any Guarantor or any 16 domestically organized Wholly Owned Subsidiary may act as Paying Agent or Debenture Registrar. (c) The Company may remove any Debenture Registrar or Paying Agent upon written notice to such Debenture Registrar or Paying Agent and to the Trustee; provided, however, that no such removal shall become effective until (i) acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Debenture Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as Debenture Registrar or Paying Agent until the appointment of a successor in accordance with clause (i) above. The Debenture Registrar or Paying Agent may resign at any time upon written notice to the Company and the Trustee. SECTION 2.05. Paying Agent to Hold Money in Trust. Prior to each due date of the principal of and interest on any Debenture, the Company shall deposit with the Paying Agent (or if the Company, a Guarantor or a Wholly Owned Subsidiary is acting as Paying Agent, segregate and hold in trust for the benefit of the Persons entitled thereto (or, in the case of a Wholly Owned Subsidiary, the Company shall cause such Wholly Owned Subsidiary to so segregate and hold such funds)) a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of holders or the Trustee all money held by the Paying Agent for the payment of principal of and interest on the Debentures, and shall notify the Trustee of any default by the Company in making any such payment. If the Company, a Guarantor or a Wholly Owned Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund (or, in the case of a Wholly Owned Subsidiary, the Company shall cause such Wholly Owned Subsidiary to so segregate and hold such funds). The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.06. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of holders. If the Trustee is not the Debenture Registrar, the Company shall furnish, or cause the Debenture Registrar to furnish, to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of holders. SECTION 2.07. Transfer and Exchange. The Debentures shall be issued in registered form and shall be transferable only upon the surrender of a Debenture for registration of transfer and in compliance with Appendix A. When a Debenture is presented to the Debenture Registrar with a request to register a transfer, the Debenture Registrar shall register the transfer as requested if its requirements therefor are met. When Debentures are presented to the Debenture Registrar with a request to exchange them for an equal principal amount of Debentures of other denominations, the Debenture Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, 17 the Company shall execute and the Trustee shall authenticate Debentures at the Debenture Registrar's request. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section. The Company shall not be required to make and the Debenture Registrar need not register transfers or exchanges of Debentures selected for redemption (except, in the case of Debentures to be redeemed in part, the portion thereof not to be redeemed) or any Debentures for a period of 15 days before a selection of Debentures to be redeemed. Prior to the due presentation for registration of transfer of any Debenture, the Company, each Guarantor, the Trustee, the Paying Agent and the Debenture Registrar may deem and treat the Person in whose name a Debenture is registered as the absolute owner of such Debenture for the purpose of receiving payment of principal of and interest, if any, on such Debenture and for all other purposes whatsoever, whether or not such Debenture is overdue, and none of the Company, any Guarantor, the Trustee, the Paying Agent, or the Debenture Registrar shall be affected by notice to the contrary. Any holder of a Global Debenture shall, by acceptance of such Global Debenture, agree that transfers of beneficial interest in such Global Debenture may be effected only through a book-entry system maintained by (a) the holder of such Global Debenture (or its agent) or (b) any holder of a beneficial interest in such Global Debenture, and that ownership of a beneficial interest in such Global Debenture shall be required to be reflected in a book entry. All Debentures issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Debentures surrendered upon such transfer or exchange. SECTION 2.08. Replacement Debentures. If a mutilated Debenture is surrendered to the Debenture Registrar or if the holder of a Debenture claims that the Debenture has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Debenture if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the holder (a) satisfies the Company and the Trustee as to compliance with such requirements within a reasonable time after such holder has notice of such loss, destruction or wrongful taking and the Debenture Registrar does not register a transfer prior to receiving such notification, (b) makes such request to the Company or the Trustee prior to the Debenture being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code (a "protected purchaser") and (c) satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent and the Debenture Registrar from any loss that any of them may suffer if a Debenture is replaced. The Company and the Trustee may charge the holder for their expenses in replacing a Debenture. In the event any such mutilated, lost, destroyed or wrongfully taken Debenture has become or is about to become due and payable, the Company in its discretion may pay such Debenture instead of issuing a new Debenture in replacement thereof. Every replacement Debenture is an additional obligation of the Company. 18 The provisions of this Section 2.08 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Debentures. SECTION 2.09. Outstanding Debentures. Debentures outstanding at any time are all Debentures authenticated by the Trustee except for those canceled by it, those delivered to it for cancelation and those described in this Section as not outstanding. Subject to Section 8.04, a Debenture does not cease to be outstanding because the Company or an Affiliate of the Company holds the Debenture. If a Debenture is replaced pursuant to Section 2.08, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Debenture is held by a protected purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Debentures (or portions thereof) to be redeemed or maturing, as the case may be, then on and after that date such Debentures (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.10. Temporary Debentures. In the event that Definitive Debentures are to be issued under the terms of this Indenture, until such Definitive Debentures are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Debentures. Temporary Debentures shall be substantially in the form of Definitive Debentures but may have variations that the Company considers appropriate for temporary Debentures. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Debentures and deliver them in exchange for temporary Debentures upon surrender of such temporary Debentures at the office or agency of the Company maintained for this purpose, without charge to the holder. SECTION 2.11. Cancelation. The Company at any time may deliver Debentures to the Trustee for cancelation. The Debenture Registrar and the Paying Agent shall forward to the Trustee any Debentures surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Debentures surrendered for registration of transfer, exchange, payment or cancelation and shall dispose of canceled Debentures in accordance with its customary procedures or deliver canceled Debentures to the Company pursuant to written direction by an Officer. The Company may not issue new Debentures to replace Debentures it has redeemed, paid or delivered to the Trustee for cancelation. The Trustee shall not authenticate Debentures in place of canceled Debentures other than pursuant to the terms of this Indenture. SECTION 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Debentures, the Company shall pay the defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the Persons who are holders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail or cause to be mailed to each 19 holder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.13. CUSIP and ISIN Numbers. The Company in issuing the Debentures may use "CUSIP" and ISIN numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" and ISIN numbers in notices of redemption as a convenience to holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debentures, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE 3 REDEMPTION AND REPURCHASE OF DEBENTURES --------------------------------------- SECTION 3.01. Provisional Redemption. (a) Any time prior to January 15, 2011, the Company may, at its option, redeem the Debentures in whole or in part (such redemption, a "PROVISIONAL REDEMPTION") on any date from time to time, upon notice as set forth in Section 3.03 and in accordance with the provisions of Section 3.03, 3.04 and 3.05, at a redemption price, payable in cash, equal to 100% of the principal amount of the Debentures to be redeemed plus accrued and unpaid interest, if any, to (but excluding) the date of redemption (such amount, together with the Make Whole Payment described below, the "PROVISIONAL REDEMPTION PRICE"), on the date of redemption (the "PROVISIONAL REDEMPTION DATE") if (i) the Last Reported Sale Price of the Common Stock has exceeded 125% of the Conversion Price then in effect for at least 20 Trading Days in any consecutive 30-Trading Day period ending on the Trading Day prior to the date of the mailing of the Redemption Notice pursuant to Section 3.03 (the "NOTICE DATE"), and (ii) either (1) a registration statement covering resales of the Debentures and the Common Stock issuable upon conversion thereof is effective and available for use and is expected to remain effective for the 30 days following the Provisional Redemption Date or (2) the Debentures and the Common Stock issuable upon conversion thereof are no longer Transfer Restricted Securities (as defined in the Registration Rights Agreement). (b) Upon any Provisional Redemption pursuant to Section 3.01(a), the Company shall make an additional payment (the "MAKE WHOLE PAYMENT") with respect to the Debentures called for redemption to holders of Debentures to be redeemed in an amount equal to the present value of all remaining scheduled payments of interest on the Debentures to be redeemed through and including January 15, 2011. The present value of the remaining scheduled interest payments will be computed using a discount rate equal to the Treasury Yield. The Company shall calculate the amount of the Make Whole Payment and make such Make Whole Payment on all Debentures to be redeemed, including those Debentures converted into Common Stock between the Notice Date and the Provisional Redemption Date. (i) The Company may elect to pay the Make Whole Payment or any portion thereof (i) in cash or, (ii) subject to the fulfillment by the Company of the conditions set forth in Section 3.08(e), by delivering the number of shares of Common Stock equal to (x) the Make Whole Payment (or any portion thereof that the Company elects to pay in 20 shares of Common Stock) divided by (y) 97.5% of the Market Price with respect to the applicable Provisional Redemption Date. If the Company elects to pay the Make Whole Payment in whole or in part with shares of Common Stock, the Company shall pay cash in lieu of fractional shares based on the Market Price with respect to the applicable Provisional Redemption Date. SECTION 3.02. Optional Redemption. Except as set forth under Section 3.01, the Debentures will not be redeemable at the Company's option prior to January 15, 2011. At any time on or after January 15, 2011 and prior to Stated Maturity, the Company, at its option, may redeem, in whole or in part, the Debentures in accordance with the provisions of Sections 3.03, 3.04 and 3.05 on the date of redemption (the "OPTIONAL REDEMPTION DATE") for cash, at a redemption price (the "OPTIONAL REDEMPTION PRICE") equal to 100% of the principal amount of the Debentures to be redeemed plus accrued and unpaid interest, if any, on the Debentures to be redeemed to (but excluding) the Optional Redemption Date (such redemption, an "OPTIONAL REDEMPTION"). SECTION 3.03. Notice of Redemption; Selection of Debentures. (a) In case the Company shall desire to exercise the right to redeem all or, as the case may be, any part of the Debentures pursuant to Section 3.01 or Section 3.02, it shall fix a Redemption Date and it or, at its written request received by the Trustee not fewer than forty-five (45) days prior (or such shorter period of time as may be acceptable to the Trustee) to the Redemption Date, the Trustee in the name of and at the expense of the Company, shall mail or cause to be mailed a notice of such redemption (a "REDEMPTION NOTICE") not fewer than twenty (20) nor more than sixty (60) days prior to the Redemption Date to each holder of Debentures so to be redeemed at its last address as the same appears on the Debenture Register; provided that if the Company shall give such notice, it shall also give written notice of the Redemption Date to the Trustee. Such mailing shall be by first class mail. The notice, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Debenture designated for redemption shall not affect the validity of the proceedings for the redemption of any other Debenture. Concurrently with the mailing of any such Redemption Notice, the Company shall issue a press release announcing such redemption, the form and content of which press release shall be determined by the Company in its sole discretion. The failure to issue any such press release or any defect therein shall not affect the validity of the Redemption Notice or any of the proceedings for the redemption of any Debenture (or portion thereof) called for redemption. (b) Each such Redemption Notice shall specify the aggregate principal amount of Debentures to be redeemed, the CUSIP number or numbers of the Debentures being redeemed, the Redemption Date (which shall be a Business Day), the Redemption Price at which Debentures are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Debentures, that interest accrued to the Redemption Date will be paid as specified in said notice, and that on and after said date interest thereon or on the portion thereof to be redeemed will cease to accrue. Such notice shall also state the current Conversion Rate, the date on which the right to convert such Debentures or portions thereof into Common Stock will expire (which date shall not be later than the close of business on the second Business Day prior to the Redemption Date), whether the Company has elected to satisfy all or a 21 portion of its Conversion Obligation with cash in lieu of delivery of shares of Common Stock with respect to any Debentures (or portions thereof) to be redeemed and, if the Company has determined to satisfy all or any portion of the Conversion Obligation in cash, the dollar amount of the Conversion Obligation to be satisfied in cash (which must be expressed either as 100% of the Conversion Obligation or as a fixed dollar amount) and, if delivered in connection with a Provisional Redemption, whether the Company has elected to pay all or a portion of the Make Whole Payment in Common Stock, and if the Company has determined to pay all or any portion of the Make Whole Payment in Common Stock, the dollar amount of the Make Whole Payment to be paid in Common Stock. In case any Debenture is to be redeemed in part, the Redemption Notice shall state the portion of the principal amount of the Debentures to be redeemed and shall state that, on and after the Redemption Date, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued. (c) On or prior to the Redemption Date specified in the Redemption Notice given as provided in this Section 3.03, the Company will deposit with the Trustee or with one or more Paying Agents (or, if the Company or any Wholly Owned Subsidiary is acting as Paying Agent, set aside, segregate and hold in trust as provided in Section 4.04) an amount of money in immediately available funds sufficient to redeem on the Redemption Date all the Debentures (or portions thereof) so called for redemption (other than those theretofore surrendered for conversion into Common Stock) at the applicable Redemption Price; provided that if such payment is made on the Redemption Date, it must be received by the Trustee or Paying Agent, as the case may be, by 10:00 a.m., New York City time, on such date. The Company shall be entitled to retain any interest, yield or gain on amounts deposited with the Trustee or any Paying Agent pursuant to this Section 3.03(c) in excess of amounts required hereunder to pay the Redemption Price. If any Debenture (or portion thereof) called for redemption is converted pursuant hereto prior to such Redemption Date, any money deposited with the Trustee or any Paying Agent or so set aside, segregated and held in trust for the redemption of such Debenture shall be paid to the Company upon its written request, or, if then held by the Company, any Guarantor or any Wholly Owned Subsidiary, shall be discharged from such trust. Whenever any Debentures are to be redeemed, the Company will give the Trustee written notice in the form of an Officers' Certificate not fewer than thirty-five (35) days (or such shorter period of time as may be acceptable to the Trustee) prior to the Redemption Date as to the aggregate principal amount of Debentures to be redeemed. (d) If less than all of the outstanding Debentures are to be redeemed, the Trustee shall select the Debentures or portions thereof of the Global Debenture or the Debentures in certificated form to be redeemed (in principal amounts of $1,000 or integral multiples thereof) by lot, on a pro rata basis or by another method the Trustee considers fair and appropriate. If any Debenture selected for partial redemption is submitted for conversion in part after such selection, the portion of such Debenture submitted for conversion shall be deemed (so far as may be possible) to be from the portion selected for redemption. The Debentures (or portions thereof) so selected shall be deemed duly selected for redemption for all purposes hereof, notwithstanding that any such Debenture is submitted for conversion in part before the mailing of the Redemption Notice. Upon any redemption of less than all of the outstanding Debentures, the Company and the Trustee may (but need not), solely for purposes of determining the pro rata allocation 22 among such Debentures as are unconverted and outstanding at the time of redemption, treat as outstanding any Debentures surrendered for conversion during the period of fifteen (15) days next preceding the mailing of a Redemption Notice and may (but need not) treat as outstanding any Debenture authenticated and delivered during such period in exchange for the unconverted portion of any Debenture converted in part during such period. SECTION 3.04. Payment of Debentures Called for Redemption by the Company. If notice of redemption has been given as provided in Section 3.03, the Debentures (or portions thereof) with respect to which such notice has been given shall, unless converted into Common Stock pursuant to the terms hereof, become due and payable on the Redemption Date and at the place or places stated in such notice at the applicable Redemption Price, and on and after the Redemption Date (unless the Company shall default in the payment of such Debentures at the Redemption Price) interest on the Debentures (or portions thereof) so called for redemption shall cease to accrue and, after the close of business on the second Business Day immediately preceding the Redemption Date (unless the Company shall default in the payment of such Debentures at the Redemption Price), such Debentures (or portions thereof) shall cease to be convertible into Common Stock and to be entitled to any benefit or security under this Indenture, and the holders thereof shall have no right in respect of such Debentures (or portions thereof) except the right to receive the Redemption Price thereof pursuant to this Indenture. On presentation and surrender of such Debentures at a place of payment specified in said notice, the said Debentures or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price; provided that if the applicable Redemption Date is an Interest Payment Date, the interest payable on such Interest Payment Date shall be paid on such Interest Payment Date to the holders of record of such Debentures on the applicable Regular Record Date instead of the holders surrendering such Debentures (or portions thereof) for redemption on such date. Upon presentation of any Debenture redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Debenture or Debentures, of authorized denominations, in principal amount equal to the unredeemed portion of the Debentures so presented. Notwithstanding the foregoing, the Trustee shall not redeem any Debentures or mail any Redemption Notice during the continuance of a default in payment of interest on the Debentures. If any Debenture (or portion thereof) called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid or duly provided for, continue to bear interest at the rate borne by the Debenture, compounded semiannually, and such Debenture shall remain convertible into Common Stock until the principal and interest shall have been paid or duly provided for. SECTION 3.05. Conversion Arrangement on Call for Redemption. In connection with any redemption of Debentures, the Company may arrange for the purchase and conversion of any Debentures by an agreement with one or more investment banks or other purchasers to purchase such Debentures by paying to the Trustee in trust for the Debentureholders, on or before the Redemption Date, an amount not less than the Redemption Price of such Debentures. Notwithstanding anything to the contrary contained in this Article 3, the obligation of the Company to pay the Redemption Price of such Debentures shall be deemed 23 to be satisfied and discharged to the extent such amount is so paid by such purchasers. If such an agreement is entered into, a copy of which will be filed with the Trustee prior to the Redemption Date, any Debentures not duly surrendered for conversion by the holders thereof may, at the option of the Company, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such holders and (notwithstanding anything to the contrary contained in Article 15) surrendered by such purchasers for conversion, all as of immediately prior to the close of business on the Redemption Date (and the right to convert any such Debentures shall be extended through such time), subject to payment of the above amount as aforesaid. At the direction of the Company, the Trustee shall hold and dispose of any such amount paid to it in the same manner as it would monies deposited with it by the Company for the redemption of Debentures. Without the Trustee's prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Debentures shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Trustee as set forth in this Indenture. SECTION 3.06. Repurchase of Debentures by the Company at Option of Holders upon a Fundamental Change. (a) If a Fundamental Change shall occur at any time prior to Stated Maturity, each holder shall have the right, at such holder's option, to require the Company to repurchase all of such holder's Debentures, or any portion thereof that is equal to $1,000 principal amount or an integral multiple thereof, on the date specified in the Fundamental Change Repurchase Notice, which date shall not be later than thirty-five (35) Business Days after the occurrence of such Fundamental Change but in no event prior to the date on which such Fundamental Change occurs (the "FUNDAMENTAL CHANGE REPURCHASE DATE"). The Company shall repurchase such Debentures at a price (the "FUNDAMENTAL CHANGE REPURCHASE PRICE") equal to 100% of the principal amount of the Debentures to be repurchased plus accrued and unpaid interest, if any, to (but excluding) the Fundamental Change Repurchase Date; provided that if such Fundamental Change Repurchase Date falls on an Interest Payment Date, then the interest payable on such Interest Payment Date shall be paid to the holders of record of the Debentures on the applicable Record Date instead of the holders surrendering the Debentures for repurchase on such date. The Company's obligation to repurchase all or a portion of a holder's Debentures under this Section 3.06 shall be satisfied if (a) a third party makes the offer to repurchase the Debentures at the Fundamental Change Repurchase Price in the manner and at the times and otherwise in compliance in all material respects with the requirements set out in this Section 3.06 and (b) such third party (i) purchases all Debentures properly tendered and not withdrawn with respect to the applicable Fundamental Change and (ii) otherwise complies with the obligations of the Company in connection herewith. (b) On or before the twenty-fifth (25th) Business Day prior to each Fundamental Change Repurchase Date, the Company, or at its written request the Trustee in the name of and at the expense of the Company (which request must be received by the Trustee at least ten (10) Business Days prior to the date the Trustee is requested to give notice as described below, unless the Trustee shall agree to a shorter period), shall mail or cause to be mailed, by first class mail, to all holders of record on such date a notice (the "FUNDAMENTAL CHANGE REPURCHASE NOTICE") of the occurrence of such Fundamental Change and of the repurchase right at the option of the holders arising as a result thereof to each holder of Debentures at its last address as the same 24 appears on the Debenture Register; provided that if the Company shall give such notice, it shall also give written notice of the Fundamental Change to the Trustee (and the Paying Agent, if the Trustee is not then the Paying Agent) at such time as it is mailed to Debentureholders. Such notice, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. Each Fundamental Change Repurchase Notice shall state: (i) the Fundamental Change Repurchase Price, excluding accrued and unpaid interest, the Conversion Rate at the time of such notice (and any applicable adjustments to such Conversion Rate) and, to the extent known at the time of such notice, the amount of interest that will be payable with respect to the Debentures on the Fundamental Change Repurchase Date; (ii) whether the Company elects to pay the Fundamental Change Repurchase Price in cash, in shares of Common Stock or a combination thereof, specifying the percentage or amount of each; (iii) if the Company elects to pay any portion of the Fundamental Change Repurchase Price in shares of Common Stock, the method of calculating the Market Price of the Common Stock; (iv) the events constituting the Fundamental Change and the date of the Fundamental Change; (v) the Fundamental Change Repurchase Date; (vi) the last date on which a holder may exercise the repurchase right; (vii) the name and address of the Paying Agent and the Conversion Agent; (viii) that Debentures as to which a Fundamental Change Repurchase Election has been given by the holder may be converted only if the election has been withdrawn by the holder in accordance with the terms of this Indenture; provided that the Debentures are otherwise convertible in accordance with Section 15.01; (ix) that the holder shall have the right to withdraw any Debentures surrendered prior to the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date (or any such later time as may be required by applicable law); (x) a description of the procedure which a Debentureholder must follow to exercise such repurchase right or to withdraw any surrendered Debentures; (xi) the CUSIP number or numbers of the Debentures (if then generally in use); and (xii) briefly, the conversion rights of the Debentures and whether, at the time of such notice, the Debentures are eligible for conversion. 25 No failure of the Company to give the foregoing notices and no defect therein shall limit the Debentureholders' repurchase rights or affect the validity of the proceedings for the repurchase of the Debentures pursuant to this Section 3.06. (c) Debentures shall be repurchased pursuant to this Section 3.06 at the option of the holder upon: (i) delivery to the Trustee (or other Paying Agent appointed by the Company) by a holder of a duly completed notice (a "FUNDAMENTAL CHANGE REPURCHASE ELECTION") in the form set forth on the reverse of the Debenture at any time prior to the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date, subject to extension to comply with applicable law, stating: (a) if certificated, the certificate numbers of the Debentures which the holder shall deliver to be repurchased; (b) the portion of the principal amount of the Debentures that the holder shall deliver to be repurchased, which portion must be $1,000 or an integral multiple thereof; (c) that such Debentures shall be repurchased as of the Fundamental Change Repurchase Date pursuant to the terms and conditions specified in the Debentures and in this Indenture; and (d) in the event the Company elects to pay the Fundamental Change Repurchase Price, in whole or in part, in shares of Common Stock but such portion of the Fundamental Change Repurchase Price shall ultimately be paid to such holder entirely in cash because any of the conditions to payment of the Fundamental Change Repurchase Price in shares of Common Stock is not satisfied prior to the close of business on the Business Day prior to the relevant Fundamental Change Repurchase Date, whether such holder elects (i) to withdraw such Fundamental Change Repurchase Election as to some or all of the Debentures to which such election relates (stating the principal amount and certificate numbers, if any, of the Debentures as to which such withdrawal relates) or (ii) to receive cash in respect of the entire Fundamental Change Repurchase Price for all Debentures (or portions thereof) to which such election relates; and (ii) delivery or book-entry transfer of the Debentures to the Trustee (or other Paying Agent appointed by the Company) simultaneously with or at any time after delivery of the Fundamental Change Repurchase Election (together with all necessary endorsements) at the Corporate Trust Office of the Trustee (or other Paying Agent appointed by the Company) in the Borough of Manhattan, such delivery or transfer being a condition to receipt by the holder of the Fundamental Change Repurchase Price therefor; provided that such Fundamental Change Repurchase Price shall be so paid pursuant to this Section 3.06 only if the Debentures so delivered or transferred to the Trustee (or other Paying Agent appointed by the Company) shall conform in all respects to the description thereof in the related Fundamental Change Repurchase Election. All 26 questions as to the validity, eligibility (including time of receipt) and acceptance of any Debenture for repurchase shall be determined by the Company, whose determination shall be final and binding absent manifest error. If a holder fails to indicate such holder's choice with respect to the election set forth in Section 3.06(c)(i)(d), such holder shall be deemed to have elected to receive cash in respect of the entire Fundamental Change Repurchase Price for all Debentures subject to such Fundamental Change Repurchase Election in the circumstances set forth in Section 3.06(c)(i)(d). SECTION 3.07. Repurchase of Debentures by the Company at Option of Holders on Specified Dates. (a) On each of January 15, 2011, January 15, 2014 and January 15, 2019, (each, a "COMPANY REPURCHASE DATE"), each holder shall have the right, at such holder's option, to require the Company to repurchase all of such holder's Debentures, or any portion thereof that is a multiple of $1,000 principal amount. The Company shall repurchase such Debentures at a price (the "COMPANY REPURCHASE PRICE") equal to 100% of the principal amount of the Debentures to be repurchased plus accrued and unpaid interest, if any, to (but excluding) the Company Repurchase Date; provided that if such Company Repurchase Date falls on an Interest Payment Date, then the interest payable on such Interest Payment Date shall be paid to the holders of record of the Debentures on the applicable Regular Record Date instead of the holders surrendering the Debentures for repurchase on such date. (b) On or before the twenty-fifth (25th) Business Day prior to each Company Repurchase Date, the Company, or at its written request the Trustee in the name of and at the expense of the Company (which request must be received by the Trustee at least ten (10) Business Days prior to the date the Trustee is requested to give notice as described below), unless the Trustee shall agree to a shorter period), shall mail or cause to be mailed, by first class mail, to the Paying Agent and all holders of record on such date a notice (the "COMPANY REPURCHASE NOTICE") to each holder of Debentures at its last address as the same appears on the Debenture Register and to any beneficial owner of Debentures as required by applicable law; provided that if the Company shall give such notice, it shall also give written notice to the Trustee (and the Paying Agent if the Trustee is not the Paying Agent) at such time as it is mailed to Debentureholders. Such notice, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. Each Company Repurchase Notice shall state: (i) the Company Repurchase Price, excluding accrued and unpaid interest, the Conversion Rate at the time of such notice (and any applicable adjustments to the Conversion Rate) and, to the extent known at the time of such notice, the amount of interest that will be payable with respect to the Debentures on the Company Repurchase Date; (ii) whether the Company elects to pay the Company Repurchase Price in cash, in shares of Common Stock or a combination thereof, specifying the percentage or amounts of each; 27 (iii) if the Company elects to pay any portion of the Company Repurchase Price in shares of Common Stock, the method of calculating the Market Price of the Common Stock; (iv) the Company Repurchase Date; (v) the last date on which a holder may exercise the repurchase right; (vi) the name and address of the Paying Agent and the Conversion Agent; (vii) that Debentures as to which a Company Repurchase Election has been given by the holder may be converted only if the election has been withdrawn by the holder in accordance with the terms of this Indenture; provided that the Debentures are otherwise convertible in accordance with Section 15.01; (viii) that the holder shall have the right to withdraw any Debentures surrendered prior to the close of business on the Business Day immediately preceding the Company Repurchase Date (or any such later time as may be required by applicable law); (ix) a description of the procedure which a Debentureholder must follow to exercise such repurchase right or to withdraw any surrendered Debentures; (x) the CUSIP number or numbers of the Debentures (if then generally in use); and (xi) briefly, the conversion rights of the Debentures and whether, at the time of such notice, the Debentures are eligible for conversion. No failure of the Company to give the foregoing notices and no defect therein shall limit the Debentureholders' repurchase rights or affect the validity of the proceedings for the repurchase of the Debentures pursuant to this Section 3.07. (c) Debentures shall be repurchased pursuant to this Section 3.07 at the option of the holder upon: (i) delivery to the Trustee (or other Paying Agent appointed by the Company) by a holder of a duly completed notice (a "COMPANY REPURCHASE ELECTION") in the form set forth on the reverse of the Debenture at any time from the opening of business on the twentieth (20th) Business Day preceding the Company Repurchase Date until the close of business on the Business Day immediately preceding the Company Repurchase Date, subject to extension to comply with applicable law, stating: (1) if certificated, the certificate numbers of the Debentures which the holder shall deliver to be repurchased; (2) the portion of the principal amount of the Debentures that the holder shall deliver to be repurchased, which portion must be $1,000 or an integral multiple thereof; 28 (3) that such Debentures shall be repurchased as of the Company Repurchase Date pursuant to the terms and conditions specified in the Debentures and in this Indenture; and (4) in the event the Company elects to pay the Company Repurchase Price, in whole or in part, in shares of Common Stock but such portion of the Company Repurchase Price shall ultimately be paid to such holder entirely in cash because any of the conditions to payment of the Company Repurchase Price in shares of Common Stock is not satisfied prior to the close of business on the Business Day prior to the relevant Company Repurchase Date, whether such holder elects (i) to withdraw the Company Repurchase Election as to some or all of the Debentures to which such election relates (stating the principal amount and certificate numbers, if any, of the Debentures as to which such withdrawal relates), or (ii) to receive cash in respect of the entire Company Repurchase Price for all Debentures (or portions thereof) to which such election relates; and (ii) delivery or book-entry transfer of the Debentures to the Trustee (or other Paying Agent appointed by the Company), simultaneously with or at any time after delivery of the Company Repurchase Election (together with all necessary endorsements) at the Corporate Trust Office of the Trustee (or other Paying Agent appointed by the Company) in the Borough of Manhattan, such delivery or transfer being a condition to receipt by the holder of the Company Repurchase Price therefor; provided that such Company Repurchase Price shall be so paid pursuant to this Section 3.07 only if the Debentures so delivered or transferred to the Trustee (or other Paying Agent appointed by the Company) shall conform in all respects to the description thereof in the related Company Repurchase Election. All questions as to the validity, eligibility (including time of receipt) and acceptance of any Debenture for repurchase shall be determined by the Company, whose determination shall be final and binding absent manifest error. If a holder fails to indicate such holder's choice with respect to the election set forth in Section 3.07(c)(i)(4), such holder shall be deemed to have elected to receive cash in respect of the entire Company Repurchase Price for all Debentures subject to such Company Repurchase Election in the circumstances set forth in Section 3.07(c)(i)(4). SECTION 3.08. Company's Right to Elect Manner of Payment of Repurchase Price and Make Whole Payment. (a) The Debentures to be repurchased by the Company on any Repurchase Date pursuant to Section 3.06 or Section 3.07, may be paid for, in whole or in part, at the election of the Company, in U.S. legal tender ("CASH") or shares of Common Stock, or in any combination of cash and shares of Common Stock, subject to the conditions set forth in Section 3.08(e). The Company shall designate in its Repurchase Notice whether the Company will purchase the Debentures for cash or shares of Common Stock, or, if a combination thereof, the percentage of the Repurchase Price that it will pay in cash and the percentage that it will pay in shares of Common Stock; provided that the Company will pay cash for accrued and unpaid interest and for fractional interests in shares of Common Stock in an amount based upon the Market Price with respect to the applicable Repurchase Date. For purposes of determining the amount of any fractional interests, all Debentures subject to repurchase held by a holder shall be considered together (no matter how many separate certificates are to be presented). 29 (b) Each holder whose Debentures are repurchased pursuant to Section 3.06 or Section 3.07 shall receive the same percentage of cash or shares of Common Stock in payment of the Repurchase Price for such Debentures as any other holder whose Debentures are so repurchased, except (i) as provided in Section 3.08(a) with regard to the payment of cash in lieu of fractional shares of Common Stock and (ii) in the event that the Company is unable to purchase the Debentures of a holder or holders for shares of Common Stock because any necessary qualifications or registrations of the shares of Common Stock under applicable state securities laws cannot be obtained, or because the conditions to purchasing such Debentures for shares of Common Stock set forth in Section 3.08(e) have not been satisfied, the Company may purchase the Debentures of such holder or holders for cash. The Company may not change its election with respect to the consideration (or components or percentages of components thereof) to be paid once the Company has given its Repurchase Notice to holders except as provided in the preceding sentence or pursuant to Section 3.08(e) in the event of a failure to satisfy, prior to the close of business on the Business Day immediately preceding the Repurchase Date, any condition to the payment of the Repurchase Price in whole or in part in shares of Common Stock. (c) At least three (3) Business Days before the date of any Repurchase Notice, the Company shall deliver an Officers' Certificate to the Trustee specifying: (i) the manner of payment selected by the Company; (ii) the information required to be included in the Repurchase Notice; (iii) if the Company elects to pay the Repurchase Price, or a specified percentage thereof, in shares of Common Stock, that the conditions to such manner of payment set forth in Section 3.08(e) have been or will be complied with; and (iv) whether the Company desires the Trustee to give the Repurchase Notice required. (d) If the Company elects to pay the Repurchase Price, or any percentage thereof, with respect to a Repurchase Date in shares of Common Stock, the number of shares of Common Stock to be delivered with respect to each $1,000 principal amount of Debentures shall be equal to the quotient obtained by dividing (i) the dollar amount of the Repurchase Price (not including any accrued and unpaid interest) to be paid in shares of Common Stock by (ii) 97.5% of the Market Price with respect to such Repurchase Date; provided that no fractional shares will be delivered. (e) The Company's right to elect to pay some or all of the Repurchase Price with respect to a Repurchase Date by delivering shares of Common Stock and to pay some or all of the Make Whole Payment with respect to a Provisional Redemption Date by delivering shares of Common Stock shall, in each case, be conditioned upon: (i) the Company giving timely notice of its election and not having previously given notice of an election to pay the Repurchase Price or Make Whole Payment, as applicable, with respect to such Repurchase Date or Provisional Redemption Date, as applicable, entirely in cash; 30 (ii) the approval for listing of such shares of Common Stock on each national or regional securities exchange on which the Common Stock is then listed, subject to official notice of issuance, and approval of trading of such shares of Common Stock on the Nasdaq National Market or other similar automated quotation system on which the Common Stock is then traded; (iii) information necessary to calculate the Market Price being published in a daily newspaper of national circulation or being otherwise readily publicly available; (iv) the registration of such shares of Common Stock under the Securities Act and the Exchange Act, in each case if required; (v) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration; and (vi) the receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel each stating that (A) the terms of the issuance of the shares of Common Stock are in conformity with this Indenture and (B) the shares of Common Stock to be issued by the Company in payment of the Repurchase Price or Make Whole Payment, as applicable, in respect of Debentures have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the Repurchase Price, or Make Whole Payment, as applicable, will be validly issued, fully paid and nonassessable and free from preemptive rights under the Company's Certificate of Incorporation and By-laws, in each case as then in effect, and the Delaware General Corporation Law (or other applicable corporate law), and, in the case of such Officers' Certificate, stating that each of the conditions in clauses (i) through (v) above and the condition set forth in the second succeeding sentence have been satisfied and, in the case of such Opinion of Counsel, stating that the condition in clause (iv) above has been satisfied. Such Officers' Certificate shall also set forth the number of shares of Common Stock to be issued for each $1,000 principal amount of Debentures and the Last Reported Sale Price of the Common Stock on each Trading Day during the period during which the Market Price with respect to such Repurchase Date or Provisional Redemption Date, as applicable, is to be calculated. If the foregoing conditions are not satisfied with respect to a holder or holders prior to the close of business on the Business Day immediately preceding the Repurchase Date or Provisional Redemption Date, as applicable, the Company shall pay the entire Repurchase Price of the Debentures of such holder or holders in cash. Upon determination of the actual number of shares of Common Stock to be issued upon repurchase of Debentures, the Company shall be required to disseminate a press release through Dow Jones & Company, Inc., Bloomberg Business News or a comparable news service containing this information or publish the information on the Company's web site or through such other public medium as the Company may use at that time. (f) All shares of Common Stock delivered upon repurchase or redemption of the Debentures shall be newly issued shares or treasury shares, shall be duly authorized, validly 31 issued, fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or adverse claim. (g) If a holder is paid some or all of the Repurchase Price or Make Whole Amount with respect to such holder's Debentures in shares of Common Stock, the Company shall pay any documentary, stamp or similar issue or transfer tax due on such issue of Common Stock; provided that the holder shall pay any such tax which is due because the holder requests the Common Stock to be issued in a name other than that of the holder. The Paying Agent may refuse to deliver the certificates representing the shares of Common Stock being issued in a name other than the holder's name until the Paying Agent receives a sum sufficient to pay any tax which will be due because the shares of Common Stock are to be issued in a name other than the holder's name. Nothing herein shall preclude any income tax withholding required by law or regulations. SECTION 3.09. Conditions and Procedures for Repurchase at Option of Holders. (a) The Company may repurchase from the holder thereof, pursuant to Section 3.06 or Section 3.07, a portion of a Debenture, if the principal amount of such portion is $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to the repurchase of all of a Debenture also apply to the repurchase of such portion of such Debenture. Upon presentation of any Debenture repurchased in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Debenture or Debentures, of any authorized denomination, in aggregate principal amount equal to the portion of the Debentures presented that is not repurchased. (b) On or prior to a Repurchase Date, the Company will deposit with the Trustee or with one or more Paying Agents (or, if the Company, a Guarantor or a Wholly Owned Subsidiary is acting as Paying Agent, set aside, segregate and hold in trust (or in the case of a Wholly Owned Subsidiary, the Company shall cause such Wholly Owned Subsidiary to so set aside, segregate and hold) as provided in Section 4.04) an amount of cash and/or shares of Common Stock, as applicable, sufficient to repurchase on the Repurchase Date all of the Debentures (or portions thereof) to be repurchased on such date at the Repurchase Price; provided that if such deposit is made on the Repurchase Date, it must be received by the Trustee or Paying Agent, as the case may be, by 10:00 a.m., New York City time, on such date. If the Trustee or other Paying Agent appointed by the Company, or the Company, a Guarantor or a Wholly Owned Subsidiary, if it, a Guarantor or a Wholly Owned Subsidiary is acting as the Paying Agent, holds cash and/or shares of Common Stock sufficient to pay the aggregate Repurchase Price of all of the Debentures (or portions thereof) that are to be repurchased as of the Repurchase Date, then on or after the Repurchase Date, (i) such Debentures to be repurchased will cease to be outstanding, (ii) interest on such Debentures to be repurchased will cease to accrue, whether or not book-entry transfer of the Debentures has been made or the Debentures have been delivered to the Trustee or Paying Agent, and (iii) all other rights of the holders of such Debentures to be repurchased will terminate other than the right to receive the Repurchase Price upon transfer or delivery of the Debentures. (c) Upon receipt by the Trustee (or other Paying Agent appointed by the Company) of a Repurchase Election, the holder of the Debenture in respect of which such 32 Repurchase Election was given shall (unless such notice is validly withdrawn) thereafter be entitled to receive solely the Repurchase Price with respect to such Debenture. Such Repurchase Price shall be paid to such holder, subject to receipt of funds and/or Debentures by the Trustee (or other Paying Agent appointed by the Company), promptly (but in no event more than five (5) Business Days) following the later of (x) the Repurchase Date with respect to such Debenture (provided that the holder has satisfied the conditions in Section 3.06(c) or Section 3.07(c), as applicable) and (y) the time of book-entry transfer or delivery of such Debenture to the Trustee (or other Paying Agent appointed by the Company) by the holder thereof in the manner required by Section 3.06(c) or Section 3.07(c), as applicable. Debentures in respect of which a Repurchase Election has been given by the holder thereof may not be converted pursuant to Article 15 hereof on or after the date of the delivery of such Repurchase Election unless such notice has first been validly withdrawn. (d) Notwithstanding anything herein to the contrary, any holder delivering to the Trustee (or other Paying Agent appointed by the Company) a Repurchase Election shall have the right to withdraw such election at any time prior to the close of business on the Business Day immediately preceding the Repurchase Date (or any such later time as may be required by applicable law) by delivery of a written notice of withdrawal to the Trustee (or other Paying Agent appointed by the Company) specifying: (i) the certificate number, if any, of the Debentures in respect of which such notice of withdrawal is being submitted, or the appropriate Depositary information if the Debentures in respect of which such notice of withdrawal is being submitted is represented by a Global Debenture, (ii) the principal amount of the Debentures with respect to which such notice of withdrawal is being submitted, and (iii) the principal amount, if any, of such Debentures which remain subject to the original Repurchase Election and which has been or will be delivered for repurchase by the Company. The Trustee (or other Paying Agent appointed by the Company) shall promptly notify the Company of the receipt by it of any Repurchase Election or written notice of withdrawal thereof. (e) The Company will comply with the provisions of Rule 13e-4 and any other tender offer rules under the Exchange Act to the extent then applicable in connection with the repurchase rights of the holders of Debentures in the event of a Fundamental Change or on any Company Repurchase Date. If then required by applicable law, the Company will file a Schedule TO or any other schedule required in connection with such repurchase. (f) There shall be no repurchase of any Debentures pursuant to Section 3.06 or Section 3.07 if there has occurred at any time prior to, and is continuing on, the Repurchase Date an Event of Default (other than an Event of Default that is cured by the payment of the Repurchase Price with respect to such Debentures). The Paying Agent will promptly return to the respective holders thereof any Debentures (x) with respect to which a Repurchase Election 33 has been withdrawn in compliance with this Indenture or (y) held by it during the continuance of an Event of Default (other than a default in the payment of the Repurchase Price with respect to such Debentures) in which case, upon such return, the Repurchase Election with respect thereto shall be deemed to have been withdrawn. (g) The Trustee (or other Paying Agent appointed by the Company) shall return to the Company any cash that remains unclaimed as provided in Section 12.03, for the payment of the Repurchase Price; provided that, to the extent that the aggregate amount of cash deposited by the Company pursuant to Section 3.09(b) exceeds the aggregate Repurchase Price of the Debentures or portions thereof which the Company is obligated to purchase as of the Repurchase Date, then, unless otherwise agreed in writing with the Company, promptly after the Business Day following the Repurchase Date, the Trustee shall return any such excess to the Company. (h) In the case of a reclassification, change, consolidation, merger, combination, sale or conveyance to which Section 15.06 applies, in which the Common Stock of the Company is changed or exchanged as a result into the right to receive stock, securities or other property or assets (including cash), which includes shares of Common Stock of the Company or shares of common stock of another Person that are, or upon issuance will be, traded on a United States national securities exchange or approved for trading on an established automated over-the-counter trading market in the United States and such shares constitute at the time such change or exchange becomes effective in excess of 50% of the aggregate fair market value of such stock, securities or other property or assets (including cash) (as determined by the Company, which determination shall be conclusive and binding), then the Person formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture (accompanied by an Opinion of Counsel that such supplemental indenture complies with the Trust Indenture Act as in force at the date of execution of such supplemental indenture) modifying the provisions of this Indenture relating to the right of holders of the Debentures to cause the Company to repurchase the Debentures following a Fundamental Change and the provisions of this Indenture relating to the Company's option to deliver shares of Common Stock in payment of the Repurchase Price, including, without limitation, the applicable provisions of this Article 3 and the definitions of Common Stock and Fundamental Change, as appropriate, as determined in good faith by the Company (which determination shall be conclusive and binding), to make such provisions correspondingly apply to such other Person if different from the Company and the common stock issued by such Person (in lieu of the Company and the Common Stock of the Company). ARTICLE 4 PARTICULAR COVENANTS OF THE COMPANY ----------------------------------- SECTION 4.01. Payment of Principal and Interest. The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of (including any Redemption Price or Repurchase Price pursuant to Article 3) and interest on each of the Debentures at the places, at the respective times and in the manner provided herein and in the Debentures. The Company shall pay interest on overdue principal at the rate specified in the Debentures, and shall pay interest on overdue installments of interest at the same rate to the extent lawful. 34 SECTION 4.02. Maintenance of Office or Agency. The Company will maintain an office or agency in the Borough of Manhattan, The City of New York, where the Debentures may be surrendered for registration of transfer or exchange or presented for payment or for conversion, redemption or repurchase and where notices and demands to or upon the Company in respect of the Debentures and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency not designated or appointed by the Trustee. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office. The Company may also from time to time designate co-debenture registrars and one or more offices or agencies where the Debentures may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby initially designates the Trustee as Paying Agent, Debenture Registrar, Custodian and Conversion Agent, and each of the Corporate Trust Office and the office or agency of the Trustee in the Borough of Manhattan shall be considered as one such office or agency of the Company for each of the aforesaid purposes. So long as the Trustee is the Debenture Registrar, the Trustee agrees to mail, or cause to be mailed, the notices set forth in Section 7.07(a) and in Section 7.07(c). If co-debenture registrars have been appointed in accordance with this Section and Article 2, the Trustee shall mail such notices only to the Company and the holders of Debentures it can identify from its records. SECTION 4.03. Appointments to Fill Vacancies in Trustee's Office. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.07(b), a Trustee, so that there shall at all times be a Trustee hereunder. SECTION 4.04. Provisions as to Paying Agent. (a) If the Company shall appoint a Paying Agent other than the Trustee, the Company will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 4.04: (i) that it will hold all sums held by it as such agent for the payment of the principal of or interest on the Debentures (whether such sums have been paid to it by the Company or by any other obligor on the Debentures, or otherwise) in trust for the benefit of the holders of the Debentures; (ii) that it will give the Trustee notice of any failure by the Company (or by any other obligor on the Debentures) to make any payment of the principal of or interest on the Debentures when the same shall be due and payable; and 35 (iii) that at any time during the continuance of an Event of Default, upon request of the Trustee, it will forthwith pay to the Trustee all sums so held in trust. The Company shall, on or before each due date of the principal of or interest on the Debentures, deposit with the Paying Agent a sum (in funds which are immediately available on the due date for such payment) sufficient to pay such principal or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of any failure to take such action; provided that if such deposit is made on the due date, such deposit shall be received by the Paying Agent by 10:00 a.m., New York City time, on such date. (b) If the Company, a Guarantor or a Wholly Owned Subsidiary shall act as Paying Agent, it will (or will cause such Wholly Owned Subsidiary to), on or before each due date of the principal of or interest on the Debentures, set aside, segregate and hold in trust for the benefit of the holders of the Debentures a sum sufficient to pay such principal or interest so becoming due and will promptly notify the Trustee of any failure to take such action and of any failure by the Company (or any other obligor under the Debentures) to make any payment of the principal of or interest on the Debentures when the same shall become due and payable. (c) Anything in this Section 4.04 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by the Company, such Guarantor, such Wholly Owned Subsidiary or such Paying Agent hereunder as required by this Section 4.04, such sums to be held by the Trustee upon the trusts herein contained and upon such payment by the Company, such Guarantor, such Wholly Owned Subsidiary or such Paying Agent to the Trustee, the Company, such Guarantor, such Wholly Owned Subsidiary or such Paying Agent shall be released from all further liability with respect to such sums. (d) Anything in this Section 4.04 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 4.04 is subject to Sections 12.02 and 12.03. The Trustee shall not be responsible for the actions of any other Paying Agents (including the Company or a Wholly Owned Subsidiary if acting as Paying Agent) and shall have no control of any funds held by such other Paying Agents. SECTION 4.05. Existence. Subject to Article 11, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and rights (both organizational and statutory); provided that the Company shall not be required to preserve any such right if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Debentureholders. SECTION 4.06. Rule 144A Information Requirement. Within the period prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), the Company covenants and agrees that it shall, during any period in which it is not subject to Section 13 or 15(d) under the Exchange Act, make available to any holder or beneficial holder of Debentures or any Common Stock issued upon 36 conversion, redemption or repurchase thereof which continue to be Restricted Securities in connection with any sale thereof, and any prospective purchaser of such Debentures or such Common Stock designated by such holder or beneficial holder, the information required pursuant to Rule 144A(d)(4) under the Securities Act upon the request of any holder or beneficial holder of such Debentures or such Common Stock and it will take such further action as any holder or beneficial holder of such Debentures or such Common Stock may reasonably request, all to the extent required from time to time to enable such holder or beneficial holder to sell such Debentures or such Common Stock without registration under the Securities Act within the limitation of the exemption provided by Rule 144A, as such Rule may be amended from time to time. Upon the request of any holder or any beneficial holder of such Debentures or such Common Stock, the Company will deliver to such holder or beneficial holder a written statement as to whether it has complied with such requirements. SECTION 4.07. Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Debentures as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.08. Compliance Certificate. The Company shall deliver to the Trustee, within one hundred twenty (120) days after the end of each fiscal year of the Company (which fiscal year of the Company is presently the twelve (12) calendar months ending December 31), a certificate signed by either the principal executive officer, principal financial officer or principal accounting officer of the Company, stating whether or not to the best knowledge of the signer thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and the status thereof of which the signer may have knowledge. The Company will deliver to the Trustee, promptly upon becoming aware of (i) any default in the performance or observance of any covenant, agreement or condition contained in this Indenture, or (ii) any Event of Default, an Officers' Certificate specifying with particularity such default or Event of Default and further stating what action the Company has taken, is taking or proposes to take with respect thereto. Any notice required to be given under this Section 4.08 shall be delivered to a Trust Officer of the Trustee at its Corporate Trust Office. SECTION 4.09. Liquidated Damages Notice. (a) In the event that the Company is required to pay Liquidated Damages to holders of Debentures pursuant to the Registration Rights Agreement, the Company will provide written notice ("LIQUIDATED DAMAGES NOTICE") to 37 the Trustee of its obligation to pay Liquidated Damages no later than fifteen (15) days prior to the proposed payment date for the Liquidated Damages, and the Liquidated Damages Notice shall set forth the amount of Liquidated Damages to be paid by the Company on such payment date. The Trustee shall not at any time be under any duty or responsibility to any holder of Debentures to determine the Liquidated Damages, or with respect to the nature, extent or calculation of the amount of Liquidated Damages when made, or with respect to the method employed in such calculation of the Liquidated Damages. SECTION 4.10. Future Guarantors. (a) The Company shall cause each of its direct or indirect domestic Wholly Owned Subsidiaries that guarantees the Senior Notes (or, after such time as the Senior Notes are no longer outstanding, Incurs or Guarantees any Indebtedness (other than Intercompany Indebtedness) aggregating more than $10,000,000) to, at the same time, execute and deliver to the Trustee a Debenture Guarantee Agreement pursuant to which such subsidiary will Guarantee payment of the Debentures on the same terms and conditions as those set forth in Article 14 of this Indenture, excluding: (i) AET for so long as the capital stock of AET is not 100% owned, either directly or indirectly, by the Company, (ii) UCAR Holdings V Inc., (and its successors) unless its legal existence has not been dissolved prior to January 1, 2005 and (iii) each of Union Carbide Grafito, Inc. (and its successors) and Graphite Electrode Network LLC (and its successors) until the date of contribution to such subsidiary by the Company and its other subsidiaries of an aggregate cumulative amount, during the period from the Original Issuance Date of the Debentures through and including such date of contribution, of cash, assets or property with an aggregate book value in excess of 1% of the Consolidated Assets of the Company and its consolidated subsidiaries (determined as of such date of contribution and based on the consolidated financial statements of the Company published most recently prior to such date of contribution) but excluding contributions of cash, assets or property to satisfy environmental or personal injury liabilities or to pay for environmental remediation. (b) The Company shall cause each of its direct and indirect domestic non-Wholly Owned Subsidiaries that guarantees the Senior Notes (or, after such time as the Senior Notes are no longer outstanding, Guarantees any Indebtedness of the Company or any of its Wholly Owned Subsidiaries aggregating more than $10,000,000) to, at the same time, execute and deliver to the Trustee a Debenture Guarantee Agreement pursuant to which such subsidiary will Guarantee payment of the Debentures on the same terms and conditions as those set forth in Article 14. References to $10,000,000 in this Section 4.10 shall mean $10,000,000 or the foreign currency equivalent thereto at the time of the relevant Incurrence, Guarantee or contribution. ARTICLE 5 DEBENTUREHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE ------------------------------------------------------------------ SECTION 5.01. Debentureholders' Lists. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee, semiannually, not more than fifteen (15) days after each May 1 and November 1 in each year beginning with May 1, 2004, and at such other times as the Trustee may request in writing, within thirty (30) days after receipt by the Company of any such request (or such lesser time as the Trustee may reasonably request in order to enable it to timely provide any notice to be provided by it hereunder), a list in such 38 form as the Trustee may reasonably require of the names and addresses of the holders of Debentures as of a date not more than fifteen (15) days (or such other date as the Trustee may reasonably request in order to so provide any such notices) prior to the time such information is furnished, except that no such list need be furnished by the Company to the Trustee so long as the Trustee is acting as the sole Debenture Registrar. SECTION 5.02. Preservation and Disclosure of Lists. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Debentures contained in the most recent list furnished to it as provided in Section 5.01 or maintained by the Trustee in its capacity as Debenture Registrar or co-debenture registrar in respect of the Debentures, if so acting. The Trustee may destroy any list furnished to it as provided in Section 5.01 upon receipt of a new list so furnished. (b) The rights of Debentureholders to communicate with other holders of Debentures with respect to their rights under this Indenture or under the Debentures, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. The Company, each Guarantor, the Trustee and the Debenture Registrar shall have the protection of Section 312(c) of the Trust Indenture Act. (c) Every Debentureholder, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of holders of Debentures made pursuant to the Trust Indenture Act. SECTION 5.03. Reports by Trustee. (a) Within sixty (60) days after January 15 of each year commencing with the year 2004, the Trustee shall transmit to holders of Debentures such reports dated as of January 15 of the year in which such reports are made concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. In the event that no events have occurred under the applicable sections of the Trust Indenture Act, the Trustee shall be under no duty or obligation to provide such reports. (b) A copy of such report shall, at the time of such transmission to holders of Debentures, be filed by the Trustee with each stock exchange and automated quotation system upon which the Debentures are listed and with the Company. The Company will promptly notify the Trustee in writing when the Debentures are listed on any stock exchange or automated quotation system or delisted therefrom. SECTION 5.04. Reports by the Company. The Company shall file with the Trustee (and the Commission at any time after this Indenture becomes qualified under the Trust Indenture Act), and transmit to holders of Debentures, such information, documents and other reports and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act, whether or not the Debentures are governed by such Act; provided that any such information, document or report required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within fifteen (15) days after the same is so required to be filed with the Commission. Delivery of such reports, information and documents to the Trustee is for 39 informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on an Officers' Certificate). ARTICLE 6 REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS ON AN EVENT OF DEFAULT ------------------------------------------------------------------- SECTION 6.01. Events of Default. In case one or more of the following events (each, an "EVENT OF DEFAULT") (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall have occurred and be continuing: (a) default in the payment of any installment of interest upon any of the Debentures, as and when the same shall become due and payable, and continuance of such default for a period of thirty (30) days; or (b) default in the payment of the principal of any of the Debentures, as and when the same shall become due and payable either at maturity or in connection with any redemption or repurchase, in each case pursuant to Article 3, by acceleration or otherwise; or (c) default in the Company's obligation to deliver shares of Common Stock, cash or other property upon conversion of any of the Debentures upon the exercise of a holder's rights pursuant to Article 15 and continuance of such default for ten (10) days or more; or (d) default in the Company's obligation to repurchase the Debentures at the option of a holder in connection with a Fundamental Change pursuant to Section 3.06 or on specified dates pursuant to Section 3.07; or (e) failure on the part of the Company to provide notice of the occurrence of a Fundamental Change within 25 days after the occurrence of such Fundamental Change as required by Section 3.06; or (f) failure on the part of the Company or the Guarantors to comply with the provisions of Article 11; or (g) default in the Company's obligation to redeem any of the Debentures after it has exercised its option to redeem such Debentures; or (h) failure on the part of the Company to cause any subsidiary to Guarantee the Debentures as required under Section 4.10 and continuance of such default for 30 days after written notice to the Company from the Trustee or to the Company by the holders of at least 25% in aggregate principal amount of the Debentures at the time outstanding determined in accordance with Section 8.04; or (i) failure on the part of the Company or the Guarantors duly to comply with or observe any other of the covenants, warranties or agreements on the part of the Company or the 40 Guarantors in the Debentures, the Debenture Guarantees or this Indenture (other than a covenant, warrant or agreement a default in whose performance or whose breach is elsewhere in this Section 6.01 specifically dealt with) and continuance of such failure for a period of sixty (60) days after the date on which written notice of such failure, requiring the Company or the Guarantors to remedy the same, shall have been given to the Company or the Guarantors by the Trustee or to the Company or the Guarantors by the holders of at least 25% in aggregate principal amount of the Debentures at the time outstanding determined in accordance with Section 8.04; or (j) failure by the Company or any Guarantor or any Significant Subsidiary to pay any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $10,000,000, or its foreign currency equivalent at the time; or (k) the entering of any judgment or decree for the payment of money in excess of $10.0 million, or its foreign currency equivalent at the time, above the coverage under the applicable insurance policies and indemnities as to which the relevant insurer or indemnitee has not disclaimed responsibility, against the Company, any Guarantor or any Significant Subsidiary, which remains outstanding for a period of 60 days following the entry of such judgment or decree and is not discharged or waived or does not have the execution thereof effectively stayed (including by agreement) within 10 days after written notice to the Company from the Trustee or the holders of at least 25% in aggregate principal amount of the Debentures at the time outstanding determined in accordance with Section 8.04; (l) the Company, any Guarantor or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Company, any Guarantor or any Significant Subsidiary or their debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company, any Guarantor or any Significant Subsidiary or any substantial part of the property of the Company, any Guarantor or any Significant Subsidiary, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against the Company, any Guarantor or any Significant Subsidiary, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay their debts as they become due; or (m) an involuntary case or other proceeding shall be commenced against the Company, any Guarantor or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to the Company, any Guarantor or any Significant Subsidiary or their debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company, any Guarantor or any Significant Subsidiary or any substantial part of the property of the Company, any Guarantor or any Significant Subsidiary, and such involuntary case or other proceeding remains undismissed or unstayed and in effect for a period of sixty (60) consecutive days; or 41 (n) any Debenture Guarantee ceases to be in full force and effect (other than in accordance with the terms of such Debenture Guarantee) or any Guarantor or any Person acting on behalf of such Guarantor denies or disaffirms such Guarantor's obligations under this Indenture or such Debenture Guarantee; then, and in each and every such case (other than an Event of Default specified in Section 6.01(l) or 6.01(m)), unless the principal of all of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding determined in accordance with Section 8.04, by notice in writing to the Company (and to the Trustee if given by Debentureholders), may declare the principal of all the Debentures and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Debentures contained to the contrary notwithstanding. If an Event of Default specified in Section 6.01(l) or 6.01(m) occurs, the principal of all the Debentures and the interest accrued thereon shall be immediately and automatically due and payable without necessity of further action. This provision, however, is subject to the conditions that if, at any time after the principal of the Debentures shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all Debentures and the principal of any and all Debentures which shall have become due otherwise than by acceleration (with interest on overdue installments of interest (to the extent that payment of such interest is enforceable under applicable law) and on such principal at the rate borne by the Debentures, to the date of such payment or deposit) and amounts due to the Trustee pursuant to Section 7.06, and if any and all defaults under this Indenture, other than the nonpayment of principal of and accrued and unpaid interest on Debentures which shall have become due by acceleration, shall have been cured or waived pursuant to Section 6.07, then and in every such case the holders of a majority in aggregate principal amount of the Debentures then outstanding determined in accordance with Section 8.04, by written notice to the Company and to the Trustee, may waive all defaults or Events of Default and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or Event of Default, or shall impair any right consequent thereon. The Company shall notify in writing a Trust Officer of the Trustee, promptly upon becoming aware thereof, of any Event of Default as set forth in the second paragraph of Section 4.08. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such waiver or rescission and annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the holders of Debentures, and the Trustee shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the holders of Debentures, and the Trustee shall continue as though no such proceeding had been taken. SECTION 6.02. Payments of Debentures on Default; Suit Therefor. The Company covenants that (a) in case default shall be made in the payment of any installment of interest upon any of the Debentures as and when the same shall become due and payable, and such default shall have continued for a period of thirty (30) days, or (b) in case default shall be 42 made in the payment of the principal of any of the Debentures as and when the same shall have become due and payable, whether at maturity of the Debentures or in connection with any redemption, repurchase, acceleration, declaration or otherwise, then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debentures, the whole amount that then shall have become due and payable on all such Debentures for principal or interest, as the case may be, with interest upon the overdue principal and interest (to the extent that payment of such interest is enforceable under applicable law) upon the overdue installments of interest at the rate borne by the Debentures, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Trustee, its agents, attorneys and counsel, and all other amounts due the Trustee under Section 7.06. Until such demand by the Trustee, the Company may pay the principal of and interest, on the Debentures to the holders, whether or not the Debentures are overdue. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on the Debentures and collect in the manner provided by law out of the property of the Company or any other obligor on the Debentures wherever situated the monies adjudged or decreed to be payable. In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Debentures under Title 11 of the United States Code, or any other applicable law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Company or such other obligor, the property of the Company or such other obligor, or in the case of any other judicial proceedings relative to the Company or such other obligor, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Debentures shall then be due and payable as therein expressed or by declaration, acceleration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 6.02, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Debentures, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and of the Debentureholders allowed in such judicial proceedings relative to the Company or any other obligor on the Debentures, its or their creditors, or its or their property, and to collect and receive any monies or other property payable or deliverable on any such claims, and to distribute the same after the deduction of any amounts due the Trustee under Section 7.06, and to take any other action with respect to such claims, including participating as a member of any official committee of creditors, as it reasonably deems necessary or advisable, and, unless prohibited by law or applicable regulations, any receiver, assignee or trustee in bankruptcy or reorganization, liquidator, custodian or similar official is hereby authorized by each of the Debentureholders to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to the Debentureholders, to pay to the Trustee any amount due it for reasonable compensation, expenses, advances and 43 disbursements, including counsel fees and expenses incurred by it up to the date of such distribution. To the extent that such payment of reasonable compensation, expenses, advances and disbursements out of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, monies, securities and other property which the holders of the Debentures may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise. All rights of action and of asserting claims under this Indenture, or under any of the Debentures, may be enforced by the Trustee without the possession of any of the Debentures, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the holders of the Debentures. In any proceedings brought by the Trustee (and in any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the holders of the Debentures, and it shall not be necessary to make any holders of the Debentures parties to any such proceedings. SECTION 6.03. Application of Monies Collected by Trustee. Any monies collected by the Trustee pursuant to this Article 6 shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such monies, upon presentation of the several Debentures, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 7.06; SECOND: In case the principal of the outstanding Debentures shall not have become due and be unpaid, to the payment of interest on the Debentures in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the rate borne by the Debentures, such payments to be made ratably to the Persons entitled thereto; THIRD: In case the principal of the outstanding Debentures shall have become due, by acceleration, declaration or otherwise, and be unpaid, to the payment of the whole amount then owing and unpaid upon the Debentures for principal and interest, with interest on the overdue principal and interest (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the rate borne by the Debentures, and in case such monies shall be insufficient to pay in full the whole amounts so due and unpaid, then to the payment of such principal, interest without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest or of any Debenture over any other Debenture, ratably to the aggregate of such principal and interest; and 44 FOURTH: To the payment of the remainder, if any, to the Company or as a court of competent jurisdiction shall direct in writing. SECTION 6.04. Proceedings by Debentureholder. No holder of any Debenture shall have any right by virtue of or by reference to any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture, or for the appointment of a receiver, trustee, liquidator, custodian or other similar official, or for any other remedy hereunder, except for default in the payment of principal or interest, unless such holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof, as hereinbefore provided, and unless also the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding determined in accordance with Section 8.04 shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable security or indemnity satisfactory to the Trustee as it may require against the costs, expenses and liabilities of the Trustee to be incurred therein or thereby, and the Trustee for sixty (60) days after its receipt of such notice, request and offer of reasonable indemnity, shall have neglected or refused to institute any such action, suit or proceeding and no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 6.07 within sixty (60) days of such notice; it being understood and intended, and being expressly covenanted by the taker and holder of every Debenture with every other taker and holder and the Trustee, that no one or more holders of Debentures shall have any right in any manner whatever by virtue of or by reference to any provision of this Indenture to affect, disturb or prejudice the rights of any other holder of Debentures, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debentures (except as otherwise provided herein). For the protection and enforcement of this Section 6.04, each and every Debentureholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Notwithstanding any other provision of this Indenture and any provision of any Debenture, the right of any holder of any Debenture to receive payment of the principal of (including any Redemption Price or Repurchase Price pursuant to Article 3 for) and accrued and unpaid interest on such Debenture on or after the respective due dates expressed in such Debenture, or to institute suit for the enforcement of any such payment on or after such respective dates against the Company, shall not be impaired or affected without the consent of such holder. Anything in this Indenture or the Debentures to the contrary notwithstanding, the holder of any Debenture, without the consent of either the Trustee or the holder of any other Debenture, on its own behalf and for its own benefit, may enforce, and may institute and maintain any proceeding suitable to enforce, its rights of conversion as provided herein. SECTION 6.05. Proceedings by Trustee. In case of an Event of Default, the Trustee may, in its discretion, proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as are necessary to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this 45 Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. SECTION 6.06. Remedies Cumulative and Continuing. Except as provided in Section 2.08, all powers and remedies given by this Article 6 to the Trustee or to the Debentureholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right or power accruing upon any default or Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or any acquiescence therein, and, subject to the provisions of Section 6.04, every power and remedy given by this Article 6 or by law to the Trustee or to the Debentureholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Debentureholders. SECTION 6.07. Direction of Proceedings and Waiver of Defaults by Majority of Debentureholders. The holders of a majority in aggregate principal amount of the Debentures at the time outstanding determined in accordance with Section 8.04 shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided that (a) such direction shall not be in conflict with any rule of law or with this Indenture, (b) the Trustee may take any other action which is not inconsistent with such direction and (c) the Trustee may decline to take any action that would benefit some Debentureholders to the detriment of other Debentureholders, or that may involve the Trustee in personal liability. The holders of a majority in aggregate principal amount of the Debentures at the time outstanding determined in accordance with Section 8.04 may, on behalf of the holders of all of the Debentures, waive any past default or Event of Default hereunder and its consequences, except (i) a default in the payment of interest on, or the principal of, the Debentures, (ii) a failure by the Company to convert any Debentures into Common Stock, (iii) a default in the payment of the Redemption Price pursuant to Section 3.04, (iv) a default in the payment of the Fundamental Change Repurchase Price pursuant to Section 3.06 or Company Repurchase Price pursuant to Section 3.07 or (v) a default in respect of a covenant or provision hereof which under Article 10 cannot be modified or amended without the consent of the holders of each or all Debentures then outstanding or affected thereby. Upon any such waiver, the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section 6.07, said default or Event of Default shall for all purposes of the Debentures and this Indenture be deemed to have been cured and to be not continuing; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 6.08. Notice of Defaults. The Trustee shall, within the earlier of ninety (90) days after the occurrence of a Default or thirty (30) days after the occurrence of such Default known to a Trust Officer or written notice of the occurrence of such Default is received by the Trustee, mail to all Debentureholders, as the names and addresses of such holders appear 46 upon the Debenture Register, notice of all Defaults known to a Trust Officer, unless such Defaults shall have been cured or waived before the giving of such notice; provided that except in the case of Default in the payment of the principal of (including any Redemption Price or Repurchase Price pursuant to Article 3 for) or interest on any of the Debentures, the Trustee shall be protected in withholding such notice if and so long as a trust committee of directors and/or Trust Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Debentureholders. SECTION 6.09. Undertaking to Pay Costs. All parties to this Indenture agree, and each holder of any Debenture by its acceptance thereof shall be deemed to have agreed, that any court may, in its discretion, require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided that the provisions of this Section 6.09 (to the extent permitted by law) shall not apply to any suit instituted by the Trustee, to any suit instituted by any Debentureholder, or group of Debentureholders, holding in the aggregate more than ten (10) percent in principal amount of the Debentures at the time outstanding determined in accordance with Section 8.04, or to any suit instituted by any Debentureholder for the enforcement of the payment of the principal of (including any Redemption Price or Repurchase Price pursuant to Article 3 for) or interest on any Debenture on or after the due date expressed in such Debenture or to any suit for the enforcement of the right to convert any Debenture in accordance with the provisions of Article 15. ARTICLE 7 THE TRUSTEE ----------- SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of certificates or opinions specifically required by any provision hereof to be furnished to it, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). 47 (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.07; and (iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the Trust Indenture Act. SECTION 7.02. Rights of Trustee. (a) The Trustee may conclusively rely and shall be protected in acting or refraining from acting on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. 48 (e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Debentures shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other paper or document unless requested in writing to do so by the holders of not less than a majority in principal amount of the Debentures at the time outstanding, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company and the Guarantors, personally or by agent or attorney at the sole cost of the Company and the Guarantors and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the holders pursuant to this Indenture, unless such holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (h) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder. (i) The Trustee may request that the Company or a Guarantor deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any Person authorized to sign an Officers' Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded. (j) The grant of any permissive rights, power or authority hereunder to the Trustee shall not be construed to be a duty. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Debentures and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent or Debenture Registrar may do the same with like rights. However, the Trustee must comply with Sections 7.09 and 7.10. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Debenture Guarantee or the Debentures, it shall not be accountable for the Company's use of the proceeds from the Debentures, and it shall not be responsible for any statement of the Company or any 49 Guarantor in this Indenture or in any document issued in connection with the sale of the Debentures or in the Debentures other than the Trustee's certificate of authentication. The Trustee shall not be charged with knowledge of any Default or Event of Default under Section 6.01 unless either (a) a Trust Officer shall have actual knowledge thereof or (b) the Trustee shall have received notice thereof in accordance with Section 16.04 from the Company, any Guarantor or any holder. SECTION 7.05. Reports by Trustee to Holders. Within thirty (30) days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each holder a brief report dated as of such May 15 that complies with Section 313(a) of the Trust Indenture Act if and to the extent required thereby. The Trustee shall also comply with Section 313(b) of the Trust Indenture Act. A copy of each report at the time of its mailing to holders shall be filed with the Commission and each stock exchange (if any) on which the Debentures are listed. The Company agrees to notify promptly the Trustee whenever the Debentures become listed on any stock exchange and of any delisting thereof. SECTION 7.06. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such reasonable compensation for its services hereunder as the Company and the Trustee shall from time to time agree in writing. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services as the Company and the Trustee shall, from time to time, agree in writing. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company and the Guarantors, jointly and severally, shall indemnify the Trustee or any predecessor Trustee and their agents against any and all loss, liability or expense (including reasonable attorneys' fees) incurred by or in connection with the administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company of any claim for which it may seek indemnity promptly upon obtaining actual knowledge thereof; provided, however, that any failure so to notify the Company shall not relieve the Company or the Guarantors of their respective indemnity obligations hereunder. The Company shall defend the claim and the indemnified party shall provide reasonable cooperation at the Company's expense in the defense. Such indemnified parties may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel; provided, however, that the Company shall not be required to pay such fees and expenses if it assumes such indemnified parties' defense and, in such indemnified parties' reasonable judgment, there is no conflict of interest between the Company and the Guarantors, as applicable, and such parties in connection with such defense. Neither the Company nor any Guarantor need reimburse any expense or indemnify against any loss, liability or expense incurred by an indemnified party through such party's own wilful misconduct, negligence or bad faith. Neither the Company nor any Guarantor need pay for any settlement made without its written consent, which consent shall not be unreasonably withheld. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Debentures on all money or property held or collected by the Trustee 50 other than money or property held in trust to pay principal of and interest on particular Debentures. The Company's payment obligations pursuant to this Section shall survive the satisfaction or discharge of this Indenture, any rejection or termination of this Indenture under any bankruptcy law or the resignation or removal of the Trustee. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(l) or 6.01(m) with respect to the Company or a Guarantor, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.07. Replacement of Trustee. (a) The Trustee may resign at any time by so notifying the Company. The holders of a majority in principal amount of the Debentures then outstanding hereunder determined in accordance with Section 8.04 may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (i) the Trustee fails to comply with Section 7.09; (ii) the Trustee is adjudged bankrupt or insolvent; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) the Trustee otherwise becomes incapable of acting. (b) If the Trustee resigns or is removed by the Company or by the holders of a majority in principal amount of the Debentures then outstanding determined in accordance with Section 8.04 and such holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. (c) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.06. (d) If a successor Trustee does not take office within sixty (60) days after the retiring Trustee resigns or is removed, the retiring Trustee, at the Company's expense, or the holders of 10% in principal amount of the Debentures then outstanding determined in accordance with Section 8.04 may petition at the expense of the Company any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee fails to comply with Section 7.06, unless the Trustee's duty to resign is stayed as provided in Section 310(b) of the Trust Indenture Act, any holder who has 51 been a bona fide holder of a Debenture for at least six (6) months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.06 shall continue for the benefit of the retiring Trustee. SECTION 7.08. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Debentures shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Debentures so authenticated; and in case at that time any of the Debentures shall not have been authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debentures or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.09. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of Section 310(a) of the Trust Indenture Act. The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with Section 310(b) of the Trust Indenture Act, subject to its right to apply for a stay of its duty to resign under the penultimate paragraph of Section 310(b) of the Trust Indenture Act; provided, however, that there shall be excluded from the operation of Section 310(b)(1) of the Trust Indenture Act any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in Section 310(b)(1) of the Trust Indenture Act are met. SECTION 7.10. Preferential Collection of Claims Against Company. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent indicated. ARTICLE 8 THE DEBENTUREHOLDERS -------------------- SECTION 8.01. Action by Debentureholders. Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action, the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by 52 Debentureholders in person or by agent or proxy appointed in writing, or (b) by the record of the holders of Debentures voting in favor thereof at any meeting of Debentureholders duly called and held in accordance with the provisions of Article 9, or (c) by a combination of such instrument or instruments and any such record of such a meeting of Debentureholders. Whenever the Company or the Trustee solicits the taking of any action by the holders of the Debentures, the Company or the Trustee may fix in advance of such solicitation, a date as the record date for determining holders entitled to take such action. The record date shall not be more than fifteen (15) days prior to the date of commencement solicitation of such action. SECTION 8.02. Proof of Execution by Debentureholders. Subject to the provisions of Section 7.01, 7.02 and 9.05, proof of the execution of any instrument by a Debentureholder or its agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The holding of Debentures shall be proved by the registry of such Debentures or by a certificate of the Debenture Registrar. The record of any Debentureholders' meeting shall be proved in the manner provided in Section 9.06. SECTION 8.03. Who Are Deemed Absolute Owners. The Company, any Guarantor, the Trustee, any Paying Agent, any Conversion Agent and any Debenture Registrar may deem the Person in whose name a Debenture shall be registered upon the Debenture Register to be, and may treat it as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue and notwithstanding any notation of ownership or other writing thereon made by any Person other than the Company or any Debenture Registrar) for the purpose of receiving payment of or on account of the principal of and interest on such Debenture, for conversion of such Debenture and for all other purposes; and none of the Company, any Guarantor, the Trustee, any Paying Agent or any Conversion Agent nor any Debenture Registrar shall be affected by any notice to the contrary. All such payments so made to any such holder, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for monies payable upon such Debenture. SECTION 8.04. Company-owned Debentures Disregarded. In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent, waiver or other action under this Indenture, Debentures which are owned by the Company or any other obligor on the Debentures or any Affiliate of the Company shall be disregarded and deemed not to be outstanding solely for the purpose of any such determination; provided that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent, waiver or other action, only Debentures which a Trust Officer knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 8.04 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Debentures and that the pledgee is not the Company, any other obligor on the Debentures or any Affiliate of the Company. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall fully protect the Trustee. Upon request of the Trustee, the Company shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Debentures, if any, known by the Company to be owned or held by or for the account of any of the above 53 described Persons, and, subject to Section 7.01, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Debentures listed therein are outstanding for the purpose of any such determination. SECTION 8.05. Revocation of Consents, Future Holders Bound. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 8.01, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder of a Debenture which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee at its Corporate Trust Office and upon proof of holding as provided in Section 8.02, revoke such action so far as concerns such Debenture. Except as aforesaid, any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture and of any Debentures issued in exchange or substitution therefor, irrespective of whether any notation in regard thereto is made upon such Debenture or any Debenture issued in exchange or substitution therefor. ARTICLE 9 MEETINGS OF DEBENTUREHOLDERS ---------------------------- SECTION 9.01. Purpose of Meetings. A meeting of Debentureholders may be called at any time and from time to time pursuant to the provisions of this Article 9 for any of the following purposes: (a) to give any notice to the Company or to the Trustee or to give any directions to the Trustee permitted under this Indenture, or to consent to the waiving of any default or Event of Default hereunder and its consequences, or to take any other action authorized to be taken by Debentureholders pursuant to any of the provisions of Article 6; (b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article 7; (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 10.02; or (d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of the Debentures under any other provision of this Indenture or under applicable law. SECTION 9.02. Call of Meetings by Trustee. The Trustee may at any time call a meeting of Debentureholders to take any action specified in Section 9.01, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Debentureholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting and the establishment of any Record Date pursuant to Section 8.01, shall be mailed to holders of Debentures at their addresses as they shall appear on the Debenture Register. Such notice shall also be mailed to the Company. Such notices shall 54 be mailed not less than twenty (20) nor more than ninety (90) days prior to the date fixed for the meeting. Any meeting of Debentureholders shall be valid without notice if the holders of all Debentures then outstanding are present in person or by proxy or if notice is waived before or after the meeting by the holders of all Debentures outstanding, and if the Company and the Trustee are either present by duly authorized representatives or have, before or after the meeting, waived notice. SECTION 9.03. Call of Meetings by Company or Debentureholders. In case at any time the Company, pursuant to a resolution of the Board of Directors, or the holders of at least 10% in aggregate principal amount of the Debentures then outstanding determined in accordance with Section 8.04, shall have requested the Trustee to call a meeting of Debentureholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within twenty (20) days after receipt of such request, then the Company or such Debentureholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 9.01, by mailing notice thereof as provided in Section 9.02. SECTION 9.04. Qualifications for Voting. To be entitled to vote at any meeting of Debentureholders a Person shall (a) be a holder of one or more Debentures on the Record Date pertaining to such meeting or (b) be a Person appointed by an instrument in writing as proxy by a holder of one or more Debentures on the Record Date pertaining to such meeting. The only Persons who shall be entitled to be present or to speak at any meeting of Debentureholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 9.05. Regulations. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Debentureholders, in regard to proof of the holding of Debentures and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit. The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Debentureholders as provided in Section 9.03, in which case the Company or the Debentureholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the holders of a majority in principal amount of the Debentures represented at the meeting and entitled to vote at the meeting. Subject to the provisions of Section 8.04, at any meeting each Debentureholder or proxyholder shall be entitled to one vote for each $1,000 principal amount of Debentures held or represented by him; provided that no vote shall be cast or counted at any meeting in respect of any Debenture challenged as not outstanding and ruled by the chairman of the meeting to be not 55 outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Debentures held by him or instruments in writing as aforesaid duly designating him as the proxy to vote on behalf of other Debentureholders. Any meeting of Debentureholders duly called pursuant to the provisions of Section 9.02 or 9.03 may be adjourned from time to time by the holders of a majority of the aggregate principal amount of Debentures represented at the meeting, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice. SECTION 9.06. Voting. The vote upon any resolution submitted to any meeting of Debentureholders shall be by written ballot on which shall be subscribed the signatures of the holders of Debentures or of their representatives by proxy and the outstanding principal amount of the Debentures held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Debentureholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 9.02. The record shall show the principal amount of the Debentures voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 9.07. No Delay of Rights by Meeting. Nothing contained in this Article 9 shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Debentureholders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Debentureholders under any of the provisions of this Indenture or of the Debentures. ARTICLE 10 SUPPLEMENTAL INDENTURES ----------------------- SECTION 10.01. Supplemental Indentures Without Consent of Debentureholders. The Company, the Guarantors and the Trustee may, from time to time, and at any time enter into an indenture or indentures supplemental hereto so as to amend this Indenture or the Debentures without notice to or consent of any Debentureholder for one or more of the following purposes: (a) make provision with respect to the conversion rights of the holders of Debentures pursuant to the requirements of Section 15.06 or the repurchase obligations of the Company pursuant to the requirements of Section 3.09(h); 56 (b) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Debentures, any property or assets; (c) to add Guarantees or guarantors with respect to the Debentures; (d) to secure the Debentures; (e) to evidence the succession of another Person to the Company, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Company pursuant to Article 11; (f) to surrender any right or power conferred upon the Company or a Guarantor under this Indenture; (g) to add to the covenants of the Company or the Guarantors such further covenants, restrictions or conditions for the benefit of the holders of Debentures, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions or conditions a Default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided that in respect of any such additional covenant, restriction or condition, such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default; (h) to provide for uncertificated Debentures in addition to, or in place of, certificated Debentures (provided, however, that the uncertificated Debentures are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code of 1986, as amended), in a manner such that the uncertificated Debentures are described in Section 163(f)(2)(b) of the Internal Revenue Code of 1986, as amended; (i) to cure any ambiguity or omission or to correct or supplement any provision contained herein or in any supplemental indenture that may be defective or inconsistent with any other provisions contained herein or in any supplemental indenture; (j) to evidence and provide for the acceptance of appointment of a successor Trustee with respect to this Indenture and the Debentures; (k) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualifications of this Indenture or any supplemental indenture under the Trust Indenture Act, or under any similar federal statute hereafter enacted; (l) to increase the Conversion Rate or increase the consideration payable to any holder of Debentures, provided that no such increase individually or in the aggregate with all other such increases has or will have an adverse effect on the interests of the Debentureholders; or 57 (m) make other changes to this Indenture or forms or terms of the Debentures, provided that no such change individually or in the aggregate with all other such changes has or will have an adverse effect on the rights of the Debentureholders. Upon the written request of the Company, accompanied by a copy of the resolutions of the Board of Directors certified by the Company's Secretary or Assistant Secretary authorizing the execution of any supplemental indenture, the Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations that may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property or asset thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any supplemental indenture that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section 10.01 may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 10.02. Notwithstanding any other provision of this Indenture or the Debentures, the Registration Rights Agreement and the obligation to pay Liquidated Damages thereunder may be amended, modified or waived in accordance with the provisions of the Registration Rights Agreement. After a supplemental indenture under this Section 10.01 becomes effective, the Company shall mail to Debentureholders a notice briefly describing such supplemental indenture. The failure to give such notice to all Debentureholders, or any defect therein, shall not impair or affect the validity of a supplemental indenture under this Section 10.01. SECTION 10.02. Supplemental Indenture with Consent of Debentureholders. With the consent (evidenced as provided in Article 8) of the holders of at least a majority in aggregate principal amount of the Debentures at the time outstanding determined in accordance with Section 8.04, the Company, the Guarantors and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided that without the consent of each Debentureholder affected thereby no such supplemental indenture shall (i) extend the Stated Maturity of any Debenture, or reduce the stated rate or extend the stated time for payment of interest on any Debenture, or reduce the principal amount of any Debenture, or reduce any amount payable on redemption or repurchase of any Debenture or change the time at which any Debenture may be redeemed or repurchased, or impair the right of any Debentureholder to receive payment of principal of and interest on such holder's Debentures on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holder's Debentures, or make the principal of or interest on any Debenture payable in any coin or currency other than that provided in the Debentures, or affect the obligation of the Company to redeem any Debenture on a Redemption Date in a manner adverse to such Debentureholder, or affect the obligation of the Company to repurchase any Debenture upon the happening of a Fundamental Change in a manner adverse to 58 such Debentureholder, or affect the obligation of the Company to repurchase any Debenture on a Company Repurchase Date in a manner adverse to such Debentureholder, or impair the right to convert the Debentures into shares of Common Stock subject to the terms set forth herein, including Section 15.06, or reduce the number of shares of Common Stock or other property receivable upon conversion, or modify any of the provisions of this Article 10 or Section 6.07, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the holder of each Debenture so affected, or change any obligation of the Company to maintain an office or agency in the places and for the purposes set forth in Section 4.02, reduce the quorum or voting requirements set forth in Article 9 or modify any Debenture Guarantee in any manner adverse to the holders or (ii) reduce the aforesaid percentage of Debentures, the holders of which are required to consent to any such supplemental indenture. Upon the written request of the Company, accompanied by a copy of the resolutions of the Board of Directors certified by its Secretary or Assistant Secretary authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Debentureholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Debentureholders under this Section 10.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. After a supplemental indenture under this Section 10.02 becomes effective, the Company shall mail to Debentureholders a notice briefly describing such supplemental indenture. The failure to give such notice to all Debentureholders, or any defect therein, shall not impair or affect the validity of a supplemental indenture under this Section 10.02. SECTION 10.03. Effect of Supplemental Indenture. Any supplemental indenture executed pursuant to the provisions of this Article 10 shall comply with the Trust Indenture Act, as then in effect, provided that this Section 10.03 shall not require such supplemental indenture or the Trustee to be qualified under the Trust Indenture Act prior to the time such qualification is in fact required under the terms of the Trust Indenture Act or this Indenture has been qualified under the Trust Indenture Act, nor shall it constitute any admission or acknowledgment by any party to such supplemental indenture that any such qualification is required prior to the time such qualification is in fact required under the terms of the Trust Indenture Act or this Indenture has been qualified under the Trust Indenture Act. Upon the execution of any supplemental indenture pursuant to the provisions of this Article 10, this Indenture shall be and shall be deemed to be modified and amended in accordance therewith and the respective rights, limitation of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company, the Guarantors and the holders of Debentures shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. 59 SECTION 10.04. Notation on Debentures. Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article 10 may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may, at the Company's expense, be prepared and executed by the Company, authenticated by the Trustee (or an authenticating agent duly appointed by the Trustee pursuant to Section 16.13) and delivered in exchange for the Debentures then outstanding, upon surrender of such Debentures then outstanding. Failure to make the appropriate notation or to issue a new Debenture shall not affect the validity of such supplemental indenture. SECTION 10.05. Trustee to Sign Supplemental Indentures. The Trustee shall sign any supplemental indenture authorized pursuant to this Article 10 if the supplemental indenture does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such supplemental indenture, the Trustee shall be entitled to receive indemnity reasonably satisfactory to it, and (subject to Section 7.01) shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel stating that such supplemental indenture is authorized or permitted by this Indenture. ARTICLE 11 CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE ------------------------------------------------- SECTION 11.01. Company and Specified Guarantors May Consolidate on Certain Terms. (a) Subject to the provisions of Section 11.02, the Company shall not consolidate or merge with or into, or convey, transfer or lease, in one transaction or a series of related transactions, directly or indirectly, all or substantially all its assets to any Person unless (i) the resulting, surviving or transferee Person (the "Successor Company") is the Company, or the resulting, surviving or transferee Person is a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia; (ii) upon any such consolidation, merger, sale, conveyance, transfer or lease, the due and punctual payment of the principal of and interest on all of the Debentures, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Company, shall be expressly assumed, by supplemental indenture reasonably satisfactory in form to the Trustee, executed and delivered to the Trustee by the Person (if other than the Company) formed by such consolidation, or into which the Company shall have been merged, or by the Person that shall have acquired or leased such property, and such supplemental indenture shall provide for the applicable conversion rights set forth in Section 15.06 and (iii) immediately after giving effect to the transaction described above, no Event of Default, and no event which, after notice or passage of time or both, would be an Event of Default, shall have occurred and be continuing. The foregoing limitation shall not prohibit any pledge of assets of the Company under the Senior Facilities or the Senior Note Indenture or under any Refinancings of the Senior Facilities, the Senior Notes or this Indenture. (b) Subject to the provisions of Section 11.02, none of the Specified Guarantors shall consolidate or merge with or into any other Person (whether or not affiliated with such Specified Guarantors), nor shall any Specified Guarantor or its successor or successors be a party 60 or parties to successive consolidations or mergers, nor shall any Specified Guarantor sell, convey, transfer or lease all or substantially all the assets of such Specified Guarantor, to any other Person (whether or not affiliated with such Specified Guarantor), unless: (i) such Specified Guarantor is the surviving Person, or the resulting, surviving or transferee Person is a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia; (ii) upon any such consolidation, merger, sale, conveyance, transfer or lease, the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by such Specified Guarantor and all obligations of such Specified Guarantor under its Debenture Guarantee and the Debentures, shall be expressly assumed, by supplemental indenture reasonably satisfactory in form to the Trustee, executed and delivered to the Trustee by the Person (if other than such Specified Guarantor) formed by such consolidation, or into which such Specified Guarantor shall have been merged, or by the Person that shall have acquired or leased such property, and such supplemental indenture shall provide for the applicable conversion rights set forth in Section 15.06 and (iii) immediately after giving effect to the transaction described above, no Event of Default, and no event which, after notice or passage of time or both, would be an Event of Default, shall have occurred and be continuing. The foregoing limitation shall not prohibit any pledge of assets of any of the Specified Guarantors under the Senior Facilities or the Senior Note Indenture or under any Refinancings of the Senior Facilities, the Senior Notes or this Indenture. SECTION 11.02. Successor to Be Substituted. (a) In case of any such consolidation, merger, sale, conveyance, transfer or lease and upon the assumption by the Successor Company, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and interest on all of the Debentures and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Company, as described in Section 11.01(a), the Successor Company shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of this first part. The Successor Company thereupon may cause to be signed, and may issue either in its own name or in the name of GrafTech International Ltd. any or all of the Debentures, issuable hereunder that theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of the Successor Company instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver, or cause to be authenticated and delivered, any Debentures that previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Debentures that the Successor Company thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures had been issued at the date of the execution hereof. In the event of any such consolidation, merger, sale, conveyance or transfer (but not in the case of a lease), the Person named as the "COMPANY" in the first paragraph of this Indenture or any successor that shall thereafter have become such in the manner prescribed in this Article 11 may be dissolved, wound up and liquidated at any time thereafter and such Person shall be released from its liabilities as obligor and maker of the Debentures and from its obligations under this Indenture. 61 (b) In case of any such consolidation, merger, sale, conveyance, transfer or lease and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by a Specified Guarantor and all obligations of such Specified Guarantor under its Debenture Guarantee and the Debentures, as described in Section 11.01(b), such successor Person shall succeed to and be substituted for such Specified Guarantor, with the same effect as if it had been named herein as the party of this first part. Such successor Person thereupon may cause to be signed, and may issue either in its own name or in the name of such Specified Guarantor any or all of the Debenture Guarantees of such Specified Guarantor, issuable hereunder that theretofore shall not have been signed by such Specified Guarantor and delivered to the Trustee. All the Debenture Guarantees of such Specified Guarantor so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debenture Guarantees of such Specified Guarantor theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debenture Guarantees had been issued at the date of the execution hereof. In the event of any such consolidation, merger, sale, conveyance or transfer (but not in the case of a lease), the applicable Person named as a "GUARANTOR" in the first paragraph of this Indenture or any successor that shall thereafter have become such in the manner prescribed in this Article 11 may be dissolved, wound up and liquidated at any time thereafter and such Person shall be released from its liabilities as obligor and maker of the Debenture Guarantees and from its obligations under this Indenture and its Debenture Guarantee. In case of any such consolidation, merger, sale, conveyance, transfer or lease, such changes in phraseology and form (but not in substance) may be made in the Debentures thereafter to be issued as may be appropriate. SECTION 11.03. Opinion of Counsel to Be Given Trustee. (a) In the event of any such consolidation, merger, sale, conveyance, transfer or lease, the Trustee shall receive an Officers' Certificate and an Opinion of Counsel, each stating that any such consolidation, merger, sale, conveyance, transfer or lease and any such supplemental indenture relating to such assumption complies with the provisions of this Article 11, and such Officers' Certificate and Opinion of Counsel shall be conclusive evidence as to such compliance with this Article 11. (b) In the event of any such consolidation, merger, sale, conveyance, transfer or lease, the Trustee shall receive an Opinion of Counsel to the effect that the Debentureholders will not recognize income, gain or loss for Federal income tax purposes as a result of such transaction and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such transaction had not occurred. ARTICLE 12 SATISFACTION AND DISCHARGE OF INDENTURE --------------------------------------- SECTION 12.01. Discharge of Indenture. When (a) the Company shall deliver to the Trustee for cancelation all Debentures theretofore authenticated (other than any Debentures that have been destroyed, lost or stolen and in lieu of or in substitution for which other Debentures shall have been authenticated and delivered) and not theretofore canceled, or (b) all the Debentures not theretofore canceled or delivered to the Trustee for cancelation shall have 62 become due and payable and the Company shall deposit with the Trustee, in trust, cash or, if expressly permitted by the terms of the Debentures or this Indenture, Common Stock sufficient to pay all amounts due and owing on Debentures (other than any Debentures that shall have been mutilated, destroyed, lost or stolen and in lieu of or in substitution for which other Debentures shall have been authenticated and delivered) not theretofore canceled or delivered to the Trustee for cancelation, accompanied by a verification report, as to the sufficiency of the deposited amount, from an independent certified accountant or other financial professional satisfactory to the Trustee, and if in either case the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect (except as to (i) remaining rights of registration of transfer, substitution and exchange and conversion of Debentures, (ii) rights hereunder of Debentureholders to receive payments of principal of and interest on the Debentures and the other rights, duties and obligations of Debentureholders, as beneficiaries hereof with respect to the amounts, if any, so deposited with the Trustee and (iii) the rights, powers, duties, obligations and immunities of the Trustee hereunder), and the Trustee, on written demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel as required by Section 16.06 and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; the Company, however, hereby agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee and to compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Debentures. SECTION 12.02. Paying Agent to Repay Monies Held. Upon the satisfaction and discharge of this Indenture, all monies then held by any Paying Agent of the Debentures (other than the Trustee) shall, upon written request of the Company, be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such monies. SECTION 12.03. Return of Unclaimed Monies. Subject to the requirements of applicable law, any monies deposited with or paid to the Trustee for payment of the principal of or interest on Debentures and not applied but remaining unclaimed by the holders of Debentures for two years after the date upon which the principal of or interest on such Debentures, as the case may be, shall have become due and payable, shall be repaid to the Company by the Trustee on demand and all liability of the Trustee shall thereupon cease with respect to such monies; and the holder of any of the Debentures shall thereafter look only to the Company for any payment that such holder may be entitled to collect unless an applicable abandoned property law designates another Person. ARTICLE 13 IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS --------------------------------------------------------------- SECTION 13.01. Indenture and Debentures Solely Corporate Obligations. No recourse for the payment of the principal of or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any Guarantor in this Indenture or in any supplemental indenture or in any Debenture, or of such Guarantor under its Debenture Guarantee, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, 63 stockholder, employee, agent, officer, director or subsidiary, as such, past, present or future, of the Company or any Guarantor or of any successor Person, either directly or through the Company or any Guarantor or any successor Person thereto, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Debentures. ARTICLE 14 DEBENTURE GUARANTEES -------------------- SECTION 14.01. Debenture Guarantees. (a) Each Guarantor hereby jointly and severally irrevocably and unconditionally guarantees on an unsecured senior basis, as a primary obligor and not merely as a surety, to each holder and to the Trustee and its successors and assigns (i) the full and punctual payment when due, whether at Stated Maturity, by acceleration, by redemption or otherwise, of all obligations of the Company under this Indenture (including obligations to the Trustee) and the Debentures, whether for payment of principal of or interest on the Debentures and all other monetary obligations of the Company under this Indenture and the Debentures and (ii) the full and punctual performance within applicable grace periods of all other obligations of the Company whether for fees, expenses, indemnification or otherwise under this Indenture and the Debentures (all the foregoing being hereinafter collectively called the "GUARANTEED OBLIGATIONS"). Subject to Section 14.02, each Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Guarantor, and that such Guarantor shall remain bound under this Article 14 notwithstanding any extension or renewal of any Guaranteed Obligation. (b) Each Guarantor waives presentation to, demand of payment from and protest to the Company of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Guarantor waives notice of any default under the Debentures or the Guaranteed Obligations. The obligations of each Guarantor hereunder shall not be affected by (i) the failure of any holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Debentures or any other agreement or otherwise; (ii) any extension or renewal of any thereof; (iii) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Debentures or any other agreement; (iv) the release of any security held by any holder or the Trustee for the Guaranteed Obligations or any of them; (v) the failure of any holder or the Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (vi) any change in the ownership of any Guarantor, except as provided in Section 14.02(b). (c) Each Guarantor hereby waives the right to which it may be entitled to have its obligations hereunder divided among the Guarantors so that such Guarantor's obligations would be less than the full amount claimed. Each Guarantor hereby waives any right to which it may be entitled to have the assets of the Company first be used and depleted as payment of the Company's or such Guarantor's obligations hereunder prior to any amounts being claimed from or paid by such Guarantor hereunder. Each Guarantor hereby waives any right to which it may 64 be entitled to require that the Company be sued prior to an action being initiated against such Guarantor. (d) Each Guarantor further agrees that its Debenture Guarantee constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any holder or the Trustee to any security held for payment of the Guaranteed Obligations. (e) Except as expressly set forth in Section 14.02, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Debentures or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Guarantor or would otherwise operate as a discharge of such Guarantor as a matter of law or equity. (f) Each Guarantor agrees that its Debenture Guarantee shall remain in full force and effect until payment in full of all the Guaranteed Obligations. Each Guarantor further agrees that its Debenture Guarantee 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 Guaranteed Obligation is rescinded or must otherwise be restored by any holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. (g) In furtherance of the foregoing and not in limitation of any other right which any holder or the Trustee has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, each Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the extent not prohibited by law) and (iii) all other monetary obligations of the Company to the holders and the Trustee. (h) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the holders in respect of any Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed Obligations. Each Guarantor further agrees that, as between it, on the one hand, and the holders and the Trustee, on the other hand, (i) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of its Debenture Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and 65 (ii) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article 6, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor or the Company for the purposes of this Section 14.01. (i) Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any holder in enforcing any rights under this Section 14.01. (j) Upon request of the Trustee, each Guarantor shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 14.02. Limitation on Liability. (a) Any other term or provision of this Indenture to the contrary notwithstanding, (i) the maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by any Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally and (ii) no waiver, modification, indulgence or circumstance shall, without the consent of the Guarantors, increase the principal amount of a Debenture or the interest rate thereon (and, if applicable, the premium or Make Whole Payment in respect thereof) except as provided in such Debenture. (b) The Debenture Guarantee as to each Guarantor shall terminate and be of no further force in effect and such Guarantor shall be deemed to be released from all obligations under this Article 14 (without any further action by the Trustee or the holders) upon (i) the sale or other disposition (including by any merger or consolidation) of such Guarantor where such Guarantor is not the surviving entity of such consolidation or merger or (ii) the sale or disposition of all or substantially all the assets of such Guarantor, in each case, other than the sale or other disposition to the Company or an Affiliate of the Company; provided, however, that such merger, consolidation sale, or other disposition shall comply with Article 11. At the request of the Company, the Trustee shall execute and deliver an appropriate instrument evidencing such release (in the form provided by the Company). SECTION 14.03. Successors and Assigns. This Article 14 shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the holders and, in the event of any transfer or assignment of rights by any holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Debentures shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 14.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the holders in exercising any right, power or privilege under this Article 14 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 14 at law, in equity, by statute or otherwise. 66 SECTION 14.05. Modification. No modification, amendment or waiver of any provision of this Article 14, nor the consent to any departure by the Guarantors therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, 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 the Guarantors in any case shall entitle the Guarantors to any other or further notice or demand in the same, similar or other circumstances. SECTION 14.06. Execution and Non-Impairment. To further evidence the Debenture Guarantees, each Guarantor agrees to execute a Debenture Guarantee to be endorsed on each Debenture ordered to be authenticated and delivered by the Trustee. The failure to endorse the Debenture Guarantee on any Debenture shall not affect or impair the validity thereof. SECTION 14.07. Contribution. Each Guarantor that makes a payment under its Debenture Guarantee shall be entitled upon payment in full of all Guaranteed Obligations to a contribution from each other Guarantor in an amount equal to such other Guarantor's pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP. ARTICLE 15 CONVERSION OF DEBENTURES ------------------------ SECTION 15.01. Right to Convert. (a) Subject to and upon compliance with the provisions of this Indenture, prior to January 15, 2024, the holder of any Debenture shall have the right, at such holder's option, to convert the principal amount of such Debenture, or any portion of such principal amount which is an integral multiple of $1,000, into fully paid and non-assessable shares of Common Stock (as such shares shall then be constituted) at the Conversion Rate in effect at such time, by surrender of the Debenture so to be converted in whole or in part, together with any required funds, under the circumstances described in this Section 15.01 and in the manner provided in Section 15.02. The Debentures shall be convertible only during the following periods upon the occurrence of one of the following events: (i) prior to January 15, 2019, during any fiscal quarter of Company after the fiscal quarter of the Company ending March 31, 2004, if the Last Reported Sale Price of the Common Stock for at least twenty (20) Trading Days during the period of thirty (30) consecutive Trading Days ending on the first Trading Day of such fiscal quarter exceeds 125% of the Conversion Price on such Trading Day and, on or after January 15, 2019, at any time after the Last Reported Sale Price of the Common Stock is more than 125% of the Conversion Price; (ii) in the event that the Company calls the Debentures for redemption, at any time prior to the close of business on the second Business Day immediately preceding the Redemption Date; provided that only those Debentures that are called for redemption may be converted following such an event; (iii) as provided in Section (b) of this Section 15.01; (iv) during the five (5) Business Day period immediately after any ten (10) consecutive Trading Day period in which the Trading Price per $1,000 principal 67 amount of the Debentures for each day of such ten (10) day measurement period was less than 98% of the product of the Last Reported Sale Price of the Common Stock on the applicable date and the Conversion Rate, as determined following a request by a holder of Debentures in accordance with the procedures described below; or (v) upon the occurrence of certain reductions in credit ratings as follows: (A) at any time when (i) the long-term credit rating assigned to the Debentures by Moody's Investor Service, Inc. ("Moody's") is Caa1 or lower or the long-term credit rating assigned to the Debentures by Standard & Poor's Rating Services ("Standard & Poor's") is two rating categories below the long term credit rating, if any, initially assigned to the Debentures by Standard & Poor's or lower or (ii) both Moody's and Standard & Poor's have discontinued, withdrawn, suspended or, in the case of Standard & Poor's, not given, their long-term credit rating with respect to the Debentures; or (B) if only one of Moody's and Standard & Poor's continues to provide a long-term credit rating for the Debentures, at any time when (i) the long-term credit rating assigned to the Debentures by such rating agency is Caa1 or lower, in the case of Moody's, or two rating categories below the long term credit rating, if any, initially assigned to the Debentures by Standard & Poor's or lower, in the case of Standard & Poor's, or (ii) such rating agency has discontinued, withdrawn, suspended or, in the case of Standard & Poor's, not given, its long-term credit rating with respect to the Debentures. Notwithstanding the foregoing, if, on the date of any conversion pursuant to Section 15.01(a)(iv) on or after January 15, 2019, the Last Reported Sale Price of the Common Stock on the Trading Day prior to the date of such conversion is greater than 100% but less than 125% of the Conversion Price, the holders of Debentures surrendered for conversion shall receive, in lieu of Common Stock based on the Conversion Rate, cash or Common Stock or a combination of cash and Common Stock, at the Company's option, with a value equal to the principal amount of the Debentures to be converted plus accrued and unpaid interest, if any, to (but excluding) the Conversion Date (a "PRINCIPAL VALUE CONVERSION"). Any Common Stock delivered upon a Principal Value Conversion will be valued at the greater of the Conversion Price on the Conversion Date and the average of the Last Reported Sale Price of the Common Stock for a five (5) Trading Day period starting the third (3rd) Trading Day following the Conversion Date. If a holder of Debentures surrenders its Debentures for a Principal Value Conversion, the Company shall notify such holder by the second (2nd) Trading Day following the Conversion Date that it is a Principal Value Conversion and whether the Company will pay such holder all or a portion of such principal amount and interest in cash, Common Stock or a combination of cash and Common Stock, and in what percentage. The Company shall pay such holder any portion of such principal amount and interest to be paid in cash and deliver Common Stock with respect to any portion of such principal amount and interest to be paid in Common Stock, no later than the third (3rd) Business Day following the determination of the average Last Reported Sale Price of the Common Stock. 68 The Company or its designated agent shall determine on a daily basis during the time period specified in clause (i) above whether the Debentures shall be convertible as a result of the occurrence of an event specified in clause (i) above and, if the Debentures shall be so convertible, the Company shall promptly deliver to the Trustee (or other Conversion Agent appointed by the Company) written notice thereof. Whenever the Debentures shall become convertible pursuant to this Section 15.01, the Company or, at the Company's request, the Trustee in the name and at the expense of the Company, shall notify the holders of the event triggering such convertibility in the manner provided in Section 16.04, and the Company shall also publicly announce such information by publication on the Company's web site or through such other public medium as it may use at such time. Any notice so given shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. The Trustee (or other Conversion Agent appointed by the Company) shall have no obligation to determine the Trading Price under this Section 15.01 unless the Company has requested in writing such a determination; and the Company shall have no obligation to make such request unless a holder provides it with reasonable evidence that the Trading Price per $1,000 principal amount of Debentures would be less than 98% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate. If such evidence is provided, the Company shall instruct the Trustee (or other Conversion Agent) in writing to determine the Trading Price of the Debentures beginning on the next Trading Day and on each successive Trading Day until, and only until, the Trading Price per $1,000 principal amount of Debentures is greater than or equal to 98% of the product of the Last Reported Sale Price of the Common Stock and the Conversion Rate. The Trustee shall be entitled at its sole discretion to consult with the Company and to request the assistance of the Company in connection with the Trustee's duties and obligations pursuant to this Section 15.01(a), and the Company agrees, if requested by the Trustee, to cooperate with, and provide assistance to, the Trustee in carrying out its duties under this Section 15.01; provided, however, that nothing herein shall be construed to relieve the Trustee of its duties pursuant to this Section 15.01(a). (b) In addition, if: (i) (A) the Company distributes to all holders of shares of the Common Stock any rights, warrants, options or other securities entitling them (for a period of not more than forty-five (45) days after the date of issuance thereof) to subscribe for or purchase shares of Common Stock, or securities convertible into shares of Common Stock (for a period of not more than forty-five (45) days after the date of issuance thereof), in either case at a price per share or conversion price per share less than the average of the Last Reported Sale Prices of the Common Stock for the five (5) Trading Days immediately preceding the declaration date of the distribution, or (B) the Company distributes to all holders of shares of Common Stock assets (including cash), evidences of indebtedness or other property or rights to subscribe for or purchase securities of the Company (other than those described in clause (A) above), which distribution has a per share value as determined by the Company's Board of Directors and set forth in a Board Resolution exceeding 10% of the average of the Last Reported Sale Prices of the Common Stock for the five (5) Trading Days immediately preceding the declaration date of such distribution, 69 then, in either case, the Debentures may be surrendered for conversion at any time on and after the date that the Company gives notice to the holders of such distribution, which notice shall be given not less than twenty (20) days prior to the Ex-Dividend Date for such distribution, until the earlier of the close of business on the Business Day immediately preceding the Ex-Dividend Date or the date the Company publicly announces that such distribution will not take place; provided, that no holder of a Debenture may exercise its right to convert if the holder will otherwise participate in such distribution without conversion; (ii) the Company consolidates with or merges with or into another Person or is a party to a binding share exchange, in each case pursuant to which the Common Stock would be converted into cash or property other than securities, then the Debentures may be surrendered for conversion at any time from and after the date which is fifteen (15) days prior to the anticipated effective date of the transaction and until and including the date which is fifteen (15) days after the actual effective date of such transaction; and (iii) the Company engages in a reclassification of the Common Stock or is a party to a consolidation, merger, binding share exchange or transfer of all or substantially all of its assets, in each case pursuant to which the Common Stock is converted into cash, securities or other property, then at the effective time of such transaction, the right to convert a Debenture into shares of Common Stock will be changed into a right to convert such Debenture into the kind and amount of cash, securities or other property which a holder would have received if the holder had converted its Debentures into shares of Common Stock immediately prior to the applicable Record Date for such transaction. If the Company engages in any transaction described in the preceding sentence, the Conversion Rate will not otherwise be adjusted. The Board of Directors shall determine the anticipated effective date of any transaction described in Section 15.01(b)(ii), and such determination shall be conclusive and binding on the holders and shall be publicly announced by the Company by publication on its web site or through such other public medium as it may use at that time not later than two (2) Business Days prior to the first fifteen (15) day period referred to therein. (c) A Debenture in respect of which a holder is electing to exercise its option to require repurchase upon a Fundamental Change pursuant to Section 3.06 or repurchase pursuant to Section 3.07 may be converted only if such holder withdraws its election in accordance with Section 3.09(d). A holder of Debentures is not entitled to any rights of a holder of Common Stock until such holder has converted its Debentures to Common Stock, and only then to the extent such Debentures are deemed to have been converted to Common Stock under this Article 15. SECTION 15.02. Exercise of Conversion Privilege; Issuance of Common Stock on Conversion; No Adjustment for Interest or Dividends; Settlement of Cash or Common Stock upon Conversion. (a) In order to exercise the conversion privilege with respect to any Debenture in certificated form, the Company must receive at the office or agency of the Company maintained for that purpose or, at the option of such holder, the Corporate Trust Office, such Debenture with the original or facsimile of the form entitled "FORM OF CONVERSION 70 NOTICE" on the reverse thereof, duly completed and manually signed, together with such Debentures duly endorsed for transfer, accompanied by the funds, if any, required by paragraph (d) of this Section 15.02. Such notice shall also state the name or names (with address or addresses) in which the certificate or certificates for shares of Common Stock which shall be issuable on such conversion shall be issued, and shall be accompanied by transfer or similar taxes, if required pursuant to Section 15.07. In order to exercise the conversion privilege with respect to any interest in a Global Debenture, the beneficial holder must complete, or cause to be completed, the appropriate instruction form for conversion pursuant to the Depositary's book-entry conversion program, deliver, or cause to be delivered, by book-entry delivery an interest in such Global Debenture, furnish appropriate endorsements and transfer documents if required by the Company or the Trustee or the Conversion Agent, and pay the funds, if any, required by this Section 15.02 and any transfer or similar taxes if required pursuant to Section 15.07. (b) As promptly as practicable after satisfaction of the requirements for conversion set forth above, subject to compliance with any restrictions on transfer if shares issuable on conversion are to be issued in a name other than that of the Debentureholder (as if such transfer were a transfer of the Debenture (or portion thereof) so converted), the Company shall issue and shall deliver to such Debentureholder at the office or agency maintained by the Company for that purpose or, at the option of such holder, the Corporate Trust Office, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such Debenture or portion thereof as determined by the Company in accordance with the provisions of this Article 15 and a check or cash in respect of any fractional interest in respect of a share of Common Stock arising upon such conversion, calculated by the Company as provided in Section 15.03. In case any Debenture of a denomination greater than $1,000 shall be surrendered for partial conversion, subject to Section 2.02, the Company shall execute and the Trustee shall authenticate and deliver to the holder of the Debenture so surrendered, without charge to such holder, a new Debenture or Debentures in authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Debenture. (c) Each conversion shall be deemed to have been effected as to any such Debenture (or portion thereof) on the date on which the requirements set forth above in this Section 15.02 have been satisfied as to such Debenture (or portion thereof) (such date, the "CONVERSION DATE"), and the Person in whose name any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become on said date the holder of record of the shares represented thereby; provided that any such surrender on any date when the stock transfer books of the Company shall be closed shall constitute the Person in whose name the certificates are to be issued as the record holder thereof for all purposes on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Rate in effect on the date upon which such requirements shall have been satisfied. (d) Notwithstanding paragraph (f) below, any Debenture or portion thereof surrendered for conversion during the period from the close of business on any Regular Record Date to the close of business on the Business Day preceding the following Interest Payment Date that has not been called for redemption during such period shall be accompanied by payment, in 71 immediately available funds or other funds acceptable to the Company, of an amount equal to the interest otherwise payable on such Interest Payment Date on the principal amount being converted; provided that no such payment need be made (1) if the Company has specified a Redemption Date that is after a Regular Record Date and on or prior to a date that is two (2) Business Days after the corresponding Interest Payment Date, (2) if the Company has specified a Repurchase Date following a Fundamental Change that occurs during such period or (3) to the extent of any overdue interest, if any overdue interest exists at the time of conversion with respect to such Debenture. Except as provided above in this Section 15.02, no payment or other adjustment shall be made for interest accrued on any Debenture (or portion thereof) converted or for dividends on any shares issued upon the conversion of such Debenture (or portion thereof) as provided in this Article 15. (e) Upon the conversion of an interest in a Global Debenture, the Trustee (or other Conversion Agent appointed by the Company), or the Custodian at the direction of the Trustee (or other Conversion Agent appointed by the Company), shall make a notation on such Global Debenture as to the reduction in the principal amount represented thereby. The Company shall notify the Trustee in writing of any conversions of Debentures effected through any Conversion Agent other than the Trustee. (f) Upon the conversion of a Debenture (or portion thereof), that portion of the accrued and unpaid interest with respect to the converted Debenture (or portion thereof) to (but excluding) the Conversion Date shall not be canceled, extinguished or forfeited, but rather shall be deemed to be paid in full to the holder thereof through delivery of the Common Stock (together with the cash payment, if any, in lieu of fractional shares) in exchange for the Debenture (or portion thereof) being converted pursuant to the provisions hereof; and the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as issued, to the extent thereof, first in exchange for and in satisfaction of the Company's obligation to pay the principal amount of the converted Debenture (or portion thereof) and the accrued and unpaid interest to (but excluding) the Conversion Date, and the balance, if any, of such fair market value of such Common Stock (and any such cash payment) shall be treated as issued in exchange for and in satisfaction of the right to convert the Debenture (or portion thereof) being converted pursuant to the provisions hereof. (g) In the event that the Company receives a Form of Conversion Notice on or prior to (1) the date on which the Company gives a Redemption Notice or (2) the date that is ten (10) days prior to the Stated Maturity (the "FINAL NOTICE DATE"), the following procedures shall apply: (i) If the Company elects to satisfy all or any portion of its obligation to convert the Debentures (the "CONVERSION OBLIGATION") in cash, the Company shall notify holders through the Trustee of the dollar amount to be satisfied in cash (which must be expressed either as 100% of the Conversion Obligation or as a fixed dollar amount) at any time on or before the date that is two (2) Business Days following the Conversion Date (the "CASH SETTLEMENT NOTICE PERIOD"), unless the Company already has informed holders of its election in connection with its Optional Redemption of the Debentures under Section 3.02. If the Company timely elects to pay cash for any portion of the Common Stock otherwise issuable to holders upon conversion, holders may retract the Conversion 72 Notice at any time during the two (2) Business Days following the final day of the Cash Settlement Notice Period (the "CONVERSION RETRACTION PERIOD"). No such retraction can be made (and a Form of Conversion Notice shall be irrevocable) if the Company does not elect to deliver cash in lieu of Common Stock (other than cash in lieu of fractional shares). Upon the expiration of a Conversion Retraction Period, a Form of Conversion Notice shall be irrevocable. If the Company elects to satisfy all or any portion of the Conversion Obligation in cash, and the applicable Form of Conversion Notice has not been retracted, then settlement (in cash or in cash and shares of Common Stock) will be made through the Conversion Agent no later than the tenth (10th) Business Date following the Conversion Date to holders timely surrendering Debentures. (ii) If the Company does not elect to satisfy any part of the Conversion Obligation in cash (other than cash in lieu of any fractional shares), delivery of the Common Stock into which the Debentures are converted (and cash in lieu of any fractional shares) shall occur through the Conversion Agent no later than the fifth (5th) Business Date following the Conversion Date to holders timely surrendering Debentures. (h) Settlement amounts will be computed as follows: (i) If the Company elects to satisfy the entire Conversion Obligation in Common Stock, it shall deliver to holders that have delivered the Conversion Notice giving rise to the Conversion Obligation a number of shares of Common Stock equal to (i) the aggregate principal amount of Debentures to be converted divided by 1,000, multiplied by (ii) the Conversion Rate. In addition, the Company shall pay cash for any fractional shares of Common Stock based on the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the Conversion Date. (ii) If the Company elects to satisfy the entire Conversion Obligation in cash, it shall deliver to holders that have delivered the Conversion Notice giving rise to the Conversion Obligation cash in an amount equal to the product of: (A) a number equal to (i) the aggregate principal amount of Debentures to be converted divided by 1,000, multiplied by (ii) the Conversion Rate; and (B) the average of the Last Reported Sale Prices of the Common Stock for the five (5) consecutive Trading Days (x) immediately following the date of the Company's notice of its election to deliver cash, if the Company has not given a Redemption Notice or Final Maturity Notice, or (y) ending on the third (3rd) Trading Day prior to the Conversion Date, in the case of a conversion following a Redemption Notice or Final Maturity Notice specifying that the Company intends to deliver cash upon conversion (each a "CASH SETTLEMENT AVERAGING PERIOD"). (iii) If the Company elects to satisfy a fixed portion (other than 100%) of the Conversion Obligation in cash, it will deliver to holders the specified cash amount (the "CASH AMOUNT") and a number of shares of Common Stock equal to the greater of (i) zero and (ii) the excess, if any, of the number of shares of Common Stock calculated 73 as if the Company elected to satisfy the entire Conversion Obligation in shares over the number of shares equal to the sum, for each day of the applicable Cash Settlement Averaging Period, of (x) 20% of the Cash Amount, divided by (y) the Last Reported Sale Price of the Common Stock. In addition, the Company shall pay cash for all fractional shares of Common Stock based on the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the Conversion Date. In no event shall the amount of cash delivered upon conversion of Debentures exceed $1,000 per $1,000 principal amount of Debentures to be converted. Any such excess amount shall be paid by the Company in shares of Common Stock. (i) The Company must determine whether or not it will satisfy all or a portion of the Conversion Obligation in cash at the time it issues a Redemption Notice or a Final Maturity Notice and such notices will state the amount of the Conversion Obligation to be settled in cash. If a Form of Conversion Notice is received from holders of Debentures after the date that a Redemption Notice or the Final Maturity Notice has been issued, such holders may not retract their Conversion Notice. Settlement (in cash and/or Common Stock) will occur no later than the fifth (5th) Business Date following the Conversion Date. SECTION 15.03. Cash Payments in Lieu of Fractional Shares. No fractional shares of Common Stock or scrip certificates representing fractional shares shall be issued upon conversion of Debentures. If more than one Debenture shall be surrendered for conversion at one time by the same holder, the number of full shares that shall be issuable upon conversion shall be computed on the basis of the aggregate principal amount of the Debentures (or specified portions thereof to the extent permitted hereby) so surrendered. If any fractional share of stock would be issuable upon the conversion of any Debenture or Debentures, the Company shall make an adjustment and payment therefor in cash to the holder thereof at the Last Reported Sale Price of the Common Stock on the last Trading Day immediately preceding the day on which the Debentures (or the specified portions thereof) are deemed to have been converted. SECTION 15.04. Conversion Rate. Each $1,000 principal amount of the Debentures shall be convertible into the number of shares of Common Stock specified in the form of Debenture (herein called the "CONVERSION RATE") set forth in Exhibit A hereto (initially 60.3136 shares), subject to adjustment as provided in this Article 15. References to Conversion Rate, applicable Conversion Rate, current Conversion Rate and Conversion Rate then in effect mean the Conversion Rate in effect on the relevant date. SECTION 15.05. Adjustment of Conversion Rate. The Conversion Rate shall be adjusted from time to time by the Company as follows: (a) If shares of Common Stock are issued as a dividend or distribution on shares of Common Stock, or if a share split or share combination is effected, the Conversion Rate will be adjusted based on the following formula: [OBJECT OMITTED] 74 where, CR0 = the Conversion Rate in effect immediately prior to such event CR' = the Conversion Rate in effect immediately after such event OS0 = the number of shares of Common Stock outstanding immediately prior to such event OS' = the number of shares of Common Stock outstanding immediately after such event An adjustment made pursuant to this subsection (a) shall become effective on the date immediately after (x) the date fixed for the determination of stockholders entitled to receive such dividend or other distribution or (y) the date on which such split or combination becomes effective, as applicable. If any dividend or distribution described in this subsection (a) is declared but not so paid or made, the Conversion Rate shall again be adjusted to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared. (b) If any rights, warrants, options or other securities are issued to all or substantially all of the holders of shares of Common Stock entitling them for a period of not more than forty-five (45) days after the date of issuance thereof to subscribe for or purchase shares of Common Stock, or securities convertible into shares of Common Stock within 45 days after the date of issuance thereof, in either case at an exercise price per share or a conversion price per share less than the Last Reported Sale Price of the Common Stock on the Business Day immediately preceding the time of announcement of such issuance, the Conversion Rate will be adjusted based on the following formula: [OBJECT OMITTED] where, CR0 = the Conversion Rate in effect immediately prior to such event CR' = the Conversion Rate in effect immediately after such event OS0 = the number of shares of Common Stock outstanding immediately prior to such event X = the total number of shares of Common Stock issuable pursuant to such rights, warrants, options, other securities or convertible securities Y = the number of shares of Common Stock equal to the aggregate exercise price or conversion price payable to exercise or convert such rights, warrants, options, other securities or convertible securities divided by the average of the Last Reported Sale Prices of the Common Stock for the ten (10) consecutive Trading Days prior to the Business Day immediately preceding the date of announcement of the issuance of such rights, warrants, options, other securities or convertible securities An adjustment made pursuant to this subsection (b) shall be made successively whenever such rights, warrants, options, other securities or convertible securities are issued, and shall become effective on the day following the date of announcement of such issuance. If, at the end of the period during which such rights, warrants, options, other securities or convertible 75 securities are exercisable or convertible, not all rights, warrants, options, other securities or convertible securities have been exercised or converted, as the case may be, the adjusted Conversion Rate shall be immediately readjusted to what it would have been based upon the number of additional shares of Common Stock actually issued (or the number of shares of Common Stock actually issued upon conversion of convertible securities actually issued). For purposes of Section 15.01(b) and this Section 15.05(b), in determining whether such rights, warrants, options, other securities or convertible securities entitle the holder to subscribe for or purchase or exercise a conversion right for shares of Common Stock at less than the average Last Reported Sale Price of the Common Stock, and in determining the aggregate exercise or conversion price payable for such shares of Common Stock, there shall be taken into account any consideration received by the Company for such rights, warrants, options, other securities or convertible securities and any amount payable on exercise or conversion thereof, with the value of such consideration, if other than cash, to be determined by the Board of Directors. (c) If shares of the Company's capital stock, evidences of the Company's indebtedness or other assets or property of the Company or its subsidiaries are distributed to all or substantially all of the holders of shares of Common Stock, excluding: (i) dividends, distributions and rights, warrants, options, other securities or convertible securities referred to in clause (a) or (b) above; (ii) dividends or distributions in cash referred to in clause (d) below; and (iii) spin-offs described below in this clause (c). then the Conversion Rate will be adjusted based on the following formula: [OBJECT OMITTED] where, CR0 = the Conversion Rate in effect immediately prior to such distribution CR' = the Conversion Rate in effect immediately after such distribution SP0 = the average of the Last Reported Sale Prices of the Common Stock for the ten (10) consecutive Trading Days prior to the Business Day immediately preceding the record date for such distribution FMV = the fair market value (as determined by the Board of Directors of the Company) of the shares of capital stock, evidences of indebtedness, assets or property distributed with respect to each outstanding share of Common Stock on the record date for such distribution 76 An adjustment made pursuant to the above paragraph shall be made successively whenever any such distribution is made and shall become effective on the day immediately after the dated fixed for the determination of shareholders entitled to receive such distribution. With respect to an adjustment pursuant to this clause (c) where there has been a payment of a dividend or other distribution on the Common Stock of shares of capital stock of any class or series, or similar equity interest, of or relating to a subsidiary or other business unit of the Company, (referred to as a "spin-off"), the Conversion Rate in effect immediately before the close of business on the record date fixed for determination of stockholders entitled to receive the distribution will be increased based on the following formula: [OBJECT OMITTED] where, CR0 = the Conversion Rate in effect immediately prior to such distribution CR' = the Conversion Rate in effect immediately after such distribution FMV0 = the average of the Last Reported Sale Prices of the capital stock or similar equity interest distributed to holders of shares of Common Stock applicable to one share of our Common Stock over the first ten (10) consecutive Trading Days after the effective date of the spin-off MP0 = the average of the Last Reported Sale Prices of the Common Stock over the first 10 consecutive Trading Days after the effective date of the spin-off The adjustment to the Conversion Rate under the preceding paragraph will occur on the tenth (10th) Trading Day after the effective date of the spin-off. If any such dividend or distribution described in this subsection (c) is declared but not paid or made, the Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such dividend or distribution had not been declared. (d) If any cash dividend or distribution is paid or made during any of the Company's quarterly fiscal periods to all or substantially all of the holders of Common Stock, the Conversion Rate will be adjusted based on the following formula: [OBJECT OMITTED] where, CR0 = the Conversion Rate in effect immediately prior to the record date for such distribution CR' = the Conversion Rate in effect immediately after the record date for such distribution SP0 = the average of the Last Reported Sale Prices of the Common Stock for the ten (10) consecutive Trading Days prior to the Business Day immediately preceding the record date of such distribution 77 C = the amount in cash per share the Company distributes to holders of shares of Common Stock An adjustment made pursuant to this subsection (d) shall become effective on the date immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution. If any dividend or distribution described in this subsection (d) is declared but not so paid or made, the Conversion Rate shall again be adjusted to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared. (e) The Conversion Rate will be increased if the Company or any of its subsidiaries purchases shares of Common Stock pursuant to a tender offer or exchange offer which involves an aggregate consideration per share of Common Stock that exceeds the Last Reported Sale Price of the Common Stock on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to the tender offer or exchange offer (the "EXPIRATION TIME"). The Conversion Rate will be increased based on the following formula: [OBJECT OMITTED] where, CR0 = the Conversion Rate in effect on the date such tender offer or exchange offer expires CR' = the Conversion Rate in effect on the day next succeeding the date such tender offer or exchange offer expires AC = the aggregate value of all cash and other consideration (as determined by the Board of Directors) paid or payable for all shares of Common Stock that the Company or one of its subsidiaries purchases in the tender offer or exchange offer OS0 = the number of shares of Common Stock outstanding immediately prior to the date such tender offer or exchange offer expires OS' = the number of shares of Common Stock outstanding immediately after the date such tender offer or exchange offer expires SP' = the average of the Last Reported Sale Prices of the Common Stock for the ten (10) consecutive Trading Days commencing on the trading day next succeeding the date such tender offer or exchange offer expires Any adjustment made pursuant to this subsection (e) shall become effective on the date immediately following the Expiration Time. If the Company is obligated to purchase shares of Common Stock pursuant to any such tender or exchange offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Rate shall again be adjusted to be the Conversion Rate that would be in effect if such tender or exchange offer had not been made. (f) The reclassification of Common Stock into securities other than Common Stock (other than any reclassification upon an event to which Section 15.06 applies) shall be deemed to involve (a) a distribution of such securities other than Common Stock to all holders of 78 Common Stock (and the effective date of such reclassification shall be deemed to be "the date fixed for the determination of shareholders entitled to receive such distribution" within the meaning of Section 15.05(c)), and (b) a subdivision, split or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such split or combination becomes effective" within the meaning of Section 15.05(a)). (g) Notwithstanding the foregoing provisions of Section 15.05, no adjustment shall be made thereunder, nor shall an adjustment be made to the ability of a holder of a Debenture to convert, for any distribution described therein if the holder will otherwise participate in the distribution without conversion of such holder's Debentures. (h) The Company may make such increases in the Conversion Rate, in addition to those required by clauses (a) through (f) of this Section 15.05, as the Board of Directors deems advisable to avoid or diminish any income tax to holders of shares of capital stock of the Company (or rights to acquire such capital stock) resulting from any dividend or distribution of such capital stock (or rights to acquire such capital stock) or from any event treated as such for income tax purposes. To the extent permitted by applicable law, the Company from time to time may increase the Conversion Rate by any amount for any period of time if the period is at least twenty (20) days, the increase is irrevocable during the period and the Board of Directors shall have made a determination that such increase would be in the best interests of the Company, which determination shall be conclusive. Whenever the Conversion Rate is increased pursuant to the preceding sentence, the Company shall mail to holders of record of the Debentures a notice of the increase at least fifteen (15) days prior to the date the increased Conversion Rate takes effect, and such notice shall state the increased Conversion Rate and the period during which it will be in effect. (i) No adjustment to the Conversion Rate need be made: (i) upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock under any plan; (ii) upon the issuance of any shares of Common Stock or options or rights to purchase shares of Common Stock pursuant to any present or future employee, director or consultant incentive benefit plan or program of or assumed by the Company or any of its subsidiaries; (iii) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security not described in (ii) above and outstanding as of the Original Issuance Date; 79 (iv) upon the repurchase by the Company of shares of Common Stock from its employee protection and deferred compensation trusts or members of its senior management upon their resignation or termination of employment; (v) for a change in the par value of the Common Stock; or (vi) for accrued and unpaid interest. No adjustment to the Conversion Rate will be required pursuant to this Indenture in connection with any event, transaction or other occurrence unless the terms of this Indenture specifically require that such an adjustment be made in connection with such event, transaction or other occurrence. (j) All adjustments to the Conversion Rate under this Article 15 shall be made by the Company and shall be calculated to the nearest one-ten thousandth (1/10,000) of a share. (k) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly file with the Trustee and any Conversion Agent other than the Trustee an Officers' Certificate setting forth the Conversion Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Unless and until a Trust Officer of the Trustee shall have received such Officers' Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Conversion Rate and may assume that the last Conversion Rate of which it has knowledge is still in effect. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Rate to the holder of each Debenture at its last address appearing on the Debenture Register provided for in Section 2.04, within twenty (20) days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of any such adjustment. (l) In any case in which this Section 15.05 provides that an adjustment shall become effective immediately after (1) a record date or Stock Record Date for an event, (2) the date fixed for the determination of stockholders entitled to receive a dividend or distribution pursuant to Section 15.05(a), (3) a date fixed for the determination of stockholders entitled to receive rights, warrants, options or other securities pursuant to Section 15.05(b) or (4) the Expiration Time for any tender or exchange offer pursuant to Section 15.05(e), (each a "DETERMINATION DATE"), the Company may elect to defer until the occurrence of the applicable Adjustment Event (as hereinafter defined) (x) issuing to the holder of any Debenture (or portion thereof) converted after such Determination Date and before the occurrence of such Adjustment Event, the additional shares of Common Stock or other securities issuable upon such conversion by reason of the adjustment required by such Adjustment Event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (y) paying to such holder any amount in cash in lieu of any fraction pursuant to Section 15.03; provided that in the case of an adjustment made pursuant to Section 15.05(d) with respect to a distribution of shares of capital stock of, or similar equity interest in, a subsidiary or other business unit of the Company, the Company may defer the issuance of such additional shares and cash payment, if any, until the third (3rd) Business Day immediately following the last day of the twenty (20) 80 consecutive Trading Day period commencing on the fifth (5th) Trading Day after the Ex-Dividend Date. For purposes of this Section 15.05(l), the term "ADJUSTMENT EVENT" shall mean: (i) in any case referred to in clause (1) hereof, the occurrence of such event; (ii) in any case referred to in clause (2) hereof, the date any such dividend or distribution is paid or made; (iii) in any case referred to in clause (3) hereof, the date of expiration of such rights, warrants, options or other securities (or the conversion period of any convertible securities issued upon exercise thereof); and (iv) in any case referred to in clause (4) hereof, the date a sale or exchange of Common Stock pursuant to such tender or exchange offer is consummated and becomes irrevocable. (m) For purposes of this Section 15.05, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. SECTION 15.06. Effect of Reclassification, Consolidation, Merger or Sale. If any of the following events occur, namely (i) any reclassification or change of the outstanding shares of Common Stock (other than a subdivision or combination to which Section 15.05(a) applies), (ii) any consolidation, merger or combination of the Company with another Person as a result of which holders of Common Stock shall be entitled to receive stock, other securities or other property or assets (including cash) with respect to or in exchange for such Common Stock, or (iii) any sale or conveyance of all or substantially all of the properties and assets of the Company to any other Person as a result of which holders of Common Stock shall be entitled to receive stock, other securities or other property or assets (including cash) with respect to or in exchange for such Common Stock, then the Company or the successor or purchasing Person, as the case may be, shall execute with the Trustee a supplemental indenture (which shall comply with the Trust Indenture Act as in force at the date of execution of such supplemental indenture) providing that each Debenture shall be convertible into the kind and amount of shares of stock, other securities or other property or assets (including cash) receivable upon such reclassification, change, consolidation, merger, combination, sale or conveyance by a holder of a number of shares of Common Stock issuable upon conversion of such Debentures (assuming, for such purposes, a sufficient number of treasury shares and authorized and unissued shares of Common Stock are available to convert all such Debentures) immediately prior to such reclassification, change, consolidation, merger, combination, sale or conveyance assuming such holder of Common Stock did not exercise his rights of election, if any, as to the kind or amount of stock, other securities or other property or assets (including cash) receivable upon such reclassification, change, consolidation, merger, combination, sale or conveyance (provided that, if the kind or amount of stock, other securities or other property or assets (including cash) receivable upon such reclassification, change, consolidation, merger, combination, sale or conveyance is not the 81 same for each share of Common Stock in respect of which such rights of election shall not have been exercised (a "NON-ELECTING share"), then for the purposes of this Section 15.06 the kind and amount of stock, other securities or other property or assets (including cash) receivable upon such reclassification, change, consolidation, merger, combination, sale or conveyance for each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). Such supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 15. The Company shall cause notice of the execution of such supplemental indenture to be mailed to each holder of Debentures, at its address appearing on the Debenture Register provided for in Section 2.04, within twenty (20) days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture. The above provisions of this Section shall similarly apply to successive reclassifications, changes, consolidations, mergers, combinations, sales and conveyances. If this Section 15.06 applies to any event or occurrence, Section 15.05 shall not apply. SECTION 15.07. Taxes on Shares Issued. The issue of stock certificates on conversions of Debentures shall be made without charge to the converting Debentureholder for any documentary, stamp or similar issue or transfer tax in respect of the issue thereof. The Company shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issue and delivery of such certificates in any name other than that of the holder of any Debenture converted, and the Company shall not be required to issue or deliver any such stock certificate unless and until the Person or Persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. SECTION 15.08. Reservation of Shares, Shares to Be Fully Paid; Compliance with Governmental Requirements; Listing of Common Stock. The Company shall provide, free from preemptive rights, out of its authorized but unissued shares or shares held in treasury, sufficient shares of Common Stock to provide for the conversion of the Debentures from time to time as such Debentures are presented for conversion. Before taking any action which would cause an adjustment increasing the Conversion Rate to an amount that would cause the Conversion Price to be reduced below the then par value, if any, of the shares of Common Stock issuable upon conversion of the Debentures, the Company will take all corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue such shares of Common Stock at such adjusted Conversion Rate. The Company covenants that all shares of Common Stock which may be issued upon conversion of Debentures will upon issue be fully paid and nonassessable by the Company and free from all taxes, Liens and charges with respect to the issue thereof. 82 Subject to the terms of the Registration Rights Agreement, the Company covenants that, if any shares of Common Stock to be provided for the purpose of conversion of Debentures hereunder require registration with or approval of any governmental authority under any federal or state law before such shares may be validly issued upon conversion, the Company will in good faith and as expeditiously as possible, to the extent then permitted by the rules and interpretations of the Commission (or any successor thereto), endeavor to secure such registration or approval, as the case may be. The Company further covenants that, if at any time the Common Stock shall be listed on the Nasdaq National Market or any national securities exchange or other automated quotation system, the Company will, if permitted by the rules of such market, exchange or automated quotation system, list and keep listed, so long as the Common Stock shall be so listed on such market, exchange or automated quotation system, all Common Stock issuable upon conversion of the Debentures; provided that if the rules of such market, exchange or automated quotation system permit the Company to defer the listing of such Common Stock until the first conversion of the Debentures into Common Stock in accordance with the provisions of this Indenture, the Company covenants to list such Common Stock issuable upon conversion of the Debentures in accordance with the requirements of such market, exchange or automated quotation system at such time. SECTION 15.09. Responsibility of Trustee. The Trustee and any other Conversion Agent shall not at any time be under any duty or responsibility to any holder of Debentures to determine the Conversion Rate or whether any facts exist which may require any adjustment of the Conversion Rate, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. The Trustee and any other Conversion Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, which may at any time be issued or delivered upon the conversion of any Debenture; and the Trustee and any other Conversion Agent make no representations with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property or cash upon the surrender of any Debenture for the purpose of conversion or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article 15. Without limiting the generality of the foregoing, neither the Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant to Section 15.06 relating either to the kind or amount of shares of stock or securities or property (including cash) receivable by Debentureholders upon the conversion of their Debentures after any event referred to in such Section 15.06 or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 7.02, may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, the Officers' Certificate (which the Company shall be obligated to file with the Trustee prior to the execution of any such supplemental indenture) with respect thereto. 83 SECTION 15.10. Notice to Holders Prior to Certain Actions. In case: (a) the Company shall declare a dividend (or any other distribution) on its Common Stock that would require an adjustment in the Conversion Rate pursuant to Section 15.05; or (b) the Company shall authorize the granting to the holders of all or substantially all of the shares of Common Stock of rights, warrants, options or other securities to subscribe for or purchase any share of any class of capital stock of the Company or any other rights, warrants, options or other securities of the Company; or (c) of any reclassification or reorganization of the Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; the Company shall cause to be filed with the Trustee and to be mailed to each holder of Debentures at its address appearing on the Debenture Register provided for in Section 2.04, as promptly as possible but in any event at least ten (10) days prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or grant, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or grant are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend, distribution, grant, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. SECTION 15.11. Shareholder Rights Plan. Debentureholders will receive, upon conversion of their Debentures, in addition to shares of Common Stock, rights under the Company's existing stockholder rights agreement unless, prior to conversion, the rights have expired, terminated or been redeemed or unless the rights have separated from the Common Stock. If the rights provided for in the existing rights plan adopted by the Company have separated from the Common Stock in accordance with the provisions of the applicable stockholder rights agreement so that the Debentureholders would not be entitled to receive any rights in respect of Common Stock issuable upon conversion of the Debentures, the Conversion Rate will be adjusted at the time of separation as if the Company had distributed, to all holders of Common Stock, shares of capital stock, evidences of indebtedness or other assets or property 84 pursuant to Section 15.05(c), subject to readjustment upon the subsequent expiration, termination or redemption of the rights. In lieu of any such adjustment, the Company may amend such applicable stockholder rights agreement to provide that upon conversion of the Debentures the holders will receive, in addition to shares of Common Stock issuable upon such conversion, the rights which would have attached to such shares of Common Stock if the rights had not become separated from the Common Stock under such applicable stockholder rights agreement. To the extent that the Company adopts any future stockholder rights agreement, upon conversion of the Debentures into shares of Common Stock, a Debentureholder shall receive, in addition to shares of Common Stock, the rights under the future stockholder rights agreement whether or not the rights have separated from shares of Common Stock at the time of conversion and no adjustment will be made in accordance with Section 15.05(c) or otherwise. ARTICLE 16 MISCELLANEOUS PROVISIONS ------------------------ SECTION 16.01. [Intentionally Omitted.] SECTION 16.02. Provisions Binding on Company's Successors. All the covenants, stipulations, promises and agreements by the Company contained in this Indenture shall bind its successors and assigns whether so expressed or not. All agreements of the Trustee in this Indenture shall bind its successors and assigns whether so expressed or not. SECTION 16.03. Official Acts by Successor Corporation. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any Person that shall at the time be the lawful sole successor of the Company. SECTION 16.04. Addresses for Notices, Etc. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Debentures on the Company or a Guarantor shall be deemed to have been sufficiently given or made, for all purposes, if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box or sent by telecopier transmission addressed as follows: GrafTech International Ltd., Brandywine West, 1521 Concord Pike, Suite 301, Wilmington, DE 19803, Attention: General Counsel and Chief Financial Officer, Facsimile: (302) 778-8238. Any notice, direction, request or demand hereunder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or served by being deposited, postage prepaid, by registered or certified mail in a post office letter box or sent by telecopier transmission addressed to the Corporate Trust Office of the Trustee, Facsimile: (617) 603-6668. The Company, any Guarantor or the Trustee, by notice to the other and the Debentureholders, may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Debentureholder shall be mailed to him by first class mail, postage prepaid, at his address as it appears on the Debenture Register and 85 shall be sufficiently given to him if so mailed within the time prescribed. Any notice so given will be deemed to have been given to such Debentureholder on the date of such mailing. Failure to mail a notice or communication to a Debentureholder or any defect in it shall not affect its sufficiency with respect to other Debentureholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 16.05. Governing Law. This Indenture, each Debenture Guarantee and each Debenture shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of the State of New York (including Section 5-1401 of the New York General Obligations Law or any successor to such statute). SECTION 16.06. Evidence of Compliance with Conditions Precedent, Certificates to Trustee. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that each Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; (3) a statement that, in the opinion of each such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with. SECTION 16.07. Legal Holidays. In any case in which the date of maturity of interest on or principal of the Debentures or the Redemption Date of any Debenture or any Repurchase Date with respect to any Debenture will not be a Business Day, then payment of such interest on or principal of the Debentures need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the Redemption Date or the Repurchase Date, as the case may be, and no interest shall accrue for the period from and after such date. SECTION 16.08. Company Responsible for Making Calculations. Unless otherwise specified in this Indenture, the Company will be responsible for making all calculations called for under the Debentures. These calculations include, but are not limited to, determination of the Last Reported Sale Price of the Common Stock and the Market Price, the amount of accrued and unpaid interest payable on the Debentures and the Conversion Rate of the Debentures. The Company will make these calculations in good faith and, absent manifest error, these calculations will be final and binding on the Debentureholders. Promptly after the 86 calculation thereof, the Company will provide to each of the Trustee and the Conversion Agent an Officers' Certificate setting forth a schedule of its calculations, and each of the Trustee and the Conversion Agent is entitled to conclusively rely upon the accuracy of such calculations without independent verification. The Trustee will forward the Company's calculations to any holder upon the request of such holder. SECTION 16.09. Trust Indenture Act. This Indenture is hereby made subject to, and shall be governed by, the provisions of the Trust Indenture Act required to be part of and to govern indentures qualified under the Trust Indenture Act, which are incorporated by reference in and made a part of this Indenture; provided that this Section 16.09 shall not require this Indenture or the Trustee to be qualified under the Trust Indenture Act prior to the time such qualification is in fact required under the terms of the Trust Indenture Act, nor shall it constitute any admission or acknowledgment by any party to this Indenture that any such qualification is required prior to the time such qualification is in fact required under the terms of the Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in an indenture qualified under the Trust Indenture Act, such required provision shall control. The following Trust Indenture Act terms have the following meanings: "Commission" means the Commission; "indenture securities" means the Debentures; "indenture security holder" means a Debentureholder; "indenture to be qualified" means this Indenture; "indenture trustee" means the Trustee; and "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. SECTION 16.10. No Security Interest Created. Except as provided in Section 7.06, nothing in this Indenture or in the Debentures, expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction in which property of the Company or its subsidiaries is located. SECTION 16.11. Benefits of Indenture. Nothing in this Indenture or in the Debentures, express or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any authenticating agent, any Debenture Registrar and their successors hereunder and the holders of Debentures any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 16.12. Table of Contents, Headings, Etc. The table of contents, cross-reference sheet and the titles and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 16.13. Authenticating Agent. The Trustee may appoint an authenticating agent that shall be authorized to act on its behalf, and subject to its direction, in the authentication and delivery of Debentures in connection with the original issuance thereof and transfers and exchanges of Debentures hereunder, including under Sections 2.03, 2.07, 2.08, 2.10, 3.03 and 3.09, as fully to all intents and purposes as though the authenticating agent had been expressly authorized by this Indenture and those Sections to authenticate and deliver Debentures. For all purposes of this Indenture, the authentication and delivery of Debentures by the authenticating agent shall be deemed to be authentication and delivery of such Debentures 87 "by the Trustee" and a certificate of authentication executed on behalf of the Trustee by an authenticating agent shall be deemed to satisfy any requirement hereunder or in the Debentures for the Trustee's certificate of authentication. Such authenticating agent shall at all times be a Person eligible to serve as trustee hereunder pursuant to Section 7.09. Any corporation into which any authenticating agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any authenticating agent shall be a party, or any corporation succeeding to the corporate trust business of any authenticating agent, shall be the successor of the authenticating agent hereunder, if such successor corporation is otherwise eligible under this Section 16.13, without the execution or filing of any paper or any further act on the part of the parties hereto or the authenticating agent or such successor corporation. Any authenticating agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any authenticating agent by giving written notice of termination to such authenticating agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any authenticating agent shall cease to be eligible under this Section, the Trustee shall either promptly appoint a successor authenticating agent or itself assume the duties and obligations of the former authenticating agent under this Indenture and, upon such appointment of a successor authenticating agent, if made, shall give written notice of such appointment of a successor authenticating agent to the Company and shall mail notice of such appointment of a successor authenticating agent to all holders of Debentures as the names and addresses of such holders appear on the Debenture Register. The Company agrees to pay to the authenticating agent from time to time such reasonable compensation for its services as shall be agreed upon in writing between the Company and the authenticating agent. The provisions of Sections 7.02, 7.03, 7.04 and 8.03 and this Section 16.13 shall be applicable to any authenticating agent. SECTION 16.14. Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. SECTION 16.15. Severability. In case any provision in this Indenture or in the Debentures shall be invalid, illegal or unenforceable, then (to the extent permitted by law) the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. U.S. Bank National Association hereby accepts the trusts in this Indenture declared and provided, upon the terms and conditions herein above set forth. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 88 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed. GRAFTECH INTERNATIONAL LTD. By: /s/ Karen G. Narowld --------------------------------------- Name: Karen G. Narowld Title:Vice President, General Counsel, Human Resources & Secretary GRAFTECH FINANCE INC. By: /s/ Karen G. Narowld --------------------------------------- Name: Karen G. Narowld Title:Vice President, General Counsel, Human Resources & Secretary GRAFTECH GLOBAL ENTERPRISES INC. By: /s/ Karen G. Narowld --------------------------------------- Name: Karen G. Narowld Title:Vice President, General Counsel, Human Resources & Secretary UCAR CARBON COMPANY INC. By: /s/ Karen G. Narowld --------------------------------------- Name: Karen G. Narowld Title:Vice President, General Counsel, Human Resources & Secretary UCAR INTERNATIONAL TRADING INC. By: /s/ Karen G. Narowld --------------------------------------- Name: Karen G. Narowld Title:Vice President, General Counsel, Human Resources & Secretary UCAR CARBON TECHNOLOGY LLC By: /s/ Karen G. Narowld --------------------------------------- Name: Karen G. Narowld Title:Vice President, General Counsel, Human Resources & Secretary 89 U.S. BANK NATIONAL ASSOCIATION, as Trustee By: /s/ John A. Brennan --------------------------------------- Name: John A. Brennan Title: Trust Officer 90 APPENDIX A PROVISIONS RELATING TO DEBENTURES --------------------------------- 1. Definitions 1.1 Definitions Except as defined in this Appendix A, terms used in this Appendix A shall have the meanings indicated in the Indenture to which this Appendix A is attached. Unless otherwise indicated, references to Sections means Sections of this Appendix. For the purposes of this Appendix A, the following terms shall have the meanings indicated below: "Definitive Debenture" means a certificated Debenture (bearing the Restricted Securities Legend if the transfer of such Debenture is restricted by applicable law) that does not include the Global Debentures Legend. "Depositary" means The Depository Trust Company, its nominees and their respective successors. "Global Debentures Legend" means the legend set forth under that caption in Exhibit A to this Indenture. "Initial Purchasers" means J.P. Morgan Securities Inc., CIBC World Markets Corp., RBC Dain Rauscher Inc., Jefferies & Company, Inc. and ABN AMRO Rothschild LLC. "Purchase Agreement" means the Purchase Agreement dated January 15, 2004, among the Company, the Guarantors and the Initial Purchasers. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registration Rights Agreement" means the Resale Registration Rights Agreement dated January 24, 2004, among the Company, the Guarantors and the Initial Purchasers. "Restricted Securities Legend" means the legend set forth in Section 2.3(d)(i). "Rule 144A" means Rule 144A as promulgated under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to a Global Debenture (as appointed by the Depositary) or any successor Person thereto, who shall initially be the Trustee. A-1 "Shelf Registration Statement" means a registration statement filed by the Company and the Guarantors in connection with an offer and sale of Initial Debentures pursuant to the Registration Rights Agreement. "Transfer Restricted Debentures" means Definitive Debentures and any other Debentures that bear or are required to bear the Restricted Securities Legend. 1.2 Other Definitions Term: "Agent Members".............................................Section 2.1(c) "Global Debenture"..........................................Section 2.1(b) 2. The Debentures 2.1 Form and Dating (a) The Debentures will be (i) offered and sold by the Company pursuant to the Purchase Agreement and (ii) resold, initially only to QIBs in reliance on Rule 144A. The Debentures may thereafter be transferred to, among others, QIBs. (b) Global Debentures. Debentures shall be issued initially in the form of one or more permanent global Debentures in definitive, fully registered form (collectively, the "Global Debenture"), without interest coupons and bearing the Global Debentures Legend and Restricted Securities Legend, which shall be deposited on behalf of the purchasers of the Debentures represented thereby with the Securities Custodian and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as provided in this Indenture. The aggregate principal amount of the Global Debentures may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee and on the schedules thereto as hereinafter provided. (c) Book-Entry Provisions. This Section 2.1(c) shall apply only to a Global Debenture deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(c) and Section 2.2 and pursuant to an order of the Company signed by two Officers, authenticate and deliver one or more Global Debentures that (i) shall be registered in the name of the Depositary for such Global Debenture or Global Debentures or the nominee of the Depositary and (ii) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions or held by the Trustee as Securities Custodian. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Debenture held on their behalf by the Depositary or by the Trustee as Securities Custodian or under such Global Debenture, and the Depositary may be treated by the Company, the Trustee and any agent A-2 of the Company or the Trustee as the absolute owner of such Global Debenture for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary (or, if registered in the name thereof, its nominee) or impair, as between the Depositary and its Agent Members, the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Debenture. (d) Definitive Debentures. Except as provided in Section 2.3 or 2.4, owners of beneficial interests in Global Debentures will not be entitled to receive physical delivery of certificated Debentures. 2.2 Authentication. The Trustee shall authenticate and make available for delivery upon a written order of the Company signed by two Officers Debentures for original issue on the date hereof in an aggregate principal amount of $225,000,000. 2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive Debentures. When Definitive Debentures are presented to the Debenture Registrar with a request: (i) to register the transfer of such Definitive Debentures; or (ii) to exchange such Definitive Debentures for an equal principal amount of Definitive Debentures of other authorized denominations, the Debenture Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Debentures surrendered for transfer or exchange: (1) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Debenture Registrar, duly executed by the holder thereof or its attorney duly authorized in writing; and (2) in the case of Transfer Restricted Debentures, are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Debentures are being delivered to the Debenture Registrar by a holder for registration in the name of such holder, without transfer, a certification from such holder to that effect (in the form set forth on the reverse side of the Debenture); or (B) if such Definitive Debentures are being transferred to the Company, a certification to that effect (in the form set forth on the reverse side of the Debenture); or (C) if such Definitive Debentures are being transferred pursuant to an exemption from registration in accordance with Rule 144 under the A-3 Securities Act or in reliance upon another exemption from the registration requirements of the Securities Act, (x) a certification to that effect (in the form set forth on the reverse side of the Debenture) and (y) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i). (b) Restrictions on Transfer of a Definitive Debenture for a Beneficial Interest in a Global Debenture. A Definitive Debenture may not be exchanged for a beneficial interest in a Global Debenture except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Debenture, duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Debenture Registrar, together with: (i) certification (in the form set forth on the reverse side of the Initial Debenture) that such Definitive Debenture is being transferred to a QIB in accordance with Rule 144A; and (ii) written instructions directing the Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to such Global Debenture to reflect an increase in the aggregate principal amount of the Debentures represented by the Global Debenture, such instructions to contain information regarding the Depositary account to be credited with such increase, then the Trustee shall cancel such Definitive Debenture and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Securities Custodian, the aggregate principal amount of Debentures represented by the Global Debenture to be increased by the aggregate principal amount of the Definitive Debenture to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Debenture equal to the principal amount of the Definitive Debenture so canceled. If no Global Debentures are then outstanding and the Global Debenture has not been previously exchanged for Definitive Debentures pursuant to Section 2.4, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Global Debenture in the appropriate principal amount. (c) Transfer and Exchange of Global Debentures. (i) The transfer and exchange of Global Debentures or beneficial interests therein shall be effected through the Depositary, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Debenture shall deliver a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in such Global Debenture or another Global Debenture and such account shall be credited in accordance with such order with a beneficial interest in the applicable Global Debenture A-4 and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Debenture being transferred. (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Debenture to a beneficial interest in another Global Debenture, the Debenture Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Debenture to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Debenture Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of Global Debenture from which such interest is being transferred. (iii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Debenture may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. (iv) In the event that a Global Debenture is exchanged for Definitive Debentures pursuant to Section 2.4 prior to the effectiveness of a Shelf Registration Statement with respect to such Definitive Debentures, such Definitive Debentures may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Debentures intended to ensure that such transfers comply with Rule 144A or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company. (d) Legend. (i) Except as permitted by the following paragraphs (ii) and (iii), each Debenture certificate evidencing the Global Debentures and the Definitive Debentures (and all Debentures issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form (each defined term in the legend being defined as such for purposes of the legend only): "THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS DEBENTURE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. A-5 THE HOLDER OF THIS DEBENTURE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH DEBENTURE, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS DEBENTURE (OR ANY PREDECESSOR OF SUCH DEBENTURE), ONLY (A) TO THE COMPANY (OR ITS SUBSIDIARIES), (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE DEBENTURES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE." Each Definitive Debenture shall bear the following additional legend: "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS." (ii) Upon any sale or transfer of a Transfer Restricted Debenture that is a Definitive Debenture, the Debenture Registrar shall permit the holder thereof to exchange such Transfer Restricted Debenture for a Definitive Debenture that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Debenture if the holder certifies in writing to the Debenture Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Initial Debenture). (iii) After a transfer of any Debentures during the period of the effectiveness of a Shelf Registration Statement with respect to such Debentures, all requirements pertaining to the Restricted Securities Legend on such Debentures shall cease to apply and the requirements that any such Debentures be issued in global form shall continue to apply. A-6 (e) Cancelation or Adjustment of Global Debenture. At such time as all beneficial interests in a Global Debenture have either been exchanged for Definitive Debentures, transferred, redeemed, repurchased or canceled, such Global Debenture shall be returned by the Depositary to the Trustee or retained by the Trustee. At any time prior to such cancelation, if any beneficial interest in a Global Debenture is exchanged for Definitive Debentures, transferred in exchange for an interest in another Global Debenture, redeemed, repurchased or canceled, the principal amount of Debentures represented by such Global Debenture shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Debenture) with respect to such Global Debenture, by the Trustee or the Securities Custodian, to reflect such reduction. (f) Obligations with Respect to Transfers and Exchanges of Debentures. (i) To permit registrations of transfers and exchanges, the Company shall execute, and the Trustee shall authenticate, Definitive Debentures and Global Debentures at the Debenture Registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchanges pursuant to Sections 2.07, 3.04, and 10.04 of this Indenture). (iii) Prior to the due presentation for registration of transfer of any Debenture, the Company, the Trustee, the Paying Agent or the Debenture Registrar may deem and treat the Person in whose name a Debenture is registered as the absolute owner of such Debenture for the purpose of receiving payment of principal of and interest on such Debenture and for all other purposes whatsoever, whether or not such Debenture is overdue, and none of the Company, the Trustee, the Paying Agent or the Debenture Registrar shall be affected by notice to the contrary. (iv) All Debentures issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Debentures surrendered upon such transfer or exchange. (g) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Debenture, a member of, or a participant in, the Depositary or any other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Debentures or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to the Debentures. All notices and communications to be given to the holders and all payments A-7 to be made to holders under the Debentures shall be given or made only to the registered holders (which shall be the Depositary or its nominee in the case of a Global Debenture). The rights of beneficial owners in any Global Debenture shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Debenture (including any transfers between or among Depositary participants, members or beneficial owners in any Global Debenture) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Definitive Debentures (a) A Global Debenture deposited with the Depositary or with the Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Definitive Debentures in an aggregate principal amount equal to the principal amount of such Global Debenture, in exchange for such Global Debenture, only if such transfer complies with Section 2.3 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as a depositary for such Global Debenture or if at any time the Depositary ceases to be a "clearing agency" registered under the Exchange Act, and a successor depositary is not appointed by the Company within 90 days of such notice or after the Company becomes aware of such cessation, or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Definitive Debentures under this Indenture. (b) Any Global Debenture that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to the Trustee, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Debenture, an equal aggregate principal amount of Definitive Debentures of authorized denominations. Any portion of a Global Debenture transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 principal amount and any integral multiple thereof and registered in such names as the Depositary shall direct. Any certificated Initial Debenture in the form of a Definitive Debenture delivered in exchange for an interest in the Global Debenture shall, except as otherwise provided by Section 2.3(d), bear the Restricted Securities Legend. (c) Subject to the provisions of Section 2.4(b), the registered holder of a Global Debenture may grant proxies and otherwise authorize any Person, including A-8 Agent Members and Persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Debentures. (d) In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to the Trustee a reasonable supply of Definitive Debentures in fully registered form without interest coupons. A-9 EXHIBIT A [FORM OF FACE OF DEBENTURE] [Global Debentures Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS DEBENTURE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS DEBENTURE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH DEBENTURE, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO E-1 YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS DEBENTURE (OR ANY PREDECESSOR OF SUCH DEBENTURE), ONLY (A) TO THE COMPANY (OR ITS SUBSIDIARIES), (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE DEBENTURES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. Each Definitive Debenture shall bear the following additional legend: IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. E-2 GRAFTECH INTERNATIONAL LTD. 1?% CONVERTIBLE SENIOR DEBENTURE CUSIP: No. $ GrafTech International Ltd., a corporation duly organized and validly existing under the laws of the State of Delaware (herein called the "COMPANY", which term includes any successor corporation under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to CEDE & CO. or its registered assigns [the principal sum of [ ] dollars [the principal sum set forth on Schedule I hereto]1 on January 15, 2024 at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest, semiannually on January 15 and July 15 of each year, commencing July 15, 2004, on said principal sum at said office or agency, in like coin or currency, at the rate per annum of 1?%, from the January 15 or July 15, as the case may be, next preceding the date of this Debenture to which interest has been paid or duly provided for, unless the date hereof is a date to which interest has been paid or duly provided for, in which case from the date of this Debenture, or unless no interest has been paid or duly provided for on this Debenture, in which case from January 22, 2004 until payment of said principal sum has been made or duly provided for. Except as otherwise provided in the Indenture, the interest payable on the Debenture pursuant to the Indenture on any January 15 or July 15 will be paid to the Person entitled thereto as it appears in the Debenture Register at the close of business on the Regular Record Date, which shall be the January 1 or July 1 (whether or not a Business Day) next preceding such January 15 or July 15, as provided in the Indenture; provided that any such interest not punctually paid or duly provided for shall be payable as provided in the Indenture. The Company promises to pay interest at the rate of 1?% per annum, compounded semiannually. The Company shall pay interest on overdue principal at the rate borne by the Debentures plus 1% per annum, and it shall pay interest on overdue installments of interest at such higher rate to the extent lawful. Interest on the Debentures shall be computed on the basis of a 360 day year of twelve 30-day months. Reference is made to the further provisions of this Debenture set forth on the reverse hereof, including, without limitation, provisions giving the holder of this Debenture the right to convert this Debenture into Common Stock of the Company on the terms and subject to the limitations referred to on the reverse hereof and as more fully specified in the Indenture. Under the circumstances described in the Indenture, the Company may fulfill all or part of its conversion obligation by delivering cash in lieu of shares of Common Stock or a combination of cash and shares of Common Stock. - ------------------------------- 1 For Global Debentures only E-3 This Debenture shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with and governed by the laws of the State of New York (including Section 5-1401 of the New York General Obligations Law or any successor to such statute). The Company has caused CUSIP numbers to be printed on the Debentures and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to holders. No representation is made as to the accuracy of such numbers either as printed on the Debentures or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. Subject to certain limitations imposed by the Trust Indenture Act and the Indenture, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Debentures and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. This Debenture shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee or a duly authorized authenticating agent under the Indenture. If and to the extent that any provision of this Debenture limits, qualifies or conflicts with a provision of the Indenture, such Indenture provision shall control. E-4 Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. GRAFTECH INTERNATIONAL LTD. by: ------------------------------------- Name: Title: by: ------------------------------------- Name: Title: Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION U.S. BANK NATIONAL ASSOCIATION as Trustee, certifies that this is one of the Securities referred to in the Indenture. By: ---------------------------------- Authorized Signatory E-5 [FORM OF REVERSE OF DEBENTURE] GRAFTECH INTERNATIONAL LTD. 1 5/8% CONVERTIBLE SENIOR DEBENTURE This Debenture is one of a duly authorized issue of Debentures of the Company, designated as its 1?% Convertible Senior Debentures (herein called the "DEBENTURES" or the "SECURITIES"), limited in aggregate principal amount to $225,000,000, issued and to be issued under and pursuant to an Indenture dated as of January 22, 2004 (herein called the "INDENTURE"), among the Company, GrafTech Finance Inc., GrafTech Global Enterprises Inc., UCAR Carbon Company Inc., UCAR International Trading Inc. and UCAR Carbon Technology LLC (herein called the "Guarantors", which term includes any successor corporation under the Indenture) and U.S. Bank National Association, as trustee (herein called the "TRUSTEE"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company, the Guarantors and the holders of the Debentures. The terms of the Debentures include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "Trust Indenture Act"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Debentures are subject to all such terms, and Debentureholders are referred to the Indenture and the Trust Indenture Act for a statement of those terms. The Debentures are general obligations of the Company. In the event of a conflict between the terms of the Indenture or the Registration Rights Agreement and the terms of the Debentures, the terms of the Indenture or the Registration Rights Agreement and not the Debentures shall govern. Initially, the Trustee will act as Paying Agent and Debenture Registrar. The Company may appoint and change any Paying Agent or Debenture Registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent or Debenture Registrar. The payment by the Company of the principal of, and premium and interest on, the Debentures is fully and unconditionally guaranteed on a joint and several senior unsecured basis by each of the Guarantors. Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Debentures; (ii) default in payment of principal on the Debentures when the same becomes due at Stated Maturity, upon declaration of acceleration or otherwise, or failure by the Company to purchase or redeem Debentures when required; (iii) failure by the Company to deliver shares, cash or other property on conversion of the Debentures in accordance with the Indenture; (iv) failure by the Company or any Guarantor to comply with other agreements in the Indenture or the Debentures, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company or any Guarantor if the amount accelerated (or so unpaid) exceeds $10.0 million; (v) certain events of bankruptcy or insolvency with respect to the Company, any E-6 Guarantor or any Significant Subsidiary; (vi) certain judgments or decrees for the payment of money in excess of $10.0 million, and (vii) certain defaults with respect to Guarantees. In case an Event of Default shall have occurred and be continuing, the principal of and accrued and unpaid interest (including Liquidated Damages, if any) on all Debentures may be declared by either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. Certain events of bankruptcy or insolvency are Events of Default which will result in the Debentures being due and payable immediately upon the occurrence of such Events of Default. Debentureholders may not enforce the Indenture or the Debentures except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Debentures unless it receives indemnity or security reasonably satisfactory to it. Subject to certain limitations, holders of a majority in principal amount of the Debentures may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Debentureholders notice of any continuing Default (except a Default in payment of principal or interest on any Debenture) if it determines that withholding notice is in the interest of the holders. A director, officer, employee or stockholder, as such, of the Company, any Guarantor or the Trustee shall not have any liability for any obligations of the Company or any Guarantor under the Debentures or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Debenture, each Debentureholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Debentures. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of at least a majority in aggregate principal amount of the Debentures at the time outstanding, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the holders of the Debentures; provided that without the consent of each Debentureholder affected thereby no such supplemental indenture shall (i) extend the Stated Maturity of any Debenture, or reduce the rate or extend the stated time for payment of interest on any Debenture, or reduce the principal amount of any Debenture or reduce any amount payable upon redemption or repurchase of any Debenture, or change the time at which any Debenture may be redeemed or repurchased, or impair the right of any Debentureholder to receive payment of principal of and interest on such holder's Debentures on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holder's Debentures, or make the principal of or interest on any Debenture payable in any coin or currency other than that provided in the Debentures, or affect the obligation of the Company to redeem any Debenture on a Redemption Date in a manner adverse to such Debentureholder, or affect the obligation of the Company to repurchase any Debenture upon a Fundamental Change in a manner adverse to such Debentureholder, or affect the obligation of the Company to repurchase any Debenture on a Company Repurchase Date in a manner adverse to such Debentureholder, or impair the right to convert the Debentures into shares of Common Stock subject to the terms set forth in the Indenture, including Section 15.06 thereof, or reduce the number of shares of Common Stock or other property receivable upon conversion, or modify any of the provisions of Article 10 or Section 6.07 thereof, except to E-7 increase any such percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the holder of each Debenture so affected, or change any obligation of the Company to maintain an office or agency in the places and for the purposes set forth in Section 4.02 thereof, or reduce the quorum or voting requirements set forth in Article 9 or modify the Debenture Guarantee in a manner adverse to the holders or (ii) reduce the aforesaid percentage of Debentures, the holders of which are required to consent to any such supplemental indenture. Subject to the provisions of the Indenture, the holders of a majority in aggregate principal amount of the Debentures at the time outstanding may on behalf of the holders of all of the Debentures waive any past default or Event of Default under the Indenture and its consequences except (A) a default in the payment of interest on, or the principal of, the Debentures, (B) a failure by the Company to convert any Debentures into Common Stock, (C) a default in the payment of the Redemption Price pursuant to Article 3 of the Indenture, (D) a default in the payment of the Company Repurchase Price or Fundamental Change Repurchase Price pursuant to Article 3 of the Indenture or (E) a default in respect of a covenant or provision of the Indenture which under Article 10 of the Indenture cannot be modified or amended without the consent of the holders of each or all Debentures then outstanding or affected thereby. Any such consent or waiver by the holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Debenture and any Debentures which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Debenture or such other Debentures. To guarantee the due and punctual payment of the principal of and interest (including Liquidated Damages, if any) on the Debentures and all other amounts payable by the Company under the Indenture and the Debentures when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Debentures and the Indenture, each of the Guarantors has unconditionally guaranteed the Guaranteed Obligations (the "DEBENTURE GUARANTEE") on a senior unsecured basis pursuant to the terms of the Indenture. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligations of the Company or the Guarantors, which are absolute and unconditional, to pay the principal of and interest (including Liquidated Damages, if any) on this Debenture at the place, at the respective times, at the rate and in the coin or currency herein prescribed. Holders must surrender Debentures to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Debentures represented by a Global Debenture (including principal and interest (including Liquidated Damages, if any)) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a Definitive Debenture (including principal and interest (including Liquidated Damages, if any)) by mailing a check to the registered address of each holder thereof; provided, that payments on a certificated Debenture will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating E-8 such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). The Company may also pay interest (including Liquidated Damages, if any) by check mailed to the address of a holder as it appears in the Debenture Register, provided, that holders with an aggregate principal amount of Debentures in excess of $2 million, may be paid, at their written election, by wire transfer in immediately available funds. However, payments to the Depositary will be made by wire transfer of immediately available funds to the account of Depositary or its nominee. The Debentures are issuable in fully registered form, without coupons, in denominations of $1,000 principal amount and any multiple of $1,000. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations provided in the Indenture, without payment of any service charge but with payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in connection with any registration or exchange of Debentures, Debentures may be exchanged for a like aggregate principal amount of Debentures of any other authorized denominations. The Debenture Registrar may require a holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Company promises to pay interest on the principal amount of this Debenture at the rate per annum shown above; provided, that if a Registration Default (as defined below) occurs, Liquidated Damages will accrue on this Debenture as set forth in the next succeeding paragraph. The Company will pay interest semiannually in arrears on January 15 and July 15 of each year, commencing July 15, 2004. Interest on the Debentures will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from January 22, 2004. The Company will pay interest on the Debentures (except defaulted interest) to the Persons who are registered holders of Debentures at the close of business on the January 1 or July 1 next preceding the interest payment date even if Debentures are canceled after the record date and on or before the interest payment date. The holder of this Debenture is entitled to the benefits of a Resale Registration Rights Agreement, dated as of January 22, 2004, among the Company, the Guarantors and the Initial Purchasers named therein (the "REGISTRATION RIGHTS AGREEMENT"). Capitalized terms used in this paragraph but not defined herein have the meanings assigned to them in the Registration Rights Agreement. If (i) the Shelf Registration Statement is not filed with the SEC on or prior to 90 days after the date of the Registration Rights Agreement, (ii) the Shelf Registration Statement is not declared effective within 180 days after the date of the Registration Rights Agreement, (iii) the Company or the Guarantors do not name a holder as a selling stockholder in the prospectus or file a post-effective amendment within the applicable time periods as required by the Registration Rights Agreement, (iv) any post-effective amendment required to be filed pursuant to the Registration Rights Agreement has not been declared effective prior to the 60th day following the date such post-effective amendment is required to be filed and (v) the Shelf Registration Statement is filed and declared effective within 180 days after the date of the Registration Rights Agreement but shall thereafter cease to be effective or usable (at any time that the Company and the Guarantors are obligated to maintain the effectiveness thereof) without being succeeded by an additional Registration Statement filed and declared effective or the filing of a supplement or amendment to the Shelf Registration Statement that E-9 reinstates the effectiveness thereof, in each case, within the applicable time periods as set forth in the Registration Agreement (each such event referred to in clauses (i) through (v), a "REGISTRATION DEFAULT"), the Company and the Guarantors shall be jointly and severally obligated to pay Liquidated Damages to each holder of Transfer Restricted Debentures, during the period of such Registration Default, in an amount equal to 0.25% of the principal amount of such Debentures to and including the 90th day following such Registration, and 0.50% of the principal amount of such Debentures from and after the 91st day following such Registration Default until the Registration Default is cured or the Shelf Registration Statement is no longer required to be kept effective. Notwithstanding the foregoing provisions, the Company and the Guarantors may issue a notice that the Shelf Registration Statement is unusable pending a material announcement and may issue any notice suspending use of the Shelf Registration Statement required under applicable securities laws to be issued and, in the event that the aggregate number of days in any consecutive twelve-month period for which all such notices are issued and effective exceeds 120 days in the aggregate, then the Company and the Guarantors shall be jointly and severally obligated to pay Liquidated Damages to each holder of Transfer Restricted Debentures in an amount equal to 0.25% of the principal amount of such Debentures to and including the 90th day following such Registration Default, and 0.50% of the principal amount of such Debentures from and after the 91st day following such Registration Default. In no event will Liquidated Damages exceed 0.50% per year. If a holder converts some or all of its Debentures into Common Stock when there exists a Registration Default with respect to the Common Stock or if a Registration Default occurs with respect to the Common Stock after a holder has converted Debentures into Common Stock, the holder will be entitled to receive Liquidated Damages on such Common Stock in an amount equal to 0.25% of the then-applicable Conversion Price to and including the 90th day following such Registration Default, and 0.50% of the then-applicable Conversion Price from and after the 91st day following such Registration Default, in each case for the period after such conversion. In no event will Liquidated Damages exceed 0.50% per year. In addition, such holder will receive, on the Settlement Date for any Debentures submitted for conversion during a Registration Default, accrued and unpaid Liquidated Damages to the Conversion Date relating to such Settlement Date. Upon the Company and the Guarantor declaring that the Shelf Registration Statement is usable after the period of time described in the preceding sentence, accrual of Liquidated Damages shall cease; provided, however, that if after any such cessation of the accrual of Liquidated Damages, the Shelf Registration Statement again ceases to be usable beyond the period permitted above, Liquidated Damages shall again accrue pursuant to the foregoing provisions. Except as provided above, all accrued Liquidated Damages shall be paid to holders in the same manner as interest payments on the Debentures on semi-annual payment dates which correspond to interest payment dates for the Debentures. Following the cure of all Registration Defaults, the accrual of Liquidated Damages shall cease. The Trustee shall have no responsibility with respect to the determination of the amount of any such Liquidated Damages. The Debentures may be redeemed at the option of the Company, in whole or in part on any date, at any time prior to January 15, 2011 (a "Provisional Redemption"), at a Redemption Price, payable in cash, equal to 100% of the principal amount of the Debentures to be redeemed plus accrued and unpaid interest (including Liquidated Damages, if any), if any, to (but excluding) the date of redemption (the "Provisional Redemption Date") if (i) the Last Reported Sales Price of the Common Stock has exceeded 125% of the Conversion Price then in effect for at least 20 Trading Days in any consecutive 30-Trading Day period ending on the E-10 Trading Day prior to the date of mailing of the notice of redemption, which notice must be given not less than 20 nor more than 60 days before the Provisional Redemption Date (the "Notice Date") and (ii) either (a) a registration statement covering resales of Debentures and the Common Stock issuable upon conversion thereof is effective and available for use and is expected to remain effective for the 30 days following the Provisional Redemption Date or (b) the Debentures and the Common Stock issuable upon conversion thereof are no longer Transfer Restricted Securities (as defined in the Registration Rights Agreement); provided that if the Provisional Redemption Date is on January 15 or July 15, then the interest payable on such date shall be paid to the holder of record on the preceding January 1 or July 1, respectively. Upon any such Provisional Redemption, the Company shall make an additional payment (the "Make Whole Payment") with respect to the Debentures called for redemption to holders of Debentures to be redeemed in an amount equal to the present value of all remaining scheduled payments of interest on the Debentures to be redeemed through and including January 15, 2011. The present value of the remaining scheduled payments will be computed using a discount rate equal to the Treasury Yield. The Company shall calculate the amount of the Make Whole Payment and make such Make Whole Payment on all Debentures called for Provisional Redemption, including those Debentures converted into Common Stock between the Notice Date and the Provisional Redemption Date. The Company may elect to make the Make Whole Payment or any portion thereof (i) in cash or (ii) subject to fulfillment by the Company of the conditions set forth in Section 3.08(e) of the Indenture, by delivering the number of shares of Common Stock equal to (x) the Make Whole Payment (or any portion thereof that the Company elects to pay in shares of Common Stock ) divided by 97.5% of the Market Price. Except as provided above, the Debentures are not redeemable prior to January 15, 2011. At any time on or after January 15, 2011 and prior to Stated Maturity, the Debentures may be redeemed at the option of the Company, in whole or in part, in cash, upon mailing a notice of such redemption not less than twenty (20) days but not more than sixty (60) days before the Redemption Date to the holders of Debentures at their last registered addresses, all as provided in the Indenture, at a Redemption Price equal to 100% of the principal amount of Debentures to be redeemed plus accrued and unpaid interest (including Liquidated Damages, if any), if any, to, but excluding, the Redemption Date; provided that if the Redemption Date is on January 15 or July 15, then the interest payable on such date shall be paid to the holder of record on the preceding January 1 or July 1, respectively. The Debentures will be redeemable in multiples of $1,000 principal amount. The Company may not give notice of any redemption of the Debentures if a default in the payment of interest (including Liquidated Damages, if any) on the Debentures has occurred and is continuing. The Debentures are not subject to redemption through the operation of any sinking fund. E-11 Subject to the terms and conditions of the Indenture, the Company shall become obligated to repurchase, at the option of the holder, all or any portion of the Debentures held by such holder if a Fundamental Change occurs at any time prior to maturity of the Debentures, on a Fundamental Change Repurchase Date specified by the Company (which shall be no later than thirty-five (35) Business Days after the occurrence of such Fundamental Change), at a Fundamental Change Repurchase Price equal to 100% of the principal amount thereof, plus accrued and unpaid interest (including Liquidated Damages, if any) to (but excluding) the Fundamental Change Repurchase Date; provided that if such Fundamental Change Repurchase Date falls after a record date and on or prior to the corresponding Interest Payment Date, the interest payable on such Interest Payment Date shall be paid to the holder of record of this Debenture on the applicable record date instead of the holders surrendering such Debentures for repurchase on such date. The Company shall mail to all holders of record of such Debentures a notice of the occurrence of a Fundamental Change and of the repurchase right arising as a result thereof on or before the twenty-fifth (25th) Business Day prior to each Fundamental Change Repurchase Date. To exercise such right, a holder shall deliver to the to the Trustee (or other Paying Agent appointed by the Company) such Debentures with the form entitled "FORM OF FUNDAMENTAL CHANGE REPURCHASE ELECTION" on the reverse thereof duly completed, together with the Debentures, duly endorsed for transfer, at any time from the opening of business on the date that is twenty-five (25) Business Days prior to such Fundamental Change Repurchase Date until the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date, as set forth in the Indenture. Subject to the terms and conditions of the Indenture, the Company shall become obligated to repurchase, at the option of the holder, all or any portion of the Debentures held by such holder on January 15, 2011, January 15, 2014 and January 15, 2019 in integral multiples of $1,000 at a Company Repurchase Price of 100% of the principal amount thereof, plus any accrued and unpaid interest (including Liquidated Damages, if any), if any, on such Debentures to but excluding the Company Repurchase Date. To exercise such right, a holder shall deliver to the Trustee (or other Paying Agent appointed by the Company) such Debenture with the form entitled "FORM OF COMPANY REPURCHASE ELECTION" on the reverse thereof duly completed, together with the Debenture, duly endorsed for transfer, at any time from the opening of business on the date that is twenty-five (25) Business Days prior to such Company Repurchase Date until the close of business on the Business Day immediately preceding the Company Repurchase Date, as set forth in the Indenture. The Company Repurchase Price to be paid on any Company Repurchase Date and the Fundamental Change Repurchase Price to be paid on any Fundamental Change Repurchase Date may be paid, at the option of the Company, in cash or by the issuance and delivery of shares of Common Stock, or in any combination thereof, subject to the terms and conditions of the Indenture. Debentureholders have the right to withdraw any Repurchase Election by delivering to the Trustee (or other Paying Agent appointed by the Company) a written notice of withdrawal up to the close of business on the Business Day immediately preceding the Repurchase Date, all as provided in the Indenture. E-12 If cash or securities sufficient to pay the Repurchase Price or Redemption Price with respect to all Debentures or portions thereof to be repurchased or redeemed as of any Repurchase Date or Redemption Date are deposited with the Trustee (or other Paying Agent appointed by the Company), then on and after such Repurchase Date or Redemption Date, interest will cease to accrue on such Debentures (or portions thereof), and the holders thereof shall have no other rights as such other than the right to receive the Repurchase Price or Redemption Price upon surrender of such Debentures. Subject to the occurrence of certain events and in compliance with the provisions of the Indenture, prior to Stated Maturity, the holder hereof has the right, at its option, to convert each $1,000 principal amount of the Debentures into 60.3136 shares (the "CONVERSION RATE") of the Company's Common Stock (at a Conversion Price of approximately $16.58 per share), as such shares shall be constituted at the date of conversion and subject to adjustment from time to time as provided in the Indenture, upon surrender of this Debenture with the form entitled "FORM OF CONVERSION NOTICE" on the reverse hereof duly completed, to the Company at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture or, at the option of such holder, the Corporate Trust Office, and, unless the shares issuable on conversion are to be issued in the same name as this Debenture, duly endorsed by, or accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the holder or by its duly authorized attorney. The Company will notify the holder thereof of any event triggering the right to convert the Debentures as specified above in accordance with the Indenture. If the Company (i) is a party to a consolidation, merger, binding share exchange or combination, (ii) reclassifies the Common Stock or (iii) sells or conveys its properties and assets substantially as an entirety to any Person, the right to convert a Debenture into shares of Common Stock may be changed into a right to convert it into securities, cash or other assets of the Company or such other Person, in each case in accordance with the Indenture. No adjustment in respect of interest on any Debenture converted or dividends on any shares issued upon conversion of such Debenture will be made upon any conversion except as set forth in the next sentence. If this Debenture (or portion hereof) is surrendered for conversion during the period from the close of business on any record date for the payment of interest to the close of business on the Business Day preceding the following Interest Payment Date and has not been called for redemption by the Company on a Redemption Date that occurs during such period, this Debenture (or portion hereof being converted) must be accompanied by payment, in immediately available funds or other funds acceptable to the Company, of an amount equal to the interest otherwise payable on such Interest Payment Date on the principal amount being converted; provided that no such payment shall be required (1) if the Company has specified a Redemption Date that is after a record date and prior to the next Interest Payment Date, (2) if the Company has specified a Repurchase Date following a Fundamental Change that is during such period or (3) to the extent of any overdue interest (including Liquidated Damages, if any), if any overdue interest exists at the time of conversion with respect to such Debenture. No fractional shares will be issued upon any conversion, but an adjustment and payment in cash will be made, as provided in the Indenture, in respect of any fraction of a share E-13 which would otherwise be issuable upon the surrender of any Debenture or Debentures for conversion. A Debenture in respect of which a holder is exercising its right to require repurchase upon a Fundamental Change or repurchase on a Repurchase Date may be converted only if such holder withdraws its election to exercise such right in accordance with the terms of the Indenture. Any Debentures called for redemption, unless surrendered for conversion by the holders thereof on or before the close of business on the second Business Day preceding the Redemption Date, may be deemed to be redeemed from the holders of such Debentures for an amount equal to the applicable Redemption Price by one or more investment banks or other purchasers who may agree with the Company (i) to purchase such Debentures from the holders thereof and convert them into shares of the Company's Common Stock and (ii) to make payment for such Debentures as aforesaid to the Trustee in trust for the holders. Upon due presentment for registration of transfer of this Debenture at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, a new Debenture or Debentures of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange thereof, subject to the limitations provided in the Indenture, without charge except for any tax, assessment or other governmental charge imposed in connection therewith. The Company, the Guarantors, the Trustee, any authenticating agent, any Paying Agent, any Conversion Agent and any Debenture Registrar may deem and treat the registered holder hereof as the absolute owner of this Debenture (whether or not this Debenture shall be overdue and notwithstanding any notation of ownership or other writing hereon made by anyone other than the Company or any Debenture Registrar) for the purpose of receiving payment hereof, or on account hereof, for the conversion hereof and for all other purposes, and neither the Company nor the Trustee nor any other authenticating agent nor any Paying Agent nor other Conversion Agent nor any Debenture Registrar shall be affected by any notice to the contrary. All payments made to or upon the order of such registered holder shall, to the extent of the sum or sums paid, satisfy and discharge liability for monies payable on this Debenture. No recourse for the payment of the principal of or interest (including Liquidated Damages, if any) on this Debenture, or for any claim based hereon or otherwise in respect hereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any Guarantor in the Indenture or any supplemental indenture or in this Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, agent, officer or director or subsidiary, as such, past, present or future, of the Company or the Guarantors or of any of their respective successors, either directly or through the Company or the Guarantors or any of their respective successors, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. E-14 If money for the payment of principal or interest (including Liquidated Damages if any) remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its request unless an abandoned property law designates another Person. After any such payment, holders entitled to the money must look only to the Company and not to the Trustee for payment. E-15 ABBREVIATIONS The following abbreviations, when used in the inscription of the face of this Debenture, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common UNIF GIFT MIN ACT -___ Custodian ___ TEN ENT - as tenant by the entireties (Cust) (Minor) JT TEN - as joint tenants with right under Uniform Gifts to Minors Act of survivorship and not as ___________________________ tenants in common (State) Additional abbreviations may also be used though not in the above list. E-16 FORM OF CONVERSION NOTICE TO: GRAFTECH INTERNATIONAL LTD. U.S. BANK NATIONAL ASSOCIATION The undersigned registered owner of this Debenture hereby irrevocably exercises the option to convert this Debenture, or the portion thereof (which is $1,000 or a multiple thereof) below designated, into shares of Common Stock of GrafTech International Ltd. in accordance with the terms of the Indenture referred to in this Debenture, and requests and instructs the Company to issue and deliver to the undersigned registered owner (unless a different name has been indicated below) the shares of Common Stock issuable and deliverable upon such conversion, together with (i) any Debentures representing any unconverted principal amount hereof and (ii) any check in payment for interest, if any, fractional shares and any Make Whole Payment or portion thereof. Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Indenture. If shares of Common Stock or any portion of the principal amount of this Debenture not converted are to be issued in the name of a Person other than the undersigned, the undersigned will provide the appropriate information below and pay all transfer taxes payable with respect thereto. Dated: ---------------------------- -------------------------------- -------------------------------- Signature(s) E-17 Signature(s) must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION" meeting the requirements of the Debenture Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "SIGNATURE GUARANTEE program" as may be determined by the Debenture Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. ----------------------------- Signature Guarantee NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Debenture in every particular without alteration or enlargement or any change whatsoever. Fill in the registration of shares of Common Stock if to be issued, and Debentures if to be delivered, other than to and in the name of the registered holder: - --------------------------------- (Name) - --------------------------------- (Street Address) - --------------------------------- (City, State and Zip Code) - --------------------------------- Please print name and address Principal amount to be converted (if less than all): $-------------------------------- Social Security or Other Taxpayer Identification Number: - --------------------------------- E-18 FORM OF FUNDAMENTAL CHANGE REPURCHASE ELECTION TO: GRAFTECH INTERNATIONAL LTD. U.S. BANK NATIONAL ASSOCIATION The undersigned registered owner of this Debenture hereby irrevocably acknowledges receipt of a notice from GrafTech International Ltd. (the "COMPANY") as to the occurrence of a Fundamental Change with respect to the Company and requests and instructs the Company to repurchase the entire principal amount of this Debenture, or the portion thereof (which is $1,000 or a multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Debenture at the price of 100% of such entire principal amount or portion thereof, together with accrued and unpaid interest (including Liquidated Damages, if any) to, but excluding, the Fundamental Change Repurchase Date, to the registered holder hereof unless a different name has been indicated below. Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Indenture. This Debenture shall be repurchased by the Company as of the Fundamental Change Repurchase Date pursuant to the terms and conditions specified in the Indenture. If shares of Common Stock or any portion of the principal amount of this Debenture is to be issued or paid, as applicable, to a Person other than the undersigned, the undersigned will provide the appropriate information below. If the Company elects to pay the Fundamental Change Repurchase Price, in whole or in part, in shares of Common Stock but such portion of the Fundamental Change Repurchase Price shall ultimately be paid to such holder entirely in cash because any of the conditions to payment of the Fundamental Change Repurchase Price in shares of Common Stock is not satisfied prior to the close of business on the Business Day immediately preceding the Fundamental Change Repurchase Date, the undersigned registered owner elects: /__/ to withdraw this Fundamental Change Repurchase Election as to $__________ principal amount of the Debentures to which this Fundamental Change Repurchase Election relates (Certificate Numbers: _______________________________), or /__/ to receive cash in respect of $_______________ principal amount of the Debentures to which this Fundamental Change Repurchase Election relates. Dated: ---------------------------- -------------------------------- -------------------------------- Signature(s) E-19 NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Debenture in every particular without alteration or enlargement or any change whatever. Debenture Certificate Number (if applicable): Principal amount to be repurchased (if less than all): Social Security or Other Taxpayer Identification Number: E-20 FORM OF COMPANY REPURCHASE ELECTION TO: GRAFTECH INTERNATIONAL LTD. U.S. BANK NATIONAL ASSOCIATION The undersigned registered owner of this Debenture hereby irrevocably acknowledges receipt of a notice from GrafTech International Ltd. (the "COMPANY") regarding the right of holders to elect to require the Company to repurchase the Debentures and requests and instructs the Company to repay the entire principal amount of this Debenture, or the portion thereof (which is $1,000 or a multiple thereof) below designated, in accordance with the terms of the Indenture at the price of 100% of such entire principal amount or portion thereof, together with accrued and unpaid interest (including Liquidated Damages, if any) to, but excluding, the Company Repurchase Date, to the registered holder hereof unless a different name has been indicated below. Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Indenture. The Debentures shall be repurchased by the Company as of the Company Repurchase Date pursuant to the terms and conditions specified in the Indenture. If shares of Common Stock or any portion of the principal amount of this Debenture is to be issued or paid, as applicable, to a person other than the undersigned, the undersigned will provide the appropriate information below. If the Company elects to pay the Company Repurchase Price, in whole or in part, in shares of Common Stock but such portion of the Company Repurchase Price shall ultimately be paid to such holder entirely in cash because any of the conditions to payment of the Company Repurchase Price in shares of Common Stock is not satisfied prior to the close of business on the Business Day immediately preceding the Company Repurchase Date, the undersigned registered owner elects: /__/ to withdraw this Company Repurchase Election as to $__________ principal amount of the Debentures to which this Company Repurchase Election relates (Certificate Numbers: ______________________________________________), or /__/ to receive cash in respect of $_______________ principal amount of the Debentures to which this Company Repurchase Election relates. Dated: ---------------------------- -------------------------------- -------------------------------- Signature(s) E-21 NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Debenture in every particular without alteration or enlargement or any change whatever. Debenture Certificate Number (if applicable): - ------------------------------------------------------ Principal amount to be repurchased (if less than all): - ------------------------------------------------------ Social Security or Other Taxpayer Identification Number: E-22 ASSIGNMENT For value received _____________________ hereby sell(s) assign(s) and transfer(s) unto __________________________________________ (Please insert social security or other Taxpayer Identification Number of assignee) the within Debenture, and hereby irrevocably constitutes and appoints attorney to transfer said Debenture on the books of the Company, with full power of substitution in the premises. In connection with any transfer of the Debenture prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision) (other than any transfer pursuant to a registration statement that has been declared effective under the Securities Act of 1933, as amended), the undersigned confirms that the Debenture is being transferred: /__/ To GrafTech International Ltd. subsidiary thereof; or /__/ To a "QUALIFIED INSTITUTIONAL BUYER" in compliance with Rule 144A under the Securities Act of1933, as amended; or /__/ Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended; or /__/ Pursuant to a registration statement which has been declared effective under the Securities Act of 1933, as amended, and which continues to be effective at the time of transfer; and unless the Debenture has been transferred to GrafTech International Ltd. or a subsidiary thereof, the undersigned confirms that the Debenture is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended. Unless one of the boxes is checked, the Trustee will refuse to register any of the Debentures evidenced by this certificate in the name of any Person other than the registered holder thereof. Dated: ---------------------------- -------------------------------- -------------------------------- Signature(s) E-23 Signature(s) must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION" meeting the requirements of the Debenture Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "SIGNATURE GUARANTEE program" as may be determined by the Debenture Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. ---------------------------- Signature Guarantee NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Debenture in every particular without alteration or enlargement or any change whatsoever. E-24
Schedule I [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is $[ ]. The following increases or decreases in this Global Security have been made: Date of Amount of decrease Amount of increase Principal amount of Signature of Exchange in Principal Amount in Principal Amount this Global Security authorized signatory of this Global of this Global following such of Trustee or Security Security decrease or increase Securities Custodian
S-1 EXHIBIT B [FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY ADDITIONAL GUARANTORS] SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated as of [ ], among [ ] (the "ADDITIONAL GUARANTOR"), a [ ] corporation and a subsidiary of GrafTech International Ltd., a Delaware corporation (or its permitted successor) (the "COMPANY"), the other Guarantors (as defined in the Indenture referred to herein) and U.S. Bank National Association, as Trustee under the Indenture (the "TRUSTEE"). W I T N E S S E T H WHEREAS, the Company and the other Guarantors have heretofor executed and delivered to the Trustee an indenture, dated as of January 22, 2004 (as the same may be amended or supplemented, the "INDENTURE"), providing for the issuance of an aggregate principal amount of $225,000,000 of 1 5/8% Convertible Senior Debentures (the "DEBENTURES"); WHEREAS, Section 4.10 of the Indenture provides that under certain circumstances the Company shall cause the Additional Guarantor to execute and deliver to the Trustee a Debenture Guarantee Agreement pursuant to which the Additional Guarantor will Guarantee payment of the Debentures on the same terms and conditions as those set forth in Article 14 of the Indenture; and WHEREAS, pursuant to Section 10.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for good and valuable consideration, the receipt of which is hereby acknowledged, the Company, the Additional Guarantor, the other Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Debentures as follows: SECTION 1. Capitalized Terms. Terms used herein but not defined shall have the meanings assigned to them in the Indenture. SECTION 2. Guarantee. The Additional Guarantor hereby unconditionally and irrevocably guarantees on an unsecured basis, as a primary obligor and not merely as surety, jointly and severally with the other Guarantors, to each holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of and interest on the Debentures when due, whether at Stated Maturity, by acceleration, by redemption or otherwise, of all other monetary obligations of the Company under the Indenture, including obligations to the Trustee, and the Debentures, whether for payment of principal of or interest on the Debentures, and all other monetary obligations of the Company under the Indenture and the Debentures, and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company, whether for fees, expenses, indemnification or otherwise, under the Indenture and the Debentures (all the foregoing being hereinafter collectively called, the "GUARANTEED OBLIGATIONS"). B-1 The Additional Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from the Additional Guarantor. and that the Additional Guarantor will remain bound under this Supplemental Indenture notwithstanding any extension or renewal of any Guaranteed Obligation. The Additional Guarantor waives presentation to, demand of payment from and protest to the Company of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. The Additional Guarantor waives notice of any default under the Debentures or the Guaranteed Obligations. The obligations of the Additional Guarantor hereunder shall not be affected by (a) the failure of any holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under the Indenture, this Supplemental Indenture, the Debentures or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of the Indenture, this Supplemental Indenture, the Debentures or any other agreement; (d) the release of any security held by any holder or the Trustee for the Guaranteed Obligations or any of them; (e) the failure of any holder or the Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (f) except as set forth in Section 7 of this Supplemental Indenture, any change in the ownership of the Additional Guarantor. The Additional Guarantor hereby waives any right to which it may be entitled to have its obligations hereunder divided among the Guarantors so that the Additional Guarantor's obligations would be less than the full amount claimed. The Additional Guarantor hereby waives any right to which it may be entitled to have the assets of the Company first be used and depleted as payment of the Company's or the Additional Guarantor's obligations hereunder prior to any amounts being claimed from or paid by the Additional Guarantor hereunder. The Additional Guarantor hereby waives any right to which it may be entitled to require that the Company be sued prior to an action being initiated against the Additional Guarantor. The Additional Guarantor further agrees that its Debenture Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any holder or the Trustee to any security held for payment of the Guaranteed Obligations. Except as expressly set forth in Sections 3 and 7 of this Supplemental Indenture, the obligations of the Additional Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Additional Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any holder or the Trustee to assert any claim or demand or to enforce any remedy under the Indenture, this Supplemental Indenture, the Debentures or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in B-2 any manner or to any extent vary the risk of the Additional Guarantor or would otherwise operate as a discharge of the Additional Guarantor as a matter of law or equity. The Additional Guarantor agrees that its Debenture Guarantee shall remain in full force and effect until payment in full of all the Guaranteed Obligations. The Additional Guarantor further agrees that its Debenture Guarantee herein 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 Guaranteed Obligation is rescinded or must otherwise be restored by any holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any holder or the Trustee has at law or in equity against the Additional Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, the Additional Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the holders or the Trustee an amount equal to the sum of (1) the unpaid principal amount of such Guaranteed Obligations, (2) accrued and unpaid interest on such Guaranteed Obligations (but only to the extent not prohibited by law) and (3) all other monetary obligations of the Company to the holders and the Trustee. The Additional Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the holders in respect of any Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed Obligations. The Additional Guarantor agrees further, that, as between it, on the one hand, and the holders and the Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of the Additional Guarantor's Debenture Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article 6 of the Indenture, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by the Additional Guarantor for the purposes of this Supplemental Indenture. The Additional Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any holder in enforcing any rights under this Section 2. Upon request of the Trustee, the Additional Guarantor shall execute and deliver such further instruments and so such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of the Indenture. SECTION 3. Limitation on Liability. Any term or provision of this Supplemental Indenture to the contrary notwithstanding, (i) the maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by the Additional Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Supplemental Indenture, as it relates to the Additional Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors B-3 generally and (ii) no waiver, modification, indulgence or circumstances shall, without the consent of the Guarantors, increase the principal amount of a Debenture or the interest rate thereon (and, if applicable, the premium or Make Whole Payment in respect thereof). SECTION 4. Successors and Assigns. This Supplemental Indenture shall be binding upon the Additional Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the holders and, in the event of any transfer or assignment of rights by any holder or the Trustee, the rights and privileges conferred upon that party in this Supplemental Indenture and in the Debentures shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Supplemental Indenture. SECTION 5. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the holders in exercising any right, power or privilege under this Supplemental Indenture shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Supplemental Indenture at law, in equity, by statute or otherwise. SECTION 6. Modification. No modification, amendment or waiver of any provision of this Supplemental Indenture, nor the consent to any departure by the Additional Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, 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 the Additional Guarantor in any case shall entitle the Additional Guarantor to any other or further notice or demand in the same, similar or other circumstances. SECTION 7. Release. Upon (i) the sale or other disposition (including by any merger or consolidation) of the Additional Guarantor with or into any Person where the Additional Guarantor is not the surviving entity of such merger or consolidation or (ii) the sale or other disposition of all or substantially all the assets of the Additional Guarantor (in each case other than a sale or disposition to the Company or an Affiliate of the Company), the Debenture Guarantee herein shall terminate and be of no further force or effect and the Additional Guarantor shall be deemed to be released from all obligations under this Supplemental Indenture without any further action on the part of the Trustee or the holders; provided, however, that such merger or consolidation, sale, conveyance or transfer shall comply with Article 11 of the Indenture. At the request and expense of the Company, the Trustee shall execute and deliver an appropriate instrument evidencing such release in the form provided by the Company. SECTION 8. Governing Law. This Supplemental Indenture shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of the State of New York (including Section 5-1401 of the New York General Obligations Law or any successor to such statute). SECTION 9. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Additional Guarantor shall not have any liability for any obligations B-4 of the Company under the Debentures or the Indenture or of the Additional Guarantor under its Debenture Guarantee, the Indenture or this Supplemental Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Debenture, each Debentureholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Debentures. SECTION 10. Multiple Originals. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 11. Headings. The headings of the Sections of this Supplemental Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. SECTION 12. Contribution. The Additional Guarantor shall be entitled upon payment in full of all Guaranteed Obligations to a contribution from each other Guarantor in an amount equal to such other Guarantor's pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP. SECTION 13. Execution and Non-Impairment. To further evidence its Debenture Guarantee, the Additional Guarantor agrees to execute a Debenture Guarantee to be endorsed on each Debenture ordered to be authenticated by the Trustee. The failure to endorse such Debenture Guarantee on any Debenture shall not affect or impair the validity thereof. B-5 IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to be duly executed as of the date first written above. ADDITIONAL SUBSIDIARY GUARANTOR by ------------------------------- Name: Title: GRAFTECH INTERNATIONAL LTD. By: ------------------------------- Name: Title: GRAFTECH FINANCE INC. By: --------------------------------- Name: Title: GRAFTECH GLOBAL ENTERPRISES INC. By: ------------------------------- Name: Title: UCAR CARBON COMPANY INC. By: ------------------------------- Name: Title: UCAR INTERNATIONAL TRADING INC. By: -------------------------------- Name: Title: B-6 UCAR CARBON TECHNOLOGY LLC By: -------------------------------- Name: Title: U.S. Bank National Association, as Trustee, by ------------------------------- Name: Title: B-7 EX-4 5 gti_regrights-jan04.txt EXHIBIT 4.5.0 Exhibit 4.5.0 EXECUTION COPY $225,000,000 AGGREGATE PRINCIPAL AMOUNT GRAFTECH INTERNATIONAL LTD. 1 5/8% CONVERTIBLE SENIOR DEBENTURES RESALE REGISTRATION RIGHTS AGREEMENT DATED JANUARY 22, 2004 1 RESALE REGISTRATION RIGHTS AGREEMENT, dated as of January 22, 2004, among GrafTech International Ltd., a Delaware corporation (together with any successor entity, herein referred to as the "COMPANY"), the guarantors listed in Schedule 2 to the Purchase Agreement (as defined below) (together with any successor entity, herein referred to as the "GUARANTORS"), and J.P. Morgan Securities Inc., as representative of the several initial purchasers (the "INITIAL PURCHASERS") under the Purchase Agreement. Pursuant to the Purchase Agreement, dated as of January 15, 2004, among the Company, the Guarantors and J.P. Morgan Securities Inc. as representative of the Initial Purchasers (the "PURCHASE AGREEMENT"), the Initial Purchasers have agreed to purchase from the Company $180,000,000 ($225,000,000 if the Initial Purchasers exercise their option in full) in aggregate principal amount of 1 ?% Convertible Senior Debentures (the "DEBENTURES") of the Company. The Debentures will be convertible into fully paid, nonassessable shares of common stock, par value $0.01 per share, of the Company (the "COMMON STOCK"). The Debentures will be convertible on the terms, and subject to the conditions, set forth in the Indenture (as defined herein). To induce the Initial Purchasers to purchase the Debentures, the Company and the Guarantors have agreed to provide the registration rights set forth in this Agreement. The parties hereby agree as follows: 1. Definitions. Capitalized terms used in this Agreement without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized terms shall have the following meanings: "AFFILIATE" of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise. The terms "CONTROLLING" and "controlled" have meanings correlative to the foregoing. "AGREEMENT": This Resale Registration Rights Agreement. "AMENDED EFFECTIVENESS DEADLINE DATE": As defined in Section 2(e) hereof. "BLUE SKY APPLICATION": As defined in Section 6(a)(i) hereof. "BUSINESS DAY": The definition of "Business Day" in the Indenture. "COMMISSION": Securities and Exchange Commission. "COMMON STOCK": As defined in the preamble hereto. "COMPANY": As defined in the preamble hereto. "CONVERSION PRICE": As defined in the Indenture. 2 "DEBENTURES": As defined in the preamble hereto. "EFFECTIVENESS PERIOD": As defined in Section 2(a)(iii) hereof. "EFFECTIVENESS TARGET DATE": As defined in Section 2(a)(ii) hereof. "EXCHANGE ACT": Securities Exchange Act of 1934, as amended. "GUARANTEES": The senior unsecured guarantees of the Debentures by the Guarantors. "GUARANTORS": As defined in the preamble hereto. "HOLDER": A Person who owns, beneficially or otherwise, Transfer Restricted Securities. "INDEMNIFIED HOLDER": As defined in Section 6(a) hereof. "INDENTURE": The Indenture, dated as of January 22, 2004 among the Company, the Guarantors and U.S. Bank National Association, as trustee (the "TRUSTEE"), pursuant to which the Debentures are to be issued, as such Indenture may be amended, modified or supplemented from time to time in accordance with the terms thereof. "INITIAL PURCHASERS": As defined in the preamble hereto. "LIQUIDATED DAMAGES": As defined in Section 3(a) hereof. "LIQUIDATED DAMAGES PAYMENT DATE": Each January 15 and July 15. "MAJORITY OF HOLDERS": Holders holding over 50% of the aggregate principal amount of Debentures outstanding; provided that, for the purpose of this definition, a holder of Shares that constitute Transfer Restricted Securities shall be deemed to hold an aggregate principal amount of Debentures (in addition to the principal amount of Debentures held by such holder) equal to the quotient of (x) the number of such shares of Common Stock held by such holder and (y) the conversion rate in effect at the time of such conversion, redemption or repurchase as determined in accordance with the Indenture. "NASD": National Association of Securities Dealers, Inc. "NOTICE AND QUESTIONNAIRE": A written notice executed by the respective Holder and delivered to the Company containing substantially the information called for by the Selling Securityholder Notice and Questionnaire attached as Appendix A to the Offering Memorandum of the Company issued January 15, 2004 relating to the Debentures. "NOTICE HOLDER": On any date, any Holder that has delivered a Notice and Questionnaire to the Company on or prior to such date. "PERSON": An individual, partnership, corporation, company, unincorporated organization, trust or joint venture or a government or agency or political subdivision thereof. 3 "PURCHASE AGREEMENT": As defined in the preamble hereto. "PROSPECTUS": The prospectus included in a Shelf Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such prospectus. "RECORD HOLDER": With respect to any Liquidated Damages Payment Date, each Person who is a Holder on the January 1 or July 1 immediately preceding the relevant Liquidated Damages Payment Date. In the case of a Holder of Shares, "Record Holder" shall mean each Person who is a Holder of shares of Common Stock that constitute Transfer Restricted Securities on the January 1 or July 1 immediately preceding the relevant Liquidated Damages Payment Date. "REGISTRATION DEFAULT": As defined in Section 3(a) hereof. "SECURITIES ACT": Securities Act of 1933, as amended. "SHARE": Each share of Common Stock issued or issuable upon conversion, redemption or repurchase of Debentures (including upon payment of any "make whole" amount in connection with a redemption of Debentures pursuant to Section 3.01 of the Indenture). "SHELF FILING DEADLINE": As defined in Section 2(a)(i) hereof. "SHELF REGISTRATION STATEMENT": As defined in Section 2(a)(i) hereof and, for purposes of Sections 2(d), 2(e), 3(a) (other than clauses (i) and (ii) thereof), 4, 5, 6 and 9(c) hereof, includes a Subsequent Shelf Registration Statement. "SUBSEQUENT SHELF REGISTRATION STATEMENT": As defined in Section 2(c) hereof. "SUSPENSION NOTICE": As defined in Section 4(c) hereof. "SUSPENSION PERIOD": As defined in Section 4(b)(i) hereof. "TIA": Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder, in each case, as in effect on the date the Indenture is qualified under the TIA. "TRANSFER RESTRICTED SECURITIES": Each Debenture (and Guarantee thereof) and each Share until the earliest of: (i) the date on which such Debenture or Share has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement; (ii) the date on which such Debenture or Share is transferred in compliance with Rule 144 under the Securities Act or may be sold or 4 transferred by a person who is not an affiliate of the Company pursuant to Rule 144 under the Securities Act (or any other similar provision then in force) without any volume or manner of sale restrictions thereunder; or (iii) the date on which such Debenture or Share ceases to be outstanding (whether as a result of redemption, repurchase and cancellation, conversion or otherwise). "UNDERWRITTEN REGISTRATION": A registration in which Debentures or Shares held by a Holder are sold to an underwriter for reoffering to the public. Unless the context otherwise requires, the singular includes the plural, and words in the plural include the singular. 2. Shelf Registration. (a) The Company and the Guarantors shall: (i) not later than 90 days after the date hereof (the "SHELF FILING DEADLINE"), cause to be filed a registration statement pursuant to Rule 415 under the Securities Act (the "SHELF REGISTRATION STATEMENT"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities held by Holders that have provided the information required pursuant to the terms of Section 2(b) hereof; (ii) use commercially reasonable efforts to cause the Shelf Registration Statement to be declared effective by the Commission not later than 180 days after the date hereof (the "EFFECTIVENESS TARGET DATE"); and (iii) use commercially reasonable efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 4(b) hereof to the extent necessary to ensure that (A) it is available for resales by the Holders of Transfer Restricted Securities entitled, subject to Section 2(b), to the benefit of this Agreement and (B) conforms with the requirements of this Agreement and the Securities Act and the rules and regulations of the Commission promulgated thereunder as announced from time to time, for a period (the "EFFECTIVENESS PERIOD") until the earliest of: (A) two years following the last date of original issuance of any of the Debentures; 5 (B) the date when the Holders of Transfer Restricted Securities are able to sell all such Transfer Restricted Securities immediately without restriction pursuant to the volume limitation provisions of Rule 144 under the Securities Act; or (C) the date when all of the Transfer Restricted Securities have been sold either pursuant to the Shelf Registration Statement or pursuant to Rule 144 under the Securities Act or any similar provision then in force. (b) At the time the Shelf Registration Statement is declared effective, each Holder that became a Notice Holder on or prior to the date that is fifteen (15) Business Days prior to such time of effectiveness shall be named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Transfer Restricted Securities in accordance with applicable law. None of the Company's or the Guarantors' securityholders (other than the Holders of Transfer Restricted Securities) shall have the right to include any of the Company's or any of the Guarantors' securities in the Shelf Registration Statement. (c) If the Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period (other than because all Transfer Restricted Securities registered thereunder shall have been resold pursuant thereto or shall have otherwise ceased to be Transfer Restricted Securities), the Company and the Guarantors shall use their reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within thirty (30) days of such cessation of effectiveness amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Shelf Registration Statement covering all of the securities that as of the date of such filing are Transfer Restricted Securities (a "SUBSEQUENT SHELF REGISTRATION STATEMENT"). If a Subsequent Shelf Registration Statement is filed, the Company and the Guarantors shall use their reasonable best efforts to cause the Subsequent Shelf Registration Statement to become effective as promptly as is practicable after such filing and to keep such Registration Statement (or Subsequent Shelf Registration Statement) continuously effective until the end of the Effectiveness Period. (d) The Company and the Guarantors shall supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company 6 and the Guarantors for such Shelf Registration Statement, if required by the Securities Act or as reasonably requested by the Initial Purchasers or by the Trustee on behalf of the Holders of the Transfer Restricted Securities covered by such Shelf Registration Statement. (e) Each Holder agrees that if such Holder wishes to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement and related Prospectus, it will do so only in accordance with this Section 2(e) and Section 4(b). Each Holder wishing to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement and related Prospectus agrees to deliver a Notice and Questionnaire to the Company at least three (3) Business Days prior to any intended distribution of Transfer Restricted Securities under the Shelf Registration Statement. From and after the date the Shelf Registration Statement is declared effective the Company and the Guarantors shall, as promptly as practicable after the date a Notice and Questionnaire is delivered, and in any event on or before the later of (x) forty-five (45) Business Days after such delivery date (but no earlier than ten (10) Business Days after effectiveness) or (y) ten (10) Business Days after the expiration of any Suspension Period in effect when the Notice and Questionnaire is delivered or put into effect within forty-five (45) Business Days of such delivery date: (i) if required by applicable law, file with the SEC a post-effective amendment to the Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Transfer Restricted Securities in accordance with applicable law and, if the Company or the Guarantors shall file a post-effective amendment to the Shelf Registration Statement, use commercially reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as is practicable, but in any event by the date (the "AMENDMENT EFFECTIVENESS DEADLINE DATE") that is sixty (60) days after the date such post effective amendment is required by this clause to be filed: (ii) provide such Holder copies of any documents filed pursuant to Section 2(e)(i); and 7 (iii) notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 2(e)(i); provided that if such Notice and Questionnaire is delivered during a Suspension Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Suspension Period in accordance with Section 4(b). Notwithstanding anything contained herein to the contrary, (i) neither the Company nor the Guarantors shall be under any obligation to name any Holder that is not a Notice Holder as a selling securityholder in any Shelf Registration Statement or related Prospectus and (ii) the Amendment Effectiveness Deadline Date shall be extended by up to ten (10) Business Days from the expiration of a Suspension Period (and neither the Company nor any of the Guarantors shall incur any obligation to pay Liquidated Damages during such extension) if such Suspension Period shall be in effect on the Amendment Effectiveness Deadline Date. 3. Liquidated Damages. (a) If: (i) the Shelf Registration Statement is not filed with the Commission prior to or on the Shelf Filing Deadline; (ii) the Shelf Registration Statement has not been declared effective by the Commission prior to or on the Effectiveness Target Date; (iii) the Company or the Guarantors have failed to perform its obligations set forth in Section 2(e) within the time periods required therein; (iv) any post-effective amendment to a Shelf Registration Statement filed pursuant to Section 2(e)(i) has not become effective under the Securities Act on or prior to the Amendment Effectiveness Deadline Date; (v) except as provided in Section 4(b)(i) hereof, the Shelf Registration Statement is filed and declared effective but, during the Effectiveness Period, shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within ten (10) Business Days by a post-effective amendment to the Shelf Registration Statement, a supplement to the Prospectus or a report filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act that cures 8 such failure and, in the case of a post-effective amendment, is itself immediately declared effective; or (vi) the Shelf Registration Statement is filed and declared effective but, during the Effectiveness Period, shall thereafter cease to be effective or fail to be usable for its intended purpose and (A) prior to or on the thirtieth (30th) day or the forty-fifth (45th) day, as the case may be, of any Suspension Period, such suspension has not been terminated or (B) Suspension Periods exceed an aggregate of 120 days in any 360 day period, (each such event referred to in foregoing clauses (i) through (iv), a "REGISTRATION DEFAULT"), the Company and the Guarantors hereby jointly and severally agree to pay interest ("LIQUIDATED DAMAGES"), with respect to the Transfer Restricted Securities from and including the day following the Registration Default to (but excluding) the earlier of (1) the day on which the Registration Default has been cured and (2) the date the Shelf Registration Statement is no longer required to be kept effective as set out below: (A) in respect of the Debentures, to each holder of Debentures accruing at a rate of, (x) with respect to the first ninety (90)-day period during which a Registration Default shall have occurred and be continuing, equal to 0.25% per annum of the outstanding principal amount thereof, and (y) with respect to the period commencing on the ninety-first (91st) day following the day on which the Registration Default shall have occurred and be continuing, equal to 0.50% per annum of the outstanding principal amount thereof; provided that in no event shall Liquidated Damages accrue at a rate per year exceeding 0.50% of the outstanding principal amount thereof; (B) in respect of the Shares, to each holder of a Share accruing at a rate of (x) with respect to the first ninety (90)-day period during which a Registration Default shall have occurred and be continuing, equal to 0.25% per annum of the then-applicable Conversion Price, and (y) with respect to the period commencing on the ninety-first (91st) day following the day the Registration Default shall have occurred and be continuing, equal to 0.50% per annum of the then-applicable Conversion Price; provided that in no event shall Liquidated Damages accrue at a rate per year exceeding 0.50% of the then-applicable conversion price. 9 (b) All accrued Liquidated Damages shall be paid in arrears to Record Holders by the Company and the Guarantors on each Liquidated Damages Payment Date. Upon the cure of all Registration Defaults relating to any particular Debenture or Share, the accrual of Liquidated Damages with respect to such Debenture or Share will cease. (c) If the Debentures are surrendered for conversion during a Registration Default, the Record Holders of the Debentures so surrendered for conversion will receive on the settlement date all accrued and unpaid Liquidated Damages with respect to such Debentures as provided in Section 3(a)(A) hereof to (but excluding) the conversion date relating to the settlement date and thereafter will receive Liquidated Damages on the Shares issued on conversion as provided in Section 3(a)(B) hereof. All obligations of the Company and the Guarantors set forth in this Section 3 that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Transfer Restricted Security shall have been satisfied in full. The Liquidated Damages set forth above shall be the exclusive monetary remedy available to the Holders of Transfer Restricted Securities for each Registration Default. 4. Registration Procedures. (a) In connection with the Shelf Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 4(b) hereof and shall use commercially reasonable efforts to effect such registration to permit the sale of the Transfer Restricted Securities, and pursuant thereto, shall as expeditiously as possible prepare and file with the Commission a Shelf Registration Statement relating to such registration on any appropriate form under the Securities Act. (b) In connection with the Shelf Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities, the Company and the Guarantors shall: (i) Subject to any notice by the Company or any of the Guarantors in accordance with this Section 4(b) of the existence of any fact or event of the kind described in Section 4(b)(iii)(D), use commercially reasonable efforts to keep the Shelf Registration Statement continuously effective during the Effectiveness Period; and upon the occurrence of any event that would cause the Shelf Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and 10 usable for resale of Transfer Restricted Securities during the Effectiveness Period, file promptly an appropriate amendment to the Shelf Registration Statement, a supplement to the Prospectus or a report filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use commercially reasonable efforts to cause such amendment to be declared effective and the Shelf Registration Statement and the related Prospectus to become usable for their intended purposes as soon as practicable thereafter; except that notwithstanding the foregoing, the Company may suspend the effectiveness of the Shelf Registration Statement (or the use of the Prospectus that is part of the Shelf Registration Statement) by written notice to the Holders for a period not to exceed an aggregate of thirty (30) days in any ninety (90)-day period; however, if such fact or event relates to a previously undisclosed proposed or pending material business transaction, the disclosure of which would impede the Company's ability to consummate such transaction, the Company may extend the period during which it may suspend the Registration Statement to a period not to exceed forty-five (45) days in any ninety (90)-day period (each such period, a "SUSPENSION PERIOD") upon: (x) the occurrence or existence of any fact or the happening of any event as a result of which the Shelf Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein would, in the Company's judgment, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; or (y) the occurrence or existence of any corporate development that, in the Company's judgment, makes it appropriate to suspend the effectiveness of the Shelf Registration Statement; provided that the Company and the Guarantors will use their reasonable best efforts to ensure that the use of the Prospectus may be resumed (A) in the case of clause (x) above, as soon as, in the judgment of the Company, public disclosure of such fact or event would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as practicable thereafter and (B) in the case of clause (y) above, as soon as, in the judgment of the Company, such suspension is no longer appropriate; provided, however, that Suspension Periods shall not exceed an aggregate of 120 days in any 360-day period, and in no event 11 shall the Company be required to specify in the written notice to the Holders the nature of the fact or event giving rise to the Suspension Period. (ii) Prepare and file with the Commission such amendments and post-effective amendments to the Shelf Registration Statement as may be necessary to keep the Shelf Registration Statement effective during the Effectiveness Period; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all Debentures or Shares covered by the Shelf Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in the Shelf Registration Statement or supplement to the Prospectus. (iii) Advise the selling Holders promptly and, if requested by such selling Holders, to confirm such advice in writing, except as provided in clause (D) below: (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Shelf Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or to the Prospectus included therein or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, or (D) of the existence of any fact or the happening of any event, during the Effectiveness Period, that requires the Company 12 to make changes in the Shelf Registration Statement or the Prospectus contained therein, in order that such Shelf Registration Statement or Prospectus does not contain an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein (in the cased of the Prospectus, in light of the circumstances under which they were made) not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Shelf Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time and will provide to each Holder who is named in the Shelf Registration Statement prompt notice of the withdrawal of any such order. (iv) Make available at reasonable times for inspection by one or more representatives of the selling Holders, designated in writing by a Majority of Holders whose Transfer Restricted Securities are included in the Shelf Registration Statement, and any attorney or accountant retained by such selling Holders, all financial and other records, pertinent corporate documents and properties of the Company and the Guarantors as shall be reasonably necessary to enable them to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act, and cause the Company's and the Parent's respective officers, directors, managers and employees to supply all information reasonably requested by any such representative or representatives of the selling Holders, attorney or accountant in connection therewith; provided, however, that neither the Company nor the Guarantors shall have any obligation to deliver information to any selling Holder or representative, attorney or accountant pursuant to this Section 4(b)(iv) unless such selling Holder or representative, attorney or accountant shall have executed and delivered a confidentiality agreement in a form acceptable to the Company relating to such information. (v) If requested by any selling Holders, promptly incorporate in the Shelf Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders may reasonably request to have included 13 therein, including, without limitation, information relating to the "PLAN OF DISTRIBUTION" of the Transfer Restricted Securities. (vi) Furnish to each selling Holder upon its request, without charge, at least one copy of the Shelf Registration Statement, as first filed with the Commission, and of each amendment thereto (and any documents incorporated by reference therein or exhibits thereto (or exhibits incorporated in such exhibits by reference) as such Holder may request). (vii) Deliver to each selling Holder, without charge, as many copies of the Prospectus (including each preliminary Prospectus) and any amendment or supplement thereto as such Persons reasonably may request; subject to any notice by the Company or the Guarantors in accordance with this Section 4(b) of the existence of any fact or event of the kind described in Section 4(b)(iii)(D), the Company and the Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto. (viii) Before any public offering of Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions in the United States as the selling Holders may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that neither the Company nor the Guarantors shall be required (A) to register or qualify as a foreign corporation or a dealer of securities where it is not now so qualified or to take any action that would subject it to the service of process in any jurisdiction where it is not now so subject or (B) to subject itself to general or unlimited service of process or to taxation in any such jurisdiction if they are not now so subject. (ix) Cooperate with the selling Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends (unless required by applicable securities laws); and enable such Transfer Restricted Securities to be in such denominations and 14 registered in such names as the Holders may request at least two Business Days before any sale of Transfer Restricted Securities. (x) Use their reasonable best efforts to cause the Transfer Restricted Securities covered by the Shelf Registration Statement to be registered with or approved by such other U.S. governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities. (xi) Subject to Section 4(b)(i) hereof, if any fact or event contemplated by Section 4(b)(iii)(D) hereof shall exist or have occurred, use their reasonable best efforts to prepare a supplement or post-effective amendment to the Shelf Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. (xii) Obtain CUSIP numbers for all Transfer Restricted Securities not later than the effective date of the Shelf Registration Statement and provide the Trustee under the Indenture with certificates for the Debentures that are in a form eligible for deposit with The Depository Trust Company. (xiii) Cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter that is required to be retained in accordance with the rules and regulations of the NASD. (xiv) Otherwise use their reasonable best efforts to comply with all applicable rules and regulations of the Commission and all reporting requirements under the rules and regulations of the Exchange Act. (xv) Cause the Indenture to be qualified under the TIA not later than the effective date of the Shelf Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the holders of Debentures to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use its 15 reasonable best efforts to cause the Trustee thereunder to execute all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner. (xvi) Cause all Shares covered by the Shelf Registration Statement to be listed or quoted, as the case may be, on each securities exchange or automated quotation system on which Common Stock is then listed or quoted. (xvii) Provide to each Holder upon written request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act after the effective date of the Shelf Registration Statement, unless such document is available through the Commission's EDGAR system. (c) Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice (a "SUSPENSION NOTICE") from the Company of the existence of any fact or occurrence of any event of the kind described in Section 4(b)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the Shelf Registration Statement until: (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 4(b)(xi) hereof; or (ii) such Holder is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice of suspension. (d) Each Holder agrees by acquisition of a Transfer Restricted Security, that no Holder shall be entitled to sell any of such Transfer Restricted Securities pursuant to a Shelf Registration Statement; or to receive a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 2(e) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the Company all information required to be disclosed in order to make the information 16 previously furnished to the Company by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably request in writing. Any sale of any Transfer Restricted Securities by any Holder shall constitute a representation and warranty by such Holder that the information relating to such Holder and its plan of distribution is as set forth in the Prospectus delivered by such Holder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Holder or its plan of distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Holder or its plan of distribution necessary to make the statements in such Prospectus, in the light of the circumstances under which they were made not misleading. 5. Registration Expenses. All expenses incident to the Company's and the Guarantors' performance of or compliance with this Agreement shall be borne by the Company and the Guarantors regardless of whether a Shelf Registration Statement becomes effective, including, without limitation: (i) all registration and filing fees and expenses (including filings made with the NASD); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing of Prospectuses and certificates for the Shares to be issued upon conversion of the Debentures) and the Company's and the Guarantor's expenses for messenger and delivery services and telephone; (iv) all fees and disbursements of counsel to the Company and the Guarantors; (v) all application and filing fees in connection with listing (or authorizing for quotation) the Shares on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors. 17 The Company and the Guarantors shall bear their internal expenses (including, without limitation, all salaries and expenses of their officers and employees performing legal, accounting or other duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company and the Guarantors. 6. Indemnification and Contribution. (a) The Company and the Guarantors agree to, jointly and severally, indemnify and hold harmless each Holder of Transfer Restricted Securities covered by the Shelf Registration Statement (including each Initial Purchaser), and its directors, officers, and employees and each person, if any, who controls any such Holder within the meaning of the Securities Act or the Exchange Act (each, an "INDEMNIFIED HOLDER"), against any loss, claim, damage, liability or expense, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to resales of the Transfer Restricted Securities), to which such Indemnified Holder may become subject, insofar as any such loss, claim, damage, liability or action arises out of, or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in (A) the Shelf Registration Statement as originally filed or in any amendment thereof, in any Prospectus, or in any amendment or supplement thereto or (B) any blue sky application or other document or any amendment or supplement thereto prepared or executed by the Company or any of the Guarantors (or based upon written information furnished by or on behalf of the Company or any of the Guarantors expressly for use in such blue sky application or other document or amendment or supplement) filed in any jurisdiction specifically for the purpose of qualifying any or all of the Transfer Restricted Securities under the securities law of any state or other jurisdiction (such application or document being hereinafter called a "BLUE SKY APPLICATION"); or (ii) the omission or alleged omission to state therein any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and agrees to reimburse each Indemnified Holder promptly upon demand for any legal or other expenses reasonably incurred by such Indemnified Holder in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or 18 alleged omission made in reliance upon and in conformity with written information furnished to the Company and the Guarantors by or on behalf of such Holder (or its related Indemnified Holder) specifically for use therein; provided, further, that with respect to any such untrue statement or alleged untrue statement in or omission or alleged omission from any preliminary prospectus contained in the Shelf Registration Statement, the indemnity agreement contained in this paragraph shall not inure to the benefit of any Indemnified Holder to the extent that any such loss, claim, damage or liability of or with respect to such Indemnified Holder to any person results from the fact that both (i) a copy of the final prospectus contained in the Shelf Registration Statement (excluding any documents incorporated by reference therein) was not sent or given to such person, at or prior to the written confirmation of the sale of such Transfer Restricted Securities to such person, and (ii) the untrue statement in or omission from such preliminary prospectus contained in the Shelf Registration Statement was corrected in such final prospectus unless, in either case, such failure to deliver the final prospectus contained in the Shelf Registration Statement was a result of non-compliance by the Company or the Guarantors with the provisions of Section 4 hereof. The foregoing indemnity agreement is in addition to any liability which the Company or the Guarantors may otherwise have. (b) Each Holder, severally and not jointly, agrees to indemnify and hold harmless the Company and the Guarantors, their respective directors, officers and employees and each person, if any, who controls the Company or any of the Guarantors within the meaning of the Securities Act or the Exchange Act to the same extent as the foregoing indemnity from the Company and the Guarantors to each such Holder, but only with reference to written information relating to such Holder furnished to the Company and the Guarantors by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement set forth in this Section shall be in addition to any liabilities which any such Holder may otherwise have. In no event shall any Holder, its directors, officers or any person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Shelf Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (i) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be 19 made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent it has been materially prejudiced by such failure and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the Holders shall have the right to employ a single counsel to represent jointly the Holders and their officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Holders against the Company or the Guarantors under this Section 6 if the Holders seeking indemnification shall have been advised by legal counsel that there may be one or more legal defenses available to such Holders and their respective officers, employees and controlling persons that are different from or additional to those available to the Company or the Guarantors, and in that event, the fees and expenses of such separate counsel shall be paid by the Company or the Guarantors. (c) The indemnifying party under this Section shall not be liable for any settlement of any proceeding effected without its written consent, which shall not be withheld unreasonably, but if settled with such consent or if there is a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 6 hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than thirty (30) days after receipt by such 20 indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent (x) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding and (y) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 6 shall for any reason be unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b) in respect of any loss, claim, damage or liability (or action in respect thereof) referred to therein, each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability (or action in respect thereof): (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other, or (ii) if the allocation provided by Section (6)(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in Section 6(d)(i) but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or alleged omissions that resulted in such loss, claim, damage or liability (or action in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the total net proceeds from the offering of the Debentures purchased under the Purchase Agreement (before deducting expenses) received by the Company and the Guarantors, on the one hand, bear to the total proceeds received by such Holder with respect to its sale of Transfer Restricted Securities on the other. The relative fault of the parties shall be determined by reference to whether the untrue or alleged untrue statement of a 21 material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors on the one hand or the Holders on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantors and each Holder agree that it would not be just and equitable if the amount of contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (d). The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 6 shall be deemed to include, for purposes of this Section 6, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 6, no Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Transfer Restricted Securities purchased by it were resold exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute as provided in this Section 6(d) are several and not joint. (e) The provisions of this Section 6 shall remain in full force and effect, regardless of any investigation made by or on behalf of any Holder, the Company, or the Guarantors or any of the officers, directors or controlling persons referred to in Section 6 hereof, and will survive the sale by a Holder of Transfer Restricted Securities. 7. Rule 144A and Rule 144. The Company and the Guarantors agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. 22 8. No Participation in Underwritten Registrations. No Holder may participate in any Underwritten Registration hereunder. 9. Miscellaneous. (a) Remedies. The Company and the Guarantors acknowledge and agree that any failure by the Company or the Guarantors to comply with their obligations under Section 2 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely, and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's and the Guarantors' obligations under Section 2 hereof. The Company and the Guarantors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) Actions Affecting Transfer Restricted Securities. Neither the Company nor the Guarantors shall, directly or indirectly, take any action with respect to the Transfer Restricted Securities as a class that would adversely affect the ability of the Holders of Transfer Restricted Securities to include such Transfer Restricted Securities in a registration undertaken pursuant to this Agreement. (c) No Inconsistent Agreements. The Company and the Guarantors have not, as of the date hereof, entered into, nor shall either of them, on or after the date hereof, enter into, any agreement with respect to their securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. In addition, the Company and the Guarantors shall not on or after the date hereof grant to any of their securityholders (other than the Holders of Transfer Restricted Securities in such capacity) the right to include any of their securities in the Shelf Registration Statement provided for in this Agreement other than the Transfer Restricted Securities. (d) Amendments and Waivers. This Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given, unless the Company has obtained the written consent of a Majority of Holders; provided, however, that with respect to any matter that directly or indirectly adversely affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), (1) a waiver 23 or consent to depart from the provisions hereof, with respect to a matter, which relates exclusively to the rights of Holders whose securities are being sold pursuant to a Shelf Registration Statement and does not directly or indirectly adversely affect the rights of other Holders, may be given by the Majority of Holders, determined on the basis of Debentures or Shares being sold rather than registered under such Shelf Registration Statement, and (2) this Agreement may be amended or supplemented without notice to or consent of any Holder to (i) cure any ambiguity or omission or to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions contained herein, or (ii) add to the covenants of the Company or the Guarantors such further covenants, restrictions or conditions for the benefit of the Holders. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first class mail (registered or certified, return receipt requested), telex, facsimile transmission, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the registrar under the Indenture or the transfer agent of the Common Stock, as the case may be; and (ii) if to the Company or the Guarantors, initially at its address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three (3) Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if transmitted by facsimile; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. Any party hereto may change the address for receipt of communications by giving written notice to the others. (f) Third Party Beneficiaries. The Holders shall be the third party beneficiaries to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. (g) Successors and Assigns. This Agreement shall be binding upon the Company and the Guarantors and their respective successors and assigns. 24 (h) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (i) Debentures Held by the Company or Their Affiliates. Whenever the consent or approval of Holders of a specified percentage of Transfer Restricted Securities is required hereunder, Transfer Restricted Securities held by the Company or its Affiliates (other than subsequent Holders if such subsequent Holders are deemed to be Affiliates solely by reason of their holding of such Debentures) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (j) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (k) Governing Law. This Agreement shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of the State of New York (including Section 5-1401 of the New York General Obligations Law or any successor to such statute). (l) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (m) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company and the Guarantors with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 25 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. GRAFTECH INTERNATIONAL LTD., By /s/ Karen G. Narwold -------------------------------- Name: Karen G. Narwold Title:Vice President, General Counsel, Human Resources and Secretary GRAFTECH FINANCE INC., By /s/ Karen G. Narwold -------------------------------- Name: Karen G. Narwold Title:Vice President, General Counsel, Human Resources and Secretary GRAFTECH GLOBAL ENTERPRISES INC., By /s/ Karen G. Narwold -------------------------------- Name: Karen G. Narwold Title:Vice President, General Counsel, Human Resources and Secretary UCAR CARBON COMPANY INC., By /s/ Karen G. Narwold -------------------------------- Name: Karen G. Narwold Title:Vice President, General Counsel, Human Resources and Secretary 26 UCAR INTERNATIONAL TRADING INC., By /s/ Karen G. Narwold -------------------------------- Name: Karen G. Narwold Title:Vice President, General Counsel, Human Resources and Secretary UCAR CARBON TECHNOLOGY LLC, By /s/ Karen G. Narwold -------------------------------- Name: Karen G. Narwold Title:Vice President, General Counsel, Human Resources and Secretary 27 The foregoing Agreement is hereby confirmed and accepted as of the date first written above. J.P. MORGAN SECURITIES INC., Acting on behalf of itself and the several Initial Purchasers By /s/ Kevin Kulak ------------------------------- Name: Kevin Kulak Title:Vice President EX-10 6 gti_cragree7.txt EXHIBIT 10.1.7 Exhibit 10.1.7 SEVENTH AMENDMENT dated as of September 19, 2003 (this "Amendment"), to the Credit Agreement dated as of February 22, 2000 (as as previously amended, the "Credit Agreement") among GRAFTECH INTERNATIONAL LTD. f/k/a UCAR INTERNATIONAL INC., a Delaware corporation ("GrafTech"), GRAFTECH GLOBAL ENTERPRISES INC. f/k/a UCAR GLOBAL ENTERPRISES INC., a Delaware corporation ("Global"), GRAFTECH FINANCE INC. f/k/a UCAR FINANCE INC., a Delaware corporation (the "Borrower"), the LC Subsidiaries from time to time party thereto, the Lenders from time to time party thereto and JPMORGAN CHASE BANK, as Administrative Agent, Collateral Agent and Issuing Bank. A. Pursuant to the Credit Agreement, the Lenders and the Issuing Bank have extended and have agreed to extend credit to the Borrower and the LC Subsidiaries, on the terms and subject to the conditions set forth therein. B. The Borrower has requested an amendment of the Credit Agreement as set forth herein. C. The Required Lenders are willing to agree to such amendment on the terms and subject to the conditions set forth herein. D. Each capitalized term used and not otherwise defined herein shall have the meaning assigned to it in the Credit Agreement. 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 agree as follows: SECTION 1. Amendments to the Credit Agreement and Other Loan Documents. (a) All references in the Credit Agreement and the other Loan Documents to (i) "Graftech Technology Company Inc." and "UCAR Graftech Technology Company Inc." shall be replaced with references to "Advanced Energy Technology Inc." (and all references to "Graftech" shall be replaced with references to "AET" and the resulting definition of "AET" shall be placed in the appropriate alphabetical order); (ii) "UCAR International Inc." shall be replaced with references to "GrafTech International Ltd.", (iii) "UCAR Global Enterprises Inc." shall be replaced with references to "GrafTech Global Enterprises Inc." and (iv) "UCAR Finance Inc." 2 shall be replaced with references to "GrafTech Finance Inc. (and all references in the Credit Agreement and the other Loan Documents to "UCAR" shall be replaced with references to "GrafTech", except in cases where the term "UCAR" is used as part of a name and is not otherwise changed by this Amendment)." (b) The fourth sentence in the preamble to the Credit Agreement is hereby amended and restated in its entirety so as to read as follows: "In no circumstance whatsoever will any Letter of Credit issued pursuant to this Agreement on behalf of Lenders holding Revolving Commitments or the proceeds of any Revolving Loan be used for any purpose other than paying (or providing one or more Letters of Credit to secure, facilitate or defer the payment of) the EU Fine (i) if at the time of the issuance of such Letter of Credit or the making of such Revolving Loan the Revolving Exposure exceeds EUR175,000,000 or (ii) if at the time of the issuance of such Letter of Credit or the making of such Revolving Loan the Revolving Exposure is less than EUR175,000,000, to the extent that as a result of the issuance of such Letter of Credit or the making of such Revolving Loan the Revolving Exposure would exceed EUR175,000,000. A draw under such a Letter of Credit, or a Revolving Loan made to replace such a Letter of Credit of equal or greater amount, the issuance of which was permitted by the preceding sentence, shall likewise be permitted." (c) Section 1.01 of the Credit Agreement is hereby amended by adding thereto, in the appropriate alphabetical order, the following definitions: "ABN Amro Facility" shall mean the intra-day revolving lines of credit (up to an aggregate principal amount of EUR20,000,000) and the overdraft lines of credit (up to aggregate principal amounts of $9,100,000 and (pound)500,000) extended to Global, the Borrower or any Subsidiary (other than an Unrestricted Subsidiary) by ABN Amro Bank N.V. or any of its Affiliates, including all obligations and guarantees related thereto, in each case as amended, extended, renewed, restated, supplemented or otherwise modified (in whole or in part and without limitation as to terms, conditions, covenants and other provisions, but without any increase in amount), from time to time, and any agreement or agreements (and related documents) governing Indebtedness incurred to refinance or replace, in whole or in part, the borrowings and commitments then outstanding or permitted to be outstanding under such lines of credit or a successor to such lines of credit; provided, that any remaining portion of such lines of credit and any such refinancing or replacement facilities shall not in the aggregate permit intra-day balances or overnight or longer-term overdrafts in excess of the maximum amounts referred to above. "ABN Amro Facility Documents" shall mean any agreement or agreements (and related documents) evidencing or governing the ABN Amro Facility. 3 "EU" shall mean the Commission of the European Communities. "EU Appeal Period" shall mean the period from the date of the assessment of the EU Fine by the EU Competition Authority through the date of the issuance of the final decision on the appeal filed with the Court of First Instance in Luxembourg by GrafTech with respect to the EU Fine. "EU Charges" shall mean charges in respect of Litigation Liabilities due to accrued interest included in the definition of the EU Fine and EU Translation Impacts. "EU Competition Authority" shall mean the Directorate General--Competition of the EU (or other relevant governmental instrumentality or court). "EU Fine" shall mean the fine of EUR50,400,000 assessed by the EU Competition Authority in July 2001, together with all interest accrued thereon during the EU Appeal Period. "EU Translation Impact" shall mean, at any date of determination, the increase, if any, in the amount of the EU Fine related to the translation of the amount of the EU Fine from Euros to Dollars as determined in accordance with GAAP for purposes of the consolidated financial statements of GrafTech, due to changes in currency exchange rates from the date of the assessment of the EU Fine by the EU Competition Authority through such date of determination. "Seventh Amendment" shall mean the Seventh Amendment, dated September 19, 2003, to this Agreement. "Shelf Equity Offering" shall mean one or more public offerings of Capital Stock (other than Disqualified Stock) of GrafTech pursuant to the Registration Statement on Form S-3 filed by GrafTech and certain of its Subsidiaries on August 18, 2003, as amended, with the Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended. (d) (i) The definition of "EU Letter of Credit" is hereby amended and restated in its entirety so as to read as follows: "EU Letter of Credit" shall mean letters of credit issued to secure, facilitate or defer the payment to the EU Competition Authority of the EU Fine." (ii) The definition of "Intercompany Senior Loans" is hereby amended by inserting "(1)" immediately after the phrase "shall mean" and adding the following phrase to the end thereof: "and (2) any reallocations of such loans to different Intercompany Borrowers at any 4 time so long as the outstanding principal amount of such Intercompany Senior Loans is not increased thereby and the terms of such new loans are substantially identical to the loans being replaced (except for changes to interest rates and currency of payments); provided, however, that the terms of any such loans may be changed from time to time to change interest rates thereon and currency of payments thereunder. (e) The Collateral Agent is hereby authorized to, and at the request of the Borrower will, within a reasonable period of time, enter into amendments to the Security Documents providing that the obligations of GrafTech, Global, the Borrower and the Subsidiaries (other than an Unrestricted Subsidiary) under the ABN Amro Facility will, so long as such obligations are not supported in whole or in part by any Letter of Credit or other collateral or credit support, be secured, equally and ratably with the Obligations, by all of the Collateral securing the Obligations. (f) Section 2.10(c) of the Credit Agreement is hereby amended by adding in each place after the words "UCAR Equity Offering" the phrase "and the Shelf Equity Offering". (g) Section 3.03(a) of the Credit Agreement is hereby amended by adding at the end thereof the phrase "; provided in each case, however, that Indebtedness evidenced by Euro-denominated Intercompany Revolving Loans made to UCAR S.A. may be repaid from time to time in an aggregate amount not to exceed the cumulative net cash proceeds from the Shelf Equity Offering" (h) Section 7.01(a) of the Credit Agreement is hereby amended by deleting the word "and" at the end of clause (xv); replacing the period at the end of clause (xvi) with "; and"; and adding the following new clause (xvii): "(xvii) Indebtedness under the ABN Amro Facility." (i) Section 7.02(n) of the Credit Agreement is hereby amended by replacing the phrase ", and Liens securing payment of EU antitrust fines, to the extent payment of such fines are deferred pursuant to an agreement with an EU authority or relevant court or is effectively stayed" with the phrase ", and Liens securing payment of the EU Fine, to the extent that payment of the EU Fine is deferred pursuant to an agreement or arrangement with the EU Competition Authority or is effectively stayed". (j) [Intentionally omitted] (k) Section 7.04 of the Credit Agreement is hereby amended by: adding in clause (ii)(B) of clause (j) thereof immediately after the words "the amount set forth on Schedule A for the Leverage Ratio that is in effect at that time" the phrase "(with each amount set forth in such Schedule A being reduced by the principal amount of any Senior Notes or Additional 5 Senior Notes repurchased pursuant to paragraph (k) of this Section)"; adding at the end of the parenthetical immediately preceding the first proviso in clause (j) the phrase "and any investment made pursuant to this paragraph (j) prior to the Amendment Effective Date (as defined in the Seventh Amendment) that was permitted when made shall continue to be permitted after such Amendment Effective Date without regard to this Section 7.04"; deleting the "and" at the end of clause (i); deleting the references in subsection (j) to "Amendment Effective Date (as defined in the Fifth Amendment to this Agreement)" and "Amendment Effective Date (as defined in the Third Amendment dated as of July 10, 2001 to this Agreement)" wherever they appear and replacing them with "Amendment Effective Date (as defined in the Seventh Amendment)"; adding "and" at the end of clause (j); and adding the following new clauses (k), (l) and (m) immediately after clause (j): "(k) investments consisting of repurchases of Senior Notes or Additional Senior Notes, to the extent permitted in Section 7.09(d), with an aggregate principal amount not to exceed $35,000,000; provided, that the aggregate amount of Senior Notes and Additional Senior Notes repurchased pursuant to this clause (k), together with the investments made under clause (j)(ii)(B) of this Section 7.04, do not exceed the amount permitted under such clause (j)(ii)(B) (prior to the effectiveness of the reduction of such permitted amount set forth in clause (j) in the amount of the repurchased Senior Notes and Additional Senior Notes) ; (l) investments by UCAR Carbon Inc. in UCAR S.A. the proceeds of which are used to repay Euro denominated Intercompany Revolving Loans made to UCAR S.A. as permitted by the proviso in Section 3.03(a); and (m) investments consisting of Intercompany Senior Loans to the extent the Indebtedness evidenced by the Intercompany Senior Loans is permitted under Section 7.01(xiv)." (l) Section 7.06 of the Credit Agreement is hereby amended by deleting the word "and" at the end of clause (e); replacing the period at the end of clause (f) with "; and"; and adding the following new clause (g): "(g) the Borrower and Global may, from time to time, make Restricted Payments to GrafTech of (i) cash in an amount equal to the purchase price of Senior Notes and Additional Senior Notes which is to be used to repurchase such Senior Notes and Additional Senior Notes to the extent permitted under Section 7.09(d) and (ii) any such Senior Notes and Additional Senior Notes." (m) The proviso at the end of Section 7.07(a) of the Credit Agreement is hereby amended and restated in its entirety to as to read as follows: 6 ", provided that the foregoing restriction shall not apply to (x) the indemnification of directors of GrafTech, Global, the Borrower and the Subsidiaries in accordance with customary practice or (y) the repayment by UCAR S.A. from time to time of Indebtedness evidenced by Euro denominated Intercompany Revolving Loans made to UCAR S.A. as permitted by the proviso in Section 3.03(a)." (n) Section 7.08 of the Credit Agreement is hereby amended by adding the following language at the end of such Section: "provided, that nothing contained in this Section shall prohibit GrafTech, Global, the Borrower or any Restricted Subsidiary from holding Senior Notes and Additional Senior Notes repurchased as permitted by Section 7.09(d)(2) or otherwise received without violation of this Agreement" (o) Section 7.09(d) of the Credit Agreement is hereby amended by adding "(1)" after the phrase "except that" and adding at the end thereof the phrase ", and (2) so long as no Default or Event of Default shall exist or result therefrom, GrafTech, Global, the Borrower or any Restricted Domestic Subsidiary may from time to time repurchase (but not retire) and hold up to $35,000,000 aggregate principal amount of Senior Notes and Additional Senior Notes, to the extent that at the time of, and after giving effect to, any such repurchase the Borrower has unused borrowing availability under the Revolving Commitments of at least the Euro Equivalent of $100,000,000 (such availability not to include any amount reserved to pay, or to provide for Letters of Credit to facilitate or defer the payment of, the EU Fine as provided in the preamble to this Agreement)". (p) The text of the provisos after the table in Section 7.11 of the Credit Agreement beginning with the words "provided further however" is hereby amended and restated in its entirety as follows: "provided further however, that for purposes of calculating the Interest Coverage Ratio to determine compliance with this Section on any date after January 18, 2002, (1) (A) to the extent that any fees, costs and expenses (including fees of counsel and experts) paid or incurred by GrafTech, Global, the Borrower or any Subsidiary in connection with the UCC/MC Lawsuit, up to $20,000,000 in the aggregate and $3,000,000 in any one fiscal quarter (or, if such date is prior to the Amendment Effective Date (as defined in the Seventh Amendment), any fees, costs and expenses paid or incurred by GrafTech, Global, the Borrower or any LC Subsidiary in respect of any EU Letter of Credit) are deducted in determining the consolidated net income of GrafTech, Global, the Borrower and the Subsidiaries and are not added back 7 by the definition of EBITDA, such amount shall be added back to EBITDA, and (B) Cash Interest Expense shall not include any amounts attributable to Indebtedness incurred to finance the amendment fees payable in connection with the Seventh Amendment or any fees, costs or expenses (including fees of counsel and experts) paid or incurred by GrafTech, Global, the Borrower or any Subsidiary in connection with the UCC/MC Lawsuit up to $20,000,000 in the aggregate and $3,000,000 in any one fiscal quarter (or, if such date is prior to the Amendment Effective Date (as defined in the Seventh Amendment) Indebtedness incurred in respect of the EU Letter of Credit) and (2) in addition (and not in limitation), for purposes of calculating the Interest Coverage Ratio to determine compliance with this Section on any date after the Amendment Effective Date (as defined in the Seventh Amendment), (a) Cash Interest Expense shall not include (i) any amounts attributable to the EU Letter of Credit, up to a maximum amount of $70,000,000 of such EU Letter of Credit, (ii) any amounts attributable to Indebtedness incurred to finance any fees, costs and expenses paid or incurred by GrafTech, Global, the Borrower or any Subsidiary in respect of the EU Letter of Credit, (iii) any fees, costs or expenses in respect of each of the foregoing, or (iv) any portion of the accrued interest that is included within the definition of the EU Fine and (b) to the extent that (x) any amounts referred to in (a) of this clause (2) or (y) any EU Charges are deducted in determining the consolidated net income of GrafTech, Global, the Borrower and the Subsidiaries and are not added back by the definition of EBITDA, such amounts or EU Charges shall be added back to EBITDA." (q) The text of the provisos after the table in Section 7.12 of the Credit Agreement beginning with the words "provided further however" is hereby amended and restated in its entirety as follows: "provided further however, that for purposes of calculating the Senior Secured Leverage Ratio to determine compliance with this Section on any date after January 18, 2002, (1) (A) to the extent that any fees, costs and expenses (including fees of counsel and experts) paid or incurred by GrafTech, Global, the Borrower or any Subsidiary in connection with the UCC/MC Lawsuit up to $20,000,000 in the aggregate and $3,000,000 in any one fiscal quarter (or, if such date is prior to the Amendment Effective Date (as defined in the Seventh Amendment) any fees, costs and 8 expenses paid or incurred by GrafTech, Global, the Borrower or any LC Subsidiary in respect of any EU Letter of Credit) are deducted in determining the consolidated net income of GrafTech, Global, the Borrower and the Subsidiaries and are not added back by the definition of EBITDA, such amount shall be added back to EBITDA, and (B) Net Senior Secured Debt shall not include Indebtedness incurred to finance the amendment fees payable in connection with the Seventh Amendment or any fees, costs and expenses (including fees of counsel and experts) paid or incurred by GrafTech, Global, the Borrower or any Subsidiary in connection with the UCC/MC Lawsuit up to $20,000,000 in the aggregate and $3,000,000 in any one fiscal quarter (or, if such date is prior to the Amendment Effective Date (as defined in the Seventh Amendment), Indebtedness incurred in respect of the EU Letter of Credit) and (2) in addition (and not in limitation), for purposes of calculating the Senior Secured Leverage Ratio to determine compliance with this Section on any date after the Amendment Effective Date (as defined in the Seventh Amendment), (a) Net Senior Secured Debt shall not include (i) the amount of the EU Letter of Credit, up to a maximum amount of $70,000,000, (ii) any fees, costs and expenses paid or incurred by GrafTech, Global, the Borrower or any Subsidiary in respect of the EU Letter of Credit or (iii) any Indebtedness incurred to finance any fees, costs and expenses described in the preceding clause (ii) and (b) to the extent that (x) any amounts attributable to any amounts referred to in (a) of this clause (2), (y) any portion of the accrued interest that is included within the definition of EU Fine or (z) any EU Charges are deducted in determining the consolidated net income of GrafTech, Global, the Borrower and the Subsidiaries and are not added back by the definition of EBITDA, such amounts, portion or EU Charges shall be added back to EBITDA." (r) Section 10.01(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(a) if to GrafTech, Global or the Borrower, to it at Brandywine Plaza West Suite 301, 1521 Concord Pike, Wilmington, DE 19803, Attention of President (Telecopy No. (302) 778-8237);" SECTION 2. Representations and Warranties. Each of GrafTech, Global and the Borrower represents and warrants to each Lender as of the date hereof and as of the Amendment Effective Date that, after giving effect to this Amendment, (a) the representations and warranties 9 set forth in Article IV of the Credit Agreement are true and correct in all material respects, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties were true and correct in all material respects as of the earlier date), and (b) no Default or Event of Default has occurred and is continuing. SECTION 3. Effectiveness. This Amendment shall become effective as of the first date on which the following conditions shall have been satisfied: (i) when the Administrative Agent or its counsel shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Borrower, GrafTech, Global and the Required Lenders; (ii) each Lender shall have received the Amendment Fee required to be paid to it pursuant to Section 4 below; and (iii) the representations and warranties set forth in Section 2 above shall be true and correct on and as of such date and the Administrative Agent shall have received a certificate of the Borrower to that effect. Notwithstanding the foregoing, the provisions of Section 1 above (other than Section 1(a), (b), (d)(ii), (k) (but only with respect to the new clause (m) contained in the amended Section 7.04(j) contained in Section 1(k) hereof) and (r), which collectively are called the "Technical Amendment Changes") shall not become effective until as of the first date (the "Amendment Effective Date") on which the following conditions are met: (a) GrafTech shall have received not less than $75,000,000 of net cash proceeds from the Shelf Equity Offering (the "Supplemental Trigger Event"); (b) each Lender shall have received the Amendment Fee required to be paid to it pursuant to Section 4 below; and (c) the representations and warranties set forth in Section 2 above shall be true and correct on and as of such date and the Administrative Agent shall have received a certificate of the Borrower to that effect; provided, however, that at any time prior to the occurrence of the Supplemental Trigger Event, the Borrower may elect to have the Amendment Effective Date become the first date on which the following conditions are met: (x) the Borrower shall have given written notice to the Administrative Agent of such election, (y) each Lender shall have received the Amendment Fee and the Supplemental Amendment Fee required to be paid to it pursuant to Section 4 below, and (z) the representations and warranties set forth in Section 2 above shall be true and correct on and as of such date and the Administrative Agent shall have received a certificate of the Borrower to that effect. If the Borrower so elects to have the Amendment Effective Date be a date prior to the Supplemental Trigger Event, then, until the Supplemental Trigger Date shall have occurred, in addition to the Technical Amendment Changes, only the provisions of Sections 1(c), (d)(i), (e), (h), (i), (p) and (q) above shall become effective on the Amendment Effective Date (except that clauses (2)(a)(i), (ii) and (iii) (and clause (2)(b)(x) as it relates to clauses (2)(a)(i), (ii) and(iii)) contained in the restated provisos to Section 7.11 of the Credit Agreement contained in Section 1(p), and clauses (2)(a) and (2)(b)(x) contained in the restated provisos to Section 7.12 of the Credit Agreement contained in Section 1(q), shall become effective on the Amendment Effective Date only for a period of time expiring June 30, 2005). SECTION 4. Amendment Fee. The Borrower agrees to pay to each Lender that executes and delivers to the Administrative Agent (or its counsel) a copy of this Amendment at 10 or prior to 5:00 p.m., New York City time, on September 19, 2003, an amendment fee (the "Amendment Fee") in an amount equal to 0.125% of such Lender's Revolving Commitment (whether used or unused) and outstanding Term Loans on September 19, 2003. On the occurrence of the Supplemental Trigger Event, the Borrower agrees to pay each Lender that has executed and delivered to the Administrative Agent (or its counsel) a copy of this Amendment at or prior to 5:00 p.m., New York City time, on September 19, 2003, an additional amendment fee (the "Supplemental Amendment Fee") in an amount equal to 0.125% of such Lender's Revolving Commitment (whether used or unused) and outstanding Term Loans as of the date of the Supplemental Trigger Event. SECTION 5. Effect of Amendment. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Issuing Bank, the Collateral Agent, the Administrative Agent or ABN Amro Incorporated, under the Credit Agreement, any other Loan Document or any ABN Amro Facility Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement, any other Loan Document or any ABN Amro Facility Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement, any other Loan Document or any ABN Amro Facility Document in similar or different circumstances. SECTION 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Delivery of any executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. SECTION 7. Applicable Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 8. Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. [SIGNATURE PAGES FOLLOW] 11 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date and year first above written. GRAFTECH INTERNATIONAL LTD., By: /s/ Corrado F. De Gasperis ____________________________ Name: Corrado F. De Gasperis Title: Vice President and Chief Financial Officer GRAFTECH GLOBAL ENTERPRISES INC., By: /s/ Corrado F. De Gasperis ____________________________ Name: Corrado F. De Gasperis Title: Vice President and Chief Financial Officer GRAFTECH FINANCE INC., By: /s/ Corrado F. De Gasperis ____________________________ Name: Corrado F. De Gasperis Title: Vice President and Chief Financial Officer JPMORGAN CHASE BANK, as a Lender, and as Administrative Agent, Collateral Agent and Issuing Bank, By: /s/ James H. Ramage ____________________________ Name: James H. Ramage Title: Managing Director 12 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. ABN AMRO BANK NV, By: /s/ Alexander M. Blodi _______________________________ Name: Alexander M. Blodi Title: Director By: /s/ Eric Oppenheimer _______________________________ Name: Eric Oppenheimer Title: Vice President ADDISON CDO, LIMITED, By: Pacific Investment Management Company LLC, as its Invetsment Advisor, By: /s/ Mohan V. Phansalkar _______________________________ Name: Mohan V. Phansalkar Title: Executive Vice President AERIES FINANCE-II LTD., By: INVESCO Senior Secured Management, Inc. as Sub-Managing Agent, By: /s/ Gregory Stoeckle _______________________________ Name: Gregory Stoeckle Title: Authorized Signatory 13 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. AIMCO CLO SERIES 2001-A, By: /s/ Jerry D. Zinkula _______________________________ Name: Jerry D. Zinkula Title: Authorized Signatory By: /s/ Chris Goergen _______________________________ Name: Chris Goergen Title: Authorized Signatory AIMCO CDO SERIES 2000-A, By: /s/ Jerry D. Zinkula _______________________________ Name: Jerry D. Zinkula Title: Authorized Signatory By: /s/ Chris Goergen _______________________________ Name: Chris Goergen Title: Authorized Signatory ALLSTATE LIFE INSURANCE COMPANY, By: /s/ Jerry D. Zinkula _______________________________ Name: Jerry D. Zinkula Title: Authorized Signatory By: /s/ Chris Goergen _______________________________ Name: Chris Goergen Title: Authorized Signatory 14 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. AMARA-I FINANCE, LTD., By: INVESCO Senior Secured Management, Inc. as Financial Manager, By: /s/ Gregory Stoeckle _______________________________ Name: Gregory Stoeckle Title: Authorized Signatory AMARA 2 FINANCE, LTD., By: INVESCO Senior Secured Management, Inc. as Financial Manager, By: /s/ Gregory Stoeckle _______________________________ Name: Gregory Stoeckle Title: Authorized Signatory APEX (TRIMARAN) CDO I, LTD, By: Trimaran Advisors, L.L.C., By: /s/ David M. Millison _______________________________ Name: David M. Millison Title: Managing Director ARCHIMEDES FUNDING II, LTD., By: ING Capital Advisors LLC, as Collateral Manager, By: /s/ Gordon R. Cook _______________________________ Name: Gordon R. Cook Title: Managing Director 15 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. ARCHIMEDES FUNDING III, LTD., By: ING Capital Advisors LLC, as Collateral Manager, By: /s/ Gordon R. Cook _______________________________ Name: Gordon R. Cook Title: Managing Director ARES III CLO LTD., By: ARES CLO Management LLC, Investment Manager, By: /s/ Seth J. Brufsky _______________________________ Name: Seth J. Brufsky Title: Vice President ARES IV CLO LTD., By: ARES CLO Management IV, L.P., Investment Manager, By: ARES CLO GP IV, LLC, its Managing Member, By: /s/ Seth J. Brufsky _______________________________ Name: Seth J. Brufsky Title: Vice President 16 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. ARES V CLO LTD., By: ARES CLO Management V, L.P., Investment Manager, By: ARES CLO GP V, LLC, its Managing Member, By: /s/ Seth J. Brufsky _______________________________ Name: Seth J. Brufsky Title: Vice President ARES VI CLO LTD., By: ARES CLO Management VI, L.P., Investment Manager, By: ARES CLO GP VI, LLC, its Managing Member, By: /s/ Seth J. Brufsky _______________________________ Name: Seth J. Brufsky Title: Vice President AURUM CLO 2002-1 LTD., By: Columbia Management Advisors, Inc. (f/k/a Stein Roe & Farnham Incorporated), as Investment Manager, By: /s/ James R. Fellows _______________________________ Name: James R. Fellows Title: Sr. Vice President & Portfolio Manager 17 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. AVALON CAPITAL LTD., By: INVESCO Senior Secured Management, Inc., as Portfolio Advisor, By: /s/ Gregory Stoeckle _______________________________ Name: Gregory Stoeckle Title: Authorized Signatory AVALON CAPITAL LTD. 2, By: INVESCO Senior Secured Management, Inc., as Portfolio Advisor, By: /s/ Gregory Stoeckle _______________________________ Name: Gregory Stoeckle Title: Authorized Signatory BANK OF AMERICA, N.A. By: /s/ Leonard Norman _______________________________ Name: Leonard Norman Title: Managing Director THE BANK OF NEW YORK, By: /s/ Julie B. Pollosco _______________________________ Name: Julie B. Pollosco Title: Managing Director 18 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. THE BANK OF NOVA SCOTIA, By: /s/ John Campbell _______________________________ Name: John Campbell Title: Unit Head BEDFORD CDO, LIMITED (#1276), By: Pacific Investment Management Company LLC, as its Investment Advisor, By: /s/ Mohan V. Phansalkar _______________________________ Name: Mohan V. Phansalkar Title: Executive Vice President BRANT POINT CDO 1999-1 LTD., as Term Lender, By: Sankaty Advisors, Inc. as Collateral Manager, By: /s/ Timothy M. Barns _______________________________ Name: Timothy M. Barns Title: Senior Vice President CALLIDUS DEBT PARTNERS CLO FUND II, LTD., By: Callidus Capital Management, LLC, its Collateral Manager, By: /s/ Mavis Taintor _______________________________ Name: Mavis Taintor Title: Managing Director 19 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. CAPTIVA III FINANCE LTD. (Acct. 275), By: Pacific Investment Management Company LLC, as Advisor, By: /s/ David Dyer _______________________________ Name: David Dyer Title: Director CASTLE HILL I - INGOTS, LTD., as Term Lender By: Sankaty Advisors, LLC, as Collateral Manager, By: /s/ Timothy M. Barns _______________________________ Name: Timothy M. Barns Title: Senior Vice President CASTLE HILL II - INGOTS, LTD., as Term Lender By: Sankaty Advisors, LLC, as Collateral Manager, By: /s/ Timothy M. Barns _______________________________ Name: Timothy M. Barns Title: Senior Vice President 20 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. CASTLE HILL III - INGOTS, LTD., as Term Lender By: Sankaty Advisors, LLC, as Collateral Manager, By: /s/ Timothy M. Barns _______________________________ Name: Timothy M. Barns Title: Senior Vice President CHARTER VIEW PORTFOLIO, By: INVESCO Senior Secured Management, Inc., as Investment Advisor, By: /s/ Gregory Stoeckle _______________________________ Name: Gregory Stoeckle Title: Authorized Signatory 21 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. CREDIT INDUSTRIEL ET COMMERCIAL, By: Callidus Capital Management, LLC, its Collateral Manager, By: /s/ Matt Gillard _______________________________ Name: Matt Gillard Title: Manager By: /s/ Gary George _______________________________ Name: Gary George Title: Manager CREDIT LYONNAIS NEW YORK BRANCH, By: /s/ Attila Koc _______________________________ Name: Attila Koc Title: Senior Vice President CREDIT SUISSE FIRST BOSTON, acting, through its Cayman Islands Branch, By: /s/ Bill O'Daly ______________________________ Name: Bill O'Daly Title: Director By: /s/ Cassandra Droogan _______________________________ Name: Cassandra Droogan Title: Associate 22 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. DELANO COMPANY (#274), By: Pacific Investment Management Company LLC, as its Investment Advisor, By: /s/ Mohan V. Phansalkar _______________________________ Name: Mohan V. Phansalkar Title: Executive Vice President ELF FUNDING TRUST III, By: New York Life Investment Management LLC, as Attorney-in-Fact, By: /s/ F. David Melka _______________________________ Name: F. David Melka Title: Vice President ENDURANCE CLO I, LTD By: ING Capital Advisors LLC, as Portfolio Manager, By: /s/ Gordon R. Cook ______________________________ Name: Gordon R. Cook Title: Managing Director FLEET NATIONAL BANK, By: /s/ Sandra H. Bennett _______________________________ Name: Sandra H. Bennett Title: Authorized Officer 23 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. GALAXY CLO 1999-1, LTD, By: /s/ W. Jeffrey Baxter _______________________________ Name: W. Jeffrey Baxter Title: Vice President GENERAL ELECTRIC CAPITAL CORPORATION, By: /s/ Robert M. Kadlick _______________________________ Name: Robert M. Kadlick Title: Duly Authorized Signatory GOLDENTREE HIGH YIELD OPPORTUNITIES II, LP, By: GoldenTree Asset Management, LP, By: /s/ Thomas O'Shea ______________________________ Name: Thomas O'Shea Title: Portfolio Manager GREAT POINT CLO 1999-1 LTD., as Term Lender, By: Sankaty Advisors, LLC, as Collateral Manager, By: /s/ Timothy M. Barns _______________________________ Name: Timothy M. Barns Title: Senior Vice President 24 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. HARBOUR TOWN FUNDING LLC, By: /s/ Diana M. Himes _______________________________ Name: Diana M. Himes Title: Assistant Vice President INTERCONTINENTAL CDO S.A. (#1284), By: Pacific Investment Management Company LLC, as its Investment Advisor, By: /s/ Mohan V. Phansalkar _______________________________ Name: Mohan V. Phansalkar Title: Executive Vice President INVESCO EUROPEAN CDO I S.A., By: INVESCO Senior Secured Management, Inc., as Collateral Manager, By: /s/ Gregory Stoeckle _______________________________ Name: Gregory Stoeckle Title: Authorized Signatory JISSEKIKUN FUNDING, LTD. (#1288), By: Pacific Investment Management Company LLC, as its Investment Advisor, By: /s/ Mohan V. Phansalkar _______________________________ Name: Mohan V. Phansalkar Title: Executive Vice President 25 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. KATONAH I, LTD., By: Katonah Capital, L.L.C., as Manager By: /s/ Ralph Della Rocco _______________________________ Name: Ralph Della Rocco Title: Authorized Officer KATONAH III, LTD., By: Katonah Capital, L.L.C., as Manager By: /s/ Ralph Della Rocco _______________________________ Name: Ralph Della Rocco Title: Authorized Officer KZH SOLEIL-2 LLC,, By: /s/ Hi Hua _______________________________ Name: Hi Hua Title: Authorized Agent LIBERTY FLOATING RATE ADVANTAGE FUND, By: Columbia Management Advisors, Inc. (f/k/a Stein Roe & Farnham Incorporated), as Advisor, By: /s/ James R. Fellows __________________________________ Name: James R. Fellows Title: Sr. Vice President & Portfolio Manager 26 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. NATEXIS BANQUES POPULAIRES, By: /s/ William J. Burke _______________________________ Name: William J. Burke Title: Vice President By: /s/ Michael J. Storms _______________________________ Name: Michael J. Storms Title: Associate OCTAGON INVESTMENT PARTNERS II, LLC, By: Octagon Credit Investors, LLC as Sub-Investment Manager, By: /s/ Michael B. Nechamkin _______________________________ Name: Michael B. Nechamkin Title: Portfolio Manager OCTAGON INVESTMENT PARTNERS III, LTD., By: Octagon Credit Investors, LLC as Portfolio Manager, By: /s/ Michael B. Nechamkin _______________________________ Name: Michael B. Nechamkin Title: Portfolio Manager 27 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. OCTAGON INVESTMENT PARTNERS IV, LTD, By: Octagon Credit Investors, LLC as Collateral Manager, By: /s/ Michael B. Nechamkin _______________________________ Name: Michael B. Nechamkin Title: Portfolio Manager OCTAGON INVESTMENT PARTNERS V, LTD., By: Octagon Credit Investors, LLC as Portfolio Manager, By: /s/ Michael B. Nechamkin _______________________________ Name: Michael B. Nechamkin Title: Portfolio Manager RACE POINT CLO, LIMITED, as Term Lender, By: Sankaty Advisors, LLC, as Collateral Manager, By: /s/ Timothy M. Barns _______________________________ Name: Timothy M. Barns Title: Senior Vice President 28 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. RACE POINT II CLO, LIMITED, as Term Lender, By: Sankaty Advisors, LLC, as Collateral Manager, By: /s/ Timothy M. Barns _______________________________ Name: Timothy M. Barns Title: Senior Vice President SAGAMORE CLO LTD., By: INVESCO Senior Secured Management, Inc., as Collateral Manager, By: /s/ Gregory Stoeckle _______________________________ Name: Gregory Stoeckle Title: Authorized Signatory SANKATY HIGH YIELD PARTNERS II, LP, By: /s/ Timothy M. Barns _______________________________ Name: Timothy M. Barns Title: Senior Vice President SARATOGA CLO I LIMITED, By: INVESCO Senior Secured Management, Inc., as Asset Manager, By: /s/ Gregory Stoeckle _______________________________ Name: Gregory Stoeckle Title: Authorized Signatory 29 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. SAWGRASS TRADING LLC, By: /s/ Diana M. Himes _______________________________ Name: Diana M. Himes Title: Assistant Vice President SEQUILS-ING I (HBDGM), LTD., By: ING Capital Advisors LLC, as Collateral Manager, By: /s/ Gordon R. Cook ______________________________ Name: Gordon R. Cook Title: Managing Director SEQUILS-LIBERTY, LTD., By: INVESCO Senior Secured Management, Inc., as Collateral Agent, By: /s/ Gregory Stoeckle _______________________________ Name: Gregory Stoeckle Title: Authorized Signatory SEQUILS-MAGNUM, LTD. (#1280), By: Pacific Investment Management Company LLC, as its Investment Advisor, By: /s/ Mohan V. Phansalkar _______________________________ Name: Mohan V. Phansalkar Title: Executive Vice President 30 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. SRF 2000,INC., By: /s/ Diana M. Himes _______________________________ Name: Diana M. Himes Title: Assistant Vice President SRF TRADING, INC., By: /s/ Diana M. Himes _______________________________ Name: Diana M. Himes Title: Assistant Vice President STEIN ROE & FARNHAM CLO I LTD., By: Columbia Management Advisors, Inc. (f/k/a Stein Roe & Farnham Incorporated), as Portfolio Manager, By: /s/ James R. Fellows _______________________________ Name: James R. Fellows Title: Sr. Vice President & Portfolio Manager STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY, By: Columbia Management Advisors, Inc. (f/k/a Stein Roe & Farnham Incorporated), as Advisor, By: /s/ James R. Fellows _______________________________ Name: James R. Fellows Title: Sr. Vice President & Portfolio Manager 31 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. TORONTO DOMINION (NEW YORK), INC. By: /s/ Stacey Malek _______________________________ Name: Stacey Malek Title: Vice President TRITON CDO IV, LIMITED, By: INVESCO Senior Secured Management, Inc., as Investment Advisor, By: /s/ Gregory Stoeckle _______________________________ Name: Gregory Stoeckle Title: Authorized Signatory VENTURE CDO 2002, LIMITED, By: Barclays Capital Asset Management Limited, its Investment ADvisor By: Barclays Bank PLC, New York Branch, its Sub-Advisor, By: /s/ Martin Davey _______________________________ Name: Martin Davey Title: Director 32 Signature Page to Seventh Amendment to GrafTech Finance Inc. Credit Agreement. VENTURE II CDO 2002, LIMITED, By: Barclays Bank PLC, New York Branch, its Investment Advisor, By: /s/ Martin Davey _______________________________ Name: Martin Davey Title: Director EX-10 7 gti_cragree8.txt EXHIBIT 10.1.8 Exhibit 10.1.8 EXECUTION COPY EIGHTH AMENDMENT dated as of January 12, 2004 (this "Amendment"), to the Credit Agreement dated as of February 22, 2000 (as previously amended, the "Credit Agreement") among GRAFTECH INTERNATIONAL LTD. f/k/a UCAR INTERNATIONAL INC., a Delaware corporation ("GrafTech"), GRAFTECH GLOBAL ENTERPRISES INC. f/k/a UCAR GLOBAL ENTERPRISES INC., a Delaware corporation ("Global"), GRAFTECH FINANCE INC. f/k/a UCAR FINANCE INC., a Delaware corporation (the "Borrower"), the LC Subsidiaries from time to time party thereto, the Lenders from time to time party thereto and JPMORGAN CHASE BANK, as Administrative Agent, Collateral Agent and Issuing Bank. A. Pursuant to the Credit Agreement, the Lenders and the Issuing Bank have extended and have agreed to extend credit to the Borrower and the LC Subsidiaries, on the terms and subject to the conditions set forth therein. B. The Borrower has requested an amendment of the Credit Agreement as set forth herein. C. The requisite Lenders are willing to agree to such amendment on the terms and subject to the conditions set forth herein. D. Each capitalized term used and not otherwise defined herein shall have the meaning assigned to it in the Credit Agreement. 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 agree as follows: SECTION 1. Amendments to the Credit Agreement. (a) The following two sentences in the preamble to the Credit Agreement are hereby deleted in their entirety: "In no circumstance whatsoever will any Letter of Credit issued pursuant to this Agreement on behalf of Lenders holding Revolving Commitments or the proceeds of any Revolving Loan be used for any purpose other than paying (or providing one or more Letters of Credit to secure, facilitate or defer the payment of) the EU 2 Fine (i) if at the time of the issuance of such Letter of Credit or the making of such Revolving Loan the Revolving Exposure exceeds EUR175,000,000 or (ii) if at the time of the issuance of such Letter of Credit or the making of such Revolving Loan the Revolving Exposure is less than EUR175,000,000, to the extent that as a result of the issuance of such Letter of Credit or the making of such Revolving Loan the Revolving Exposure would exceed EUR175,000,000. A draw under such a Letter of Credit, or a Revolving Loan made to replace such a Letter of Credit of equal or greater amount, the issuance of which was permitted by the preceding sentence, shall likewise be permitted." (b) Section 1.01 of the Credit Agreement is hereby amended by adding thereto, in the appropriate alphabetical order, the following definitions: "Convertible Notes" shall mean convertible senior notes of GrafTech having terms no less favorable to GrafTech and the Lenders than those contemplated by Exhibit A to the Eighth Amendment. "Eighth Amendment" shall mean the Eighth Amendment, dated as of January 12, 2004, to this Agreement. (c) The definition of "LC Subsidiary" is hereby amended by inserting immediately after the words "at any time," the words "without duplication, each of (i) the Borrower and (ii)". (d) The definition of "Net Proceeds" is hereby amended by deleting the "and" directly preceding clause (b)(iv), substituting therefor a "," and adding directly after such clause (b)(iv) the phrase "and (v) in the case of any issuance of Convertible Notes, accrued net interest paid by the purchasers of such Convertible Notes". (e) The definition of "Revolving Commitment" is hereby amended by deleting the last sentence thereof and replacing it with the following: "The aggregate amount of the Revolving Commitments on the Amendment Effective Date under the Eighth Amendment immediately after giving effect to the Eighth Amendment is EUR175,000,000." (f) Section 2.05 of the Credit Agreement is hereby amended by adding the following new sentence to the end of clause (b): "Notwithstanding the previous sentence, in addition, upon request of the Borrower or the applicable LC Subsidiary, one or more Letters of Credit shall be issued, amended, renewed or extended, solely for the purpose of securing payment of the EU Fine during any appeal process or under any post-appeal payment plan (as contemplated by EU regulatory and litigation process), so long as upon, and after giving effect to, the issuance, amendment, renewal or extension of each such Letter of Credit (x) the aggregate LC Exposure for such Letters of Credit shall not exceed EUR65,000,000 and (y) the aggregate Revolving Exposures will not exceed the aggregate Revolving Commitments." 3 (g) Section 2.08(c) of the Credit Agreement is hereby amended by inserting directly following the phrase "outstanding amount of Term Borrowings, then," the phrase "except in connection with the sale of assets described in Section 7.09(d)(5),". (h) Section 7.01(a)(ix) of the Credit Agreement is hereby amended by deleting "$25,000,000" and replacing it with "$50,000,000". (i) Section 7.01(a)(xii) of the Credit Agreement is hereby amended by deleting "$20,000,000" and replacing it with "$50,000,000"; and deleting "$15,000,000" and replacing it with "$35,000,000". (j) Section 7.01(a) of the Credit Agreement is hereby further amended by renumbering the last two clauses thereof "(xvii)" and "(xviii)" rather than "(xvi)" and "(xvii)", respectively; changing the reference in such new clause (xvii) from "(xv)" to "(xvi)"; and inserting between clause (xv) and new clause (xvii) the following new clause (xvi): "(xvi) Indebtedness of the Borrower to GrafTech in respect of the Net Proceeds of the Convertible Notes advanced to it by GrafTech; and any Guarantee by the Borrower or any Domestic Subsidiary of the Convertible Notes that is either unsecured or is secured solely by a lien described in Section 7.02(w);" (k) Section 7.01(b)(iv) of the Credit Agreement is hereby amended by deleting the words "and (xiv) of Section 7.01(a)" therein and substituting therefor the words ", (xiv) and (xv) of Section 7.01(a) and clause (vii) of this Section 7.01(b)". (l) Section 7.01(b) of the Credit Agreement is hereby further amended by deleting the word "and" at the end of clause (v); replacing the words ""Unrestricted Subsidiary."" at the end of clause (vi) with ""Unrestricted Subsidiary";"; and adding the following new clauses (vii) and (viii): "(vii) Indebtedness of GrafTech consisting of the Convertible Notes in an aggregate principal amount not to exceed $225,000,000, provided that such Convertible Notes are not guaranteed by any person other than Global, the Borrower and the Domestic Subsidiaries; and (viii) Indebtedness of Global to GrafTech in respect of the Net Proceeds of the Convertible Notes advanced to it by GrafTech." (m) Section 7.02 of the Credit Agreement is hereby amended by changing the reference to "Senior Notes or Additional Senior Notes" in clause (h) thereof to "Senior Notes, 4 Additional Senior Notes or Convertible Notes"; changing the reference to "Senior Notes or Additional Senior Notes" and the reference to "Senior Notes or the Additional Senior Notes" in clause (w) thereof to "Senior Notes, Additional Senior Notes or Convertible Notes"; deleting the "and" at the end of clause (v) thereof; replacing the "." at the end of clause (w) thereof with "; and"; and adding immediately after clause (w) thereof the following new clause (x): "(x) Liens on the Indebtedness permitted under Sections 7.01(a)(xvi) and 7.01(b)(viii) to secure Convertible Notes or to secure the Obligations, provided that the aggregate principal amount of such Indebtedness securing Convertible Notes shall not at any time exceed the aggregate principal amount at such time of the Convertible Notes." (n) Section 7.04(j) of the Credit Agreement is hereby amended by: changing each reference to "Amendment Effective Date (as defined in the Seventh Amendment)" to "Amendment Effective Date (as defined in the Eighth Amendment)"; changing each reference to "Equity Proceeds" therein to "Equity Proceeds or with Capital Stock of GrafTech (other than Disqualified Stock)"; by inserting immediately after the words "pursuant to paragraph (k) of this Section" in the third parenthetical in clause (ii)(B) therein the words "and the amount of cash, evidences of Indebtedness or Disqualified Stock paid under clause (p) of this Section (other than payments of accrued interest on conversions, redemptions or repurchases thereunder, as applicable); and by adding the words "except for direct equity investments in Unrestricted Subsidiaries in an aggregate amount of consideration (as valued at the time each investment is made) in connection with such investments not to exceed $5,000,000" immediately after the words "or contributed to the capital of any Unrestricted Subsidiary)" in the second proviso of such Section. (o) Section 7.04(k) of the Credit Agreement is hereby amended and restated as follows: "(k) investments consisting of repurchases of Senior Notes or Additional Senior Notes, to the extent permitted in Section 7.09(d)(2), with an aggregate principal amount not to exceed $35,000,000; provided, that the aggregate amount of Senior Notes and Additional Senior Notes repurchased pursuant to this clause (k), together with (i) the investments made under clause (j)(ii)(B) of this Section 7.04 and (ii) the aggregate amount of cash, evidences of Indebtedness or Disqualified Stock paid under clause (p) of this Section 7.04 (other than payments of accrued interest on conversions, redemptions or repurchases thereunder, as applicable) do not exceed the amount permitted under such clause (j)(ii)(B) (prior to the effectiveness of the reduction of such permitted amount set forth in such clause (j) in the aggregate amount of the repurchased Senior Notes and Additional Senior Notes and the cash, evidences of Indebtedness or Disqualified Stock paid 5 under such clause (p) (other than payments of accrued interest on conversions, redemptions or repurchases thereunder, as applicable));" (p) Section 7.04 of the Credit Agreement is hereby further amended by deleting the "and" at the end of clause (l); replacing the period at the end of clause (m) with ";"; and adding immediately after clause (m) the following new clauses (n), (o), (p), (q) and (r): "(n) investments consisting of Indebtedness permitted under Sections 7.01(a)(xvi) and 7.01(b)(viii); (o) investments consisting of repurchases of Senior Notes or Additional Senior Notes, to the extent permitted in Section 7.09(d)(3); (p) investments consisting of, or in connection with, conversions, redemptions or repurchases of Convertible Notes, to the extent permitted in Section 7.09(d)(4), provided, that the aggregate amount of cash, evidences of Indebtedness or Disqualified Stock paid in connection therewith (other than payments of accrued interest on such conversions, redemptions or repurchases, as applicable), together with the investments made under clauses (j)(ii)(B) and (k) of this Section 7.04, do not exceed the amount permitted under such clause (j)(ii)(B) (prior to the effectiveness of the reduction of such permitted amount set forth in such clause (j) in the aggregate amount of the Senior Notes and Additional Senior Notes repurchased under such clause (k) and the cash, evidences of Indebtedness or Disqualified Stock paid in connection herewith (other than payments of accrued interest on any such conversions, redemptions or repurchases, as applicable)); (q) investments consisting of repurchases or redemptions of Senior Notes, Additional Senior Notes or Convertible Notes, to the extent permitted in Section 7.09(d)(5); and (r) investments in Senior Notes, Additional Senior Notes and Convertible Notes to the extent acquired for Capital Stock of GrafTech (other than Disqualified Stock)." (q) Section 7.06 of the Credit Agreement is hereby amended by deleting the word "and" at the end of clause (f); replacing the period at the end of clause (g) with "; and"; and adding immediately after clause (g) thereof the following new clause (h): "(h) at any time no Default or Event of Default has occurred and is continuing, the Borrower and Global may make Restricted Payments to GrafTech of cash in order to fund payments (A) in connection with conversions, 6 redemptions or repurchases of Convertible Notes, to the extent permitted under Section 7.09(d), or (B) of interest then due in respect of the Convertible Notes." (r) Section 7.08 of the Credit Agreement is hereby amended by deleting the words "and the Additional Senior Notes" in clause (c)(i) and substituting therefor the words ", the Additional Senior Notes and the Convertible Notes"; deleting the words "and Additional Senior Notes" in clause (c)(iv) and substituting therefor the words ", the Additional Senior Notes and the Convertible Notes"; and changing the reference "7.09(d)(2)" in clause (c)(iv) to "7.09(d)". (s) Section 7.09(a) of the Credit Agreement is hereby amended by inserting immediately after the phrase "except that" the words "(1) at any time no Default or Event of Default has occurred and is continuing, the Borrower and Global may make payments in respect of intercompany Indebtedness owed to GrafTech and permitted under Sections 7.01(a)(xvi) and 7.01(b)(viii) in order to fund (i) conversions, redemptions or repurchases of Convertible Notes, to the extent permitted under Section 7.09(d), or (ii) interest payments then due in respect of the Convertible Notes and (2)"; deleting the phrase "to this sentence" appearing in the proviso and replacing it with the phrase "to this Section 7.09(a)(2)". (t) Section 7.09(d) of the Credit Agreement is hereby amended by: inserting the words "or the Convertible Notes" immediately after the words "Additional Senior Notes" appearing in the first two lines; deleting "and (2)" appearing therein and replacing it with ", (2)"; deleting "the Euro Equivalent of $100,000,000" appearing therein and replacing it with "EUR75,000,000"; and deleting the parenthetical appearing at the end thereof and replacing it with the following: ", (3) so long as no Default or Event of Default shall exist or result therefrom, GrafTech, Global, the Borrower or any Restricted Domestic Subsidiary may from time to time repurchase (but not retire) and hold up to an additional $50,000,000 aggregate principal amount of Senior Notes and Additional Senior Notes, to the extent that (i) such repurchases are made with proceeds of the Convertible Notes on or prior to December 31, 2004 and (ii) that at the time of, and after giving effect to, any such repurchase the Borrower has unused borrowing availability under the Revolving Commitments of at least EUR75,000,000, (4) so long as no Default or Event of Default shall exist or result therefrom, GrafTech, Global, the Borrower or any Restricted Domestic Subsidiary may from time to time convert or redeem Convertible Notes or repurchase (but not retire) and hold Convertible Notes, provided that (i) the aggregate amount of cash, evidences of Indebtedness or Disqualified Stock paid in connection therewith (other than payments of accrued interest on such conversions, redemptions or repurchases, as applicable) shall not exceed $30,000,000, and (ii) at the time thereof, and after giving effect thereto, the 7 Borrower has unused borrowing availability under the Revolving Commitments of at least EUR75,000,000 (except in connection with the conversion of Convertible Notes into Capital Stock of GrafTech or the payment for Convertible Notes in Capital Stock of GrafTech (other than Disqualified Stock)), (5) so long as no Default or Event of Default shall exist or result therefrom and at the time of, and after giving effect thereto, the Borrower has unused borrowing availability under the Revolving Commitments of at least EUR75,000,000, GrafTech, Global, the Borrower or any Restricted Domestic Subsidiary may from time to time with the proceeds from any sales of non-core, non-strategic assets pursuant to its asset disposition program announced on January 9, 2002 redeem or repurchase up to $35,000,000 aggregate principal amount of additional Convertible Notes, Senior Notes and Additional Senior Notes, to the extent required by the applicable indenture if such proceeds are not reinvested in the business of GrafTech and its subsidiaries or applied to reduce the Revolving Commitments, and (6) GrafTech, the Borrower or any Restricted Subsidiary may, from time to time, to the extent acquired for Capital Stock of GrafTech (other than Disqualified Stock), repurchase or acquire (but not retire) and hold Senior Notes, Additional Senior Notes and Convertible Notes. Notwithstanding anything herein to the contrary, a call for redemption shall not be treated as a redemption until the consummation of such redemption." (u) Clause (g) of Article 8 of the Credit Agreement is hereby amended by adding "(i)" after the phrase "provided that this clause (g) shall not apply" and adding the following phrase at the end of such clause (g) "or (ii) to any requirement under the Convertible Notes, Senior Notes or Additional Senior Notes to offer to redeem or repurchase such notes if such redemption or repurchase is permitted under Section 7.09(d)(5);". (v) Schedule A of the Credit Agreement is hereby amended by (i) deleting the table set forth therein and substituting therefor the following: - ----------------------------------------------------------------------- Leverage Ratio Amount -------------- ------ - ------------------------------------------------------------------------ greater than or equal to 2.0:1.0 $100,000,000 - ------------------------------------------------------------------------ less than 2.0:1.0 $125,000,000 - ------------------------------------------------------------------------ SECTION 2. Representations and Warranties. Each of GrafTech, Global and the Borrower represents and warrants to each Lender as of the date hereof and as of the Amendment Effective Date that, after giving effect to this Amendment, (a) the representations and warranties set forth in Article IV of the Credit Agreement are true and correct in all material respects, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties were true and correct in all material respects as of the earlier date), and (b) no Default or Event of Default has occurred and is continuing. SECTION 3. Reduction of Revolving Commitments. As of the Amendment Effective Date, without any notice or any other action by any person, the aggregate amount of the Revolving Commitments shall automatically and permanently be reduced by an amount that will result in the Revolving Commitments equaling EUR175,000,000. 8 SECTION 4. Effectiveness. This Amendment shall become effective as of the first date on which the following conditions shall have been satisfied: (i) when the Administrative Agent or its counsel shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Borrower, GrafTech, Global and Lenders holding at least 51% of the sum of all Revolving Loans outstanding, Letters of Credit Exposures and unused Revolving Commitments; and (ii) the representations and warranties set forth in Section 2 above shall be true and correct on and as of such date and the Administrative Agent shall have received a certificate of the Borrower to that effect. Notwithstanding the foregoing, the provisions of Section 1 above (other than Section 1(c) and (f)) shall not become effective until as of the first date (the "Amendment Effective Date") on which the following conditions are met: (a) GrafTech shall have received not less than $100,000,000 of gross cash proceeds from the Convertible Notes, (b) the Borrower shall have repaid in full all of the outstanding Term Loans, together with accrued and unpaid interest thereon, (c) each Revolving Lender shall have received the Amendment Fee required to be paid to it pursuant to Section 5 below and (d) the representations and warranties set forth in Section 2 above shall be true and correct on and as of such date and the Administrative Agent shall have received a certificate of the Borrower to that effect. Notwithstanding anything herein to the contrary, the Amendment Effective Date shall not occur after March 31, 2004. SECTION 5. Amendment Fee. The Borrower agrees to pay to each Revolving Lender that executes and delivers to the Administrative Agent (or its counsel) a copy of this Amendment at or prior to 5:00 p.m., New York City time, on January 12, 2004 an amendment fee (the "Amendment Fee") in an amount equal to 0.05% of such Lender's Revolving Commitment (whether used or unused), based on the amount outstanding immediately after the issuance of the Convertible Notes, the application of the Net Proceeds therefrom pursuant to Section 4 above and the reduction of the Revolving Commitments pursuant to Section 3 above; provided that the Borrower shall have no liability for any such Amendment Fee if the Amendment Effective Date shall not occur. Such Amendment Fee shall be payable on the Amendment Effective Date. SECTION 6. Effect of Amendment. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Issuing Bank, the Collateral Agent, or the Administrative Agent, under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. 9 SECTION 7. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Delivery of any executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. SECTION 8. Applicable Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 9. Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. [SIGNATURE PAGES FOLLOW] 10 IN WITNESS WHEREOF, the parties hereto have caused this Eighth Amendment to be duly executed by their respective authorized officers as of the date and year first above written. GRAFTECH INTERNATIONAL LTD., By: /s/ Corrado F. De Gasperis ________________________________ Name: Corrado F. De Gasperis Title: Vice President and Chief Financial Officer GRAFTECH GLOBAL ENTERPRISES INC., By: /s/ Corrado F. DeGasperis ________________________________ Name: Corrado F. DeGasperis Title: Vice President and Chief Financial Officer GRAFTECH FINANCE INC., By: /s/ Corrado F. DeGasperis ________________________________ Name: Corrado F. DeGasperis Title: Vice President and Chief Financial Officer JPMORGAN CHASE BANK, as a Lender, and as Administrative Agent, Collateral Agent and Issuing Bank, By: ________________________________ Name: James H. Ramage Title: Managing Director 10 IN WITNESS WHEREOF, the parties hereto have caused this Eighth Amendment to be duly executed by their respective authorized officers as of the date and year first above written. GRAFTECH INTERNATIONAL LTD., By: ________________________________ Name: Title: GRAFTECH GLOBAL ENTERPRISES INC., By: ________________________________ Name: Title: GRAFTECH FINANCE INC., By: ________________________________ Name: Title: JPMORGAN CHASE BANK, as a Lender, and as Administrative Agent, Collateral Agent and Issuing Bank, By: /s/ James H. Ramage ________________________________ Name: James H. Ramage Title: Managing Director 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. ABN AMRO Bank N.V. By: /s/ Eric Oppenheimer _______________________________ Name: Eric Oppenheimer Title: Vice President By: /s/ Michele R. Costello _______________________________ Name: Michele R. Costello Title: Assistant Vice President 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: Bank of America, N.A. By: /s/ H. Leonard Norman _______________________________ Name: H. Leonard Norman Title: Managing Director 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: The Bank of New York By: /s/ Christine T. Rio _______________________________ Name: Christine T. Rio Title: Vice President 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: Credit Industriel et Commercial By: /s/ Mathew Gillard /s/ Stuart Rose ___________________________________________ Name: Mathew Gillard Stuart Rose Title: Manager Manager 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: The Bank of Nova Scotia By: /s/ John W. Campbell _______________________________ Name: John W. Campbell Title: Managing Director 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: CREDIT SUISSE FIRST BOSTON acting through its Cayman Islands Branch By: /s/ Bill O'Daly /s/ Cassandra Droogan _________________________________________________ Name: Bill O'Daly Cassandra Droogan Title: Director Associate 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: Fleet National Bank By: /s/ Sandra H. Bennett _______________________________ Name: Sandra H. Bennett Title: Authorized Officer 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. General Electric Capital Corporation By: /s/ Robert M. Kadlick _______________________________ Name: Robert M. Kadlick Title: Duly Authorized Signatory 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: GoldenTree High Yield Opportunities II, LP By: GoldenTree Asset Management, LP By: /s/ Thomas O'Shea _______________________________ Name: Thomas O'Shea Title: Portfolio Manager 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: Intercontinental CDO S.A. By: Pacific Investment Management Company LLC, as its Investment Advisor By: /s/ Mohan V. Phansalkar _______________________________ Mohan V. Phansalkar Executive Vice President 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: NATEXIS BANQUES POPULAIRES By: /s/ William J. Burke _______________________________ Name: William J. Burke Title: Vice President /s/ Michael J. Storms Michael J. Storms Associate 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: Sankaty High Yield Partners II, L.P. By: /s/ Diane J. Exter _______________________________ Name: Diane J. Exter Title: Managing Director Portfolio Manager 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: Toronto Dominion (New York), Inc. By: /s/ Stacey Malek _______________________________ Name: Stacey Malek Title: Vice President 11 Signature Page to Eighth Amendment to GrafTech Finance Inc. Credit Agreement. Name of Institution: UniCredito Italiano New York Branch By: /s/ Barry Henry /s/ Saiyed A. Abbas ____________________________________________________ Name: Barry Henry Saiyed A. Abbas Title: Vice President Vice President 12 EIGHTH AMENDMENT ---------------- Definition of "Convertible Notes" --------------------------------- Exhibit A ---------
Issuer................................................... GrafTech International Ltd. ("GrafTech") Securities Offered....................................... Up to $225 million principal amount convertible senior debentures. Maturity Date............................................ Between 2011 and 2024 Interest and Interest Payment Dates...................... Payable semi-annually in cash at a rate to be determined, commencing 2004. Guarantees............................................... The debentures will be guaranteed by GrafTech's domestic subsidiaries holding a substantial majority of its U.S. assets, which are the same subsidiaries that guarantee the Obligations under the Credit Agreement. Ranking of and Security for the Debentures and the The debentures will rank equally with present and future senior debt Guarantees............................................... and senior to present and future subordinated debt of GrafTech. Each guarantee will rank equally with present and future senior debt of the subsidiary guarantor and senior to present and future subordinated debt of the subsidiary guarantor. The debentures and the guarantees may be secured by first priority pledges of intercompany notes from GrafTech Finance and GrafTech Global created with proceeds of the debentures received from GrafTech and pledges, junior to the first priority pledge under the Credit Agreement, of shares of AET. Conversion Rights........................................ The debentures will be convertible into shares of common stock of GrafTech ("common stock") at a conversion rate to be determined, subject to antidilution and other adjustments as customary upon the occurrence of certain events, under customary circumstances to be determined, but including: 13 o upon the occurrence of certain market price conditions; o upon a call of the debentures for redemption by GrafTech; o upon fundamental changes (including a change of control) and other corporate transactions (including mergers and consolidations); or o upon the occurrence of specified credit rating events. Upon conversion, GrafTech will have the right to deliver, in lieu of shares of common stock, cash or a combination of cash and shares of common stock. Sinking Fund............................................. None. Optional Redemption by GrafTech.......................... GrafTech may at any time redeem the debentures, in whole or in part, for cash at a redemption price of up to 101% of principal amount, plus any accrued and unpaid interest, but GrafTech may do so prior to a date to be determined (but not earlier than 2007) only if certain market price conditions are achieved. If GrafTech redeems the debentures prior to such date (which may be as late as 2013), it will make an additional payment on the redeemed debentures approximately equal to the interest that would otherwise accrue after such date on the debentures through such date. GrafTech may make the additional payment in cash, shares of common stock or a combination thereof. Repurchase of the Debentures by GrafTech at Holders may require GrafTech to repurchase some or all of the the Option of the Holder................................. debentures at dates to be determined, but not earlier than 2009, at a repurchase price of up to 101% of principal amount, plus any accrued and unpaid interest. GrafTech may pay the repurchase price in cash, shares of common stock or a combination of cash and shares of our common stock, except that GrafTech will pay accrued and unpaid interest in cash. Repurchase of the Debentures by GrafTech Upon a If GrafTech experiences a fundamental change (including a change of Fundamental Change or Other Transaction.................. control) prior to maturity of the debentures, the Holders will have the right to require GrafTech to repurchase some or all of the debentures at a repurchase price of up to 101% of principal amount, plus any accrued and unpaid interest. GrafTech may pay the repurchase price in ash, shares of common stock or a 14 combination of cash and shares of common stock, except that GrafTech will pay any accrued and unpaid interest in cash. Registration Rights...................................... GrafTech will agree to file a shelf registration statement under the Securities Act relating to the resale of the debentures and the shares of common stock issuable upon conversion, redemption or repurchase thereof. If the registration statement is not filed or has not become effective within time periods to be determined, GrafTech will agree to pay customary liquidated damages to holders of the debentures. It is possible that GrafTech may make the additional payment in cash, shares of common stock or a combination thereof. Covenants................................................ As customary or as appropriate to give effect to the provisions described above. Use of Net Proceeds...................................... To repay all of the Tranche B Term Loans and for general corporate purposes. GrafTech will contribute or on-loan proceeds to GrafTech Finance and GrafTech Global and may retain proceeds to pay or secure antitrust fines or for other purposes permitted by the Credit Agreement.
EX-10 8 ucarcompdefplan.txt EXHIBIT 10.16.0 Exhibit 10.16.0 UCAR CARBON COMPENSATION DEFERRAL PLAN (As Amended and Restated Effective March 31, 2003) UCAR CARBON COMPENSATION DEFERRAL PLAN ARTICLE I PURPOSE 1.1 The purpose of this Plan is to (i) allow Eligible Employees to defer up to 85% of their Variable Compensation, (ii) allow Eligible Employees to defer up to 50% of their base salary, and (iii) (prior to April 1, 2003 only) allow Eligible Employees to defer a portion or all of their lump sum payments otherwise payable from the SRIP, ERIP and/or EBP. Effective March 31, 2003, the Plan shall also provide for (iv) the deferral of certain lump sum benefit amounts transferred from the SRIP, ERIP and EBP, (v) an additional contribution for Eligible Employees with Employer Retirement Contributions lost under the Savings Plan because of the limitations imposed under Section 401(a)(17) of the Code, and (vi) an Additional Matching Contribution for Participants who defer up to 5% of their compensation in excess of the Code Section 401(a)(17) limit (for the relevant year) under this Plan. Effective October 31, 2003, the Plan shall also provide for the deferral of certain lump sum benefit amounts transferred from the UCAR TCN Pension Plan. 1.2 This restatement of the Plan shall be effective for amounts payable on or after March 31, 2003. Article II ARTICLE II DEFINITIONS 2.1 "Additional Matching Contributions" shall mean the amounts credited to a Participant's account pursuant to Section 5.5(b). 2.2 "Administrative Committee" means the Non-qualified Plans Administrative Committee of the Company. 2.3 "Applicable Investment Fund Rate" means the difference between the value of each of the applicable investment funds as selected by the Administrative Committee and communicated to the Participants determined on a fund by fund basis, as of (i) the later of the Date of Deferral or the effective date of a Participant's election under Section 8.2(c), and (ii) the relevant valuation date for determining the amount of earnings of such investment fund in accordance with Article VIII. Such value shall include any hypothetical dividends and hypothetical capital gains distributions paid on such investment fund during the period for which the Applicable Investment Fund Rate is being determined, as if such hypothetical dividends or hypothetical capital gains distributions are reinvested when payable in additional shares of such fund. 2.4 "Beneficiary" means the person, persons or estate entitled (as determined under Article VII) to receive payment under this Plan following a Participant's death. 2.5 "Board" shall mean the Board of Directors of the Company. 2.6 "Change of Control" shall be deemed to occur if any of the following circumstances shall occur: (a) any "person" or "group" within the meaning of Section 13(d) or 14(d)(2) of the Exchange Act becomes the beneficial owner of 15% or more of the then outstanding Common Stock or 15% or more of the then outstanding voting securities of the Corporation; 2 (b) any "person" or "group" within the meaning of Section 13(d) or 14(d)(2) of the Exchange Act acquires by proxy or otherwise the right to vote on any matter or question with respect to 15% or more of the then outstanding Common Stock or 15% or more of the combined voting power of the then outstanding voting securities of the Corporation; (c) Present Directors and New Directors cease for any reason to constitute a majority of the Board of Directors of the Corporation (and, for purposes of this clause (c), "Present Directors" shall mean individuals who at the beginning of any consecutive twenty-four month period were members of the Board and "New Directors" shall mean individuals whose election by the Board or whose nomination for election as directors by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then in office who were Present Directors or New Directors); (d) the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation; or (e) consummation of: (i) a reorganization, restructuring, recapitalization, reincorporation, merger or consolidation of the Corporation (a "Business Combination") unless, following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock and the voting securities of the Corporation outstanding immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the common equity securities and the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination (including, without limitation, a corporation or other entity which as a result of such Business Combination owns the Corporation or all or substantially all of the assets of the Corporation or the Company either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of outstanding Common Stock and the combined voting power of the outstanding voting securities of the Corporation, respectively, (b) no "person" or "group" within the meaning of Section 13(d) or 14(d)(2) of the Exchange Act (excluding (1) any corporation or other entity resulting from such Business Combination and (2) any employee benefit plan (or related trust) of the Company or any corporation or other entity resulting from such Business Combination) beneficially owns 15% or more of the common equity securities or 15% or more of the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination, except to the extent that such beneficial ownership existed prior to such Business 3 Combination with respect to the Common Stock and the voting securities of the Corporation, and (c) at least a majority of the members of the board of directors (or similar governing body) of the corporation or other entity resulting from such Business Combination were members of the Board of Directors of the Corporation at the time of the execution of the initial agreement providing for such Business Combination or at the time of the action of the Board approving such Business Combination, whichever is earlier; or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation or the Company, whether held directly or indirectly through one or more subsidiaries (excluding any pledge, mortgage, grant of security interest, sale-leaseback or similar transaction, but including any foreclosure sale), provided, that, for purposes of clauses (e)(i) and (e)(ii) above, the divestiture of less than substantially all of the assets of the Corporation or the Company in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spin-off, sale of stock of or merger or consolidation of a subsidiary, transfer or otherwise, shall not constitute a Change in Control. Notwithstanding the foregoing, a Change in Control of the Corporation shall not be deemed to occur pursuant to clause (a) or (b) above, solely because 15% or more of the then outstanding Common Stock or the then outstanding voting securities of the Corporation is or becomes beneficially owned or is directly or indirectly held or acquired by one or more employee benefit plans (or related trusts) maintained by the Company. For purposes hereof, references to "beneficial owner" and correlative phrases shall have the same definition as set forth in Rule 13d-3 under the Exchange Act (except that ownership by underwriters for purposes of a distribution or offering shall not be deemed to be "beneficial ownership"), references to the Exchange Act or rules and regulations thereunder shall mean those in effect on June 29, 2000 and references to "Common Stock" shall mean the common stock of the Corporation. 2.7 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 2.8 "Company" means UCAR Carbon Company Inc. 2.9 "Compensation" means, solely for purposes of this Plan, a Participant's taxable base salary, taxable Variable Compensation awarded under a Variable Compensation 4 Plan and any compensation that is deferred by the Participant under this Plan or any other plan maintained by the Company which satisfies the requirements of Code Sections 125 or 401(k). 2.10 "Corporation" means GrafTech International Ltd., a Delaware corporation. 2.11 "Date of Deferral" means (i) with respect to Variable Compensation, the dates on which payments of Variable Compensation awards for a given Service Year would otherwise have been made, (ii) with respect to base salary deferral, the date on which the relevant salary would have been paid, (iii) with respect to amounts which would otherwise have been paid from the SRIP, ERIP or EBP, the date on which lump sum amounts would have otherwise been distributed in accordance with the terms of the SRIP, ERIP or EBP, (iv) with respect to all Frozen Non-qualified Benefits, March 31, 2003, (v) with respect to Make-up Contributions and Additional Matching Contributions, the date such Contributions are actually credited by the Company to a Participant's account, and (vi) with respect to Frozen TCN Benefits, October 31, 2003. 2.12 "Deferred Compensation" means the amount of Compensation deferred by a Participant under this Plan pursuant to Sections 5.3, 5.4 and 5.5 of this Plan. 2.13 "Disability" shall mean a disability for purposes of the current or most recent UCAR Carbon Long-Term Disability Plan. 2.14 "EBP" means the UCAR Carbon Equalization Benefit Plan, as amended from time to time. 2.15 "Eligible Employee" means an individual who (i) on the date of his or her election to participate in this Plan as provided in Section 5.1, is (a) in salary grade 13 or above, and (b) a participant in a Variable Compensation Plan employed with the Company in the United 5 States (or outside the United States to the extent such amounts to be deferred would otherwise be included as income for such person under the Code), or (ii) the Administrative Committee determines should be permitted to participate in this Plan. 2.16 "Employer Retirement Contributions" means the Employer Retirement Contributions described under, and made pursuant to, the terms of the Savings Plan. 2.17 "ERIP" means the UCAR Carbon Enhanced Retirement Income Plan, as amended from time to time. 2.18 "Excess Deferrals" means a Participant's deferrals pursuant to Section 5.3(a)(iii) of this Plan. 2.19 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.20 "Frozen Non-qualified Benefit" shall mean the lump sum benefit amount accrued and frozen under the SRIP, ERIP and EBP as of March 31, 2003, that is transferred to this Plan as of March 31, 2003 pursuant to Section 5.4(a) and reflected on Schedule A hereto. 2.21 "Frozen TCN Benefit" means the lump sum benefit amount accrued and frozen under the TCN Plan as of October 31, 2003, that is transferred to this Plan as of October 31, 2003 pursuant to Section 5.4(b) and reflected on Schedule B hereto. 2.22 "Incentive Plan" means the GrafTech Incentive Compensation Plan (effective January 1, 2003) as it may be amended from time to time, or any successor plan. 2.23 "Make-up Contributions" shall mean the amounts credited to a Participant's account pursuant to Section 5.5(a). 2.24 "Participant" means an Eligible Employee who (i) elects in advance to defer a portion of his or her base salary in accordance with Section 5.3 of this Plan, or (ii) elects in advance to defer a portion of his or her Variable Compensation for a given Service Year under 6 one of the Variable Compensation Plans in accordance with Section 5.3 of this Plan, if one were to be paid to such Participant for that year, and who is in fact subsequently awarded Variable Compensation for that year, payable during the following calendar year on the Date of Deferral. Effective March 31, 2003, a Participant shall also include an Eligible Employee who (a) has a Frozen Non-qualified Benefit under the Plan, or (b) receives compensation (as defined in Section 1.16 of the Savings Plan but including any base salary and Variable Compensation deferred under this Plan for the year) for such calendar year in an amount in excess of the compensation that may be considered under Section 1.16 of the Savings Plan because of the limitations imposed by Code Section 401(a)(17). Effective October 31, 2003, a Participant shall also include an Eligible Employee who has a Frozen TCN Benefit under the Plan. 2.25 "Plan" means this UCAR Carbon Compensation Deferral Plan, as it may be amended from time to time. 2.26 "Retirement" shall mean with respect to any Participant, the Participant's termination of employment with the Company and the attainment of age 50 with at least 10 years of service with the Company. 2.27 "Retirement Plan" means the UCAR Carbon Retirement Plan, as amended from time to time. 2.28 "Savings Plan" means the UCAR Carbon Savings Plan, as amended from time to time. 2.29 "Service Year" means one of the calendar years including or after 1999, as to which an election may be made in accordance with Article V, and in respect of which Variable Compensation may be paid during the following calendar year on a Date of Deferral. 7 2.30 "SRIP" means the UCAR Carbon Supplemental Retirement Income Plan, as amended from time to time. 2.31 "TCN Plan" means the UCAR TCN Pension Plan, as amended from time to time. 2.32 "Unforeseen Emergency" means an event beyond the control of the Participant that would result in severe financial hardship to the Participant if early withdrawal of the Participant's deferrals (including any earnings credited to him or her pursuant to Article VIII of this Plan) under this Plan were not permitted. Whether a Participant has an Unforeseen Emergency shall be determined by the Administrative Committee. 2.33 "Variable Compensation" means any amounts awarded in accordance with one of the Variable Compensation Plans. 2.34 "Variable Compensation Plans" means, collectively, the Incentive Plan and any other variable compensation plan authorized by the Administrative Committee to participate in this Plan. ARTICLE III ADMINISTRATION 3.1 Except as otherwise indicated, the Administrative Committee shall supervise the administration and interpretation of this Plan, may establish administrative regulations to further the purpose of this Plan and shall take any other action necessary for the proper operation of this Plan. In carrying out their responsibilities under this Plan, the Administrative Committee and other Plan fiduciaries shall have discretionary authority to interpret the terms of this Plan and to determine eligibility for entitlement to benefits, in accordance with the terms of this Plan. An interpretation made pursuant to such discretionary 8 authority shall be given full force and effect, unless it can be shown that the interpretation or determination was arbitrary and capricious. All decisions and acts of the Administrative Committee shall be final and binding upon all Participants, their Beneficiaries and all other persons. ARTICLE IV ELIGIBILITY 4.1 To be eligible to participate in this Plan for a given year, a person must have become an Eligible Employee not later than the day on or before the date which an Eligible Employee must make the election provided for in Article V of this Plan for that year. ARTICLE V DEFERRALS 5.1 During each of the years this Plan is in effect, Eligible Employees shall be informed of the opportunity to participate in this Plan. An Eligible Employee choosing to participate in this Plan must make an election to do so on or before the date designated herein (or, if not so designated, the date designated by the Administrative Committee) and otherwise in accordance with such procedures as may be established by the Administrative Committee. 5.2 (a) While an election to defer Variable Compensation under one of the Variable Compensation Plans shall be irrevocable when made until the next scheduled annual election period, participation in this Plan with respect to Variable Compensation shall become effective only on a Date a Deferral and only if, on such date, the Eligible Employee receives an award under one of the Variable Compensation Plans (or would have received an award but for an election to defer under this Plan). 9 Variable Compensation awards, if any, must be deferred during the annual election period immediately preceding the calendar year in which the relevant services will be performed. Notwithstanding the foregoing, an Eligible Employee who becomes eligible to participate in this Plan after March 31, 2003 may elect to defer a Variable Compensation award during the calendar year in which services will be performed; provided, however, he or she makes an election to defer within 31 days after becoming eligible to participate in this Plan. (b) Participation in this Plan shall become effective only on a Date of Deferral and only if the Eligible Employee is employed with the Company on the date on which the Eligible Employee must make the election provided for in this Article V. Base salary must be deferred during the annual election period immediately preceding the calendar year in which the relevant services will be performed. A Participant may suspend his or her election to defer his or her base salary at any time; provided, however, that such Eligible Employee may not resume deferrals of base salary until the following calendar year. Notwithstanding the foregoing, an Eligible Employee who becomes eligible to participate in this Plan after March 31, 2003 may elect to defer a portion of his or her base salary during the calendar year in which services will be performed; provided he or she makes an election to defer within 31 days after becoming eligible to participate this Plan. 5.3 (a) On or before the date designated by the Administrative Committee and otherwise in accordance with such procedures as may be established, a Participant may elect voluntarily to defer: (i) up to 85% of the Participant's award under the Variable Compensation Plans (in 1% increments); 10 (ii) up to 50% of his or her base salary (in 1% increments); and/or (iii) effective March 31, 2003, some or all of his or her Compensation in excess of $200,000 to the extent such Compensation has not been previously deferred under this Plan. Such $200,000 amount shall be adjusted at the same time and in the same manner as the limitation described in Code Section 401(a)(17). For 2003 only, Compensation for purposes of this subparagraph (iii) means only Compensation earned after March 31, 2003. While Compensation for purposes of this subparagraph (iii) means all Compensation as defined in Section 2.9, deferrals under this subparagraph (iii) may be made only from base salary and Variable Compensation. Deferrals made under this subparagraph (iii) are referred to under this Plan as "Excess Deferrals". For any given year, a Participant's Excess Deferrals shall not exceed 50% of his or her Compensation in excess of $200,000 (as adjusted). (b) Except for Excess Deferrals under Section 5.3(a)(iii), a Participant must elect, during any applicable calendar year, to defer in the aggregate a minimum of $1,000 of his or her base salary or Variable Compensation in order to participate in this Plan in any particular year. Notwithstanding any provision in this Plan to the contrary, if a Participant fails to defer in the aggregate at least $1,000 of base salary or Variable Compensation in any calendar year, the Administrative Committee may, in its sole discretion, require such Participant to irrevocably elect to defer a minimum aggregate amount of $1,000 in the calendar year immediately following thereafter in order to participate in this Plan in any particular year. 5.4 (a) Effective March 31, 2003, all Frozen Non-qualified Benefits have been transferred to this Plan and are deferred in accordance with the terms hereof. A Participant 11 shall become vested in his or her Frozen Non-qualified Benefit upon the attainment of five years of service with the Corporation and any of its subsidiaries. (b) Effective October 31, 2003, the Frozen TCN Benefits listed on Schedule B have been transferred to this Plan and are deferred in accordance with the terms hereof. A Participant shall become vested in his or her Frozen TCN Benefit upon the attainment of five years of service with the Corporation and any of its subsidiaries. 5.5 (a) Within forty-five days after each March 31st, June 30th, September 30th and December 31st, the Company shall credit a Participant with 5% of the Participant's Compensation (as defined in Section 1.16 of the Savings Plan without regard to Code section 401(a)(17) and without regard to deferrals of base salary and Variable Compensation under this Plan), which exceeds $200,000 ("Make-up Contributions"), provided that no credit will be made with respect to compensation for which a credit was made in a prior quarter in the year. Such $200,000 shall be adjusted at the same time and in the same manner as the limitation described in Code Section 401(a)(17). For the year 2003 only, Compensation shall mean only Compensation earned after March 31, 2003. A Participant shall become vested in his or her Make-up Contributions upon the attainment of five years of service with the Corporation and any of its subsidiaries. (b) Within forty-five days after each March 31st, June 30th, September 30th and December 31st, the Company shall credit a Participant with 100% of the first 3% and 50% of the next 2% of the Participant's Excess Deferrals ("Additional Matching Contributions"). A Participant shall be immediately vested in his or her Additional Matching Contributions. 12 (c) The provisions of Sections 5.5(a) and (b) shall not apply to any Participant who has a separate agreement with the Company providing that such Participant will not receive allocations under this Section 5.5. (d) Effective October 31, 2003, the provisions of Section 5.5(a) shall also apply to any Participant who has a Frozen TCN Benefit and is not eligible to participate in the Savings Plan; Make-up Contributions under this paragraph (d) will be made with respect to Compensation under as well as in excess of $200,000. ARTICLE VI PAYMENTS TO PARTICIPANTS AND BENEFICIARIES 6.1 Time of Payment. (a) Subject to subsections (b), (c), (d), (e), (f), (g) and (h) of this Section 6.1, a Participant shall receive payment of his or her deferrals, and any earnings accruals credited under Article VIII, during the January next following his or her date of termination of employment. Notwithstanding the foregoing (including any election made by a Participant under paragraph (b) hereof) or the provisions of paragraph (f) of this Section 6.1, for Participants ("UCI Participants") employed by UCAR Composites Inc. ("UCI") whose employment is terminated in connection with the sale of the assets of UCI to Coast Composites, Inc. ("UCI Sale"), payment of their entire account balances shall be made in a lump sum payment upon the closing of the UCI Sale. (b) (i) Notwithstanding any provision in this Plan to the contrary, a Participant may elect to commence receipt of payments of any amounts deferred upon a specific future fixed year payment date(s) which is at least five years after the Date of Deferral or such shorter schedule as the Administrative Committee may determine; provided, however, that such payments must begin no later than the calendar year in which the Participant attains age 70 1/2. A Participant making such an election shall receive his or her lump sum payment in the 13 month of the future fixed year payment date as specified by the Participant in his or her election pursuant to Section 5.1 or, if applicable, such Participant shall receive installment payments in accordance with Section 6.2. (ii) With respect to a Participant who has attained age 55 at the time of the election of his or her deferral, the five-year period described in subsection (i) of this Section 6.1(b) shall instead be one year with respect to all deferrals under this Plan. (iii) A Participant is limited to four future fixed year payment dates. The amounts paid out in such future fixed year payments shall include the sum of a Participant's deferrals under this Plan and any earnings accrued thereon. (c) A Participant who has an Unforeseen Emergency may receive a distribution of all or a portion of his or her account balance, including any earnings credited to him or her pursuant to Article VIII of this Plan; provided that the Participant may not receive an amount greater than the amount necessary to meet the Unforeseen Emergency and any amounts necessary to pay federal, state and local income taxes or penalties reasonably anticipated to result from a withdrawal under this Section 6.1. (d) Notwithstanding any provision in this Plan to the contrary, a Participant may, on the applicable Date of Deferral or at any time thereafter prior to a Change of Control, elect to receive payment of his or her entire account balance under this Plan at such time as a Change of Control occurs. Moreover, a Participant may elect to change his or her election to receive (or not to receive) payment of his or her entire account balance under this Plan upon the occurrence of a Change of Control at any time prior to the date that a Change of Control occurs. Any payments made under this subsection (d) shall be made in a lump sum within 45 days after the Change of Control has occurred. 14 (e) A Participant may request a distribution of all or a portion of his or her account balance, including any earnings credited to him or her pursuant to Article VIII of this Plan, at any time and for any reason by submitting a written request to the Administrative Committee, subject to the following substantial limitations and conditions: (i) The Participant shall permanently forfeit 10% of the amount distributed to him or her; and (ii) If the Participant is still employed by the Company, the Participant shall not be permitted to make deferral elections into the Plan for two Plan years following the year of such a distribution. Upon the Participant's agreement to these two conditions, the Administrative Committee shall direct a distribution to the Participant of the amount requested, less the 10% partial forfeiture described above (which shall revert to the Company and not be paid to or for the benefit of the Participant, his or her Beneficiary or any other person). The distribution shall be made in a lump sum as soon as administratively practicable. (f) This subsection (f) shall govern the payment of vested Frozen Non-qualified Benefits, vested Frozen TCN Benefits, vested Make-up Contributions and Additional Matching Contributions under the Plan. (i) For Participants who Retire or otherwise terminate employment after March 31, 2003 and on or before December 1, 2003, such Participants shall be paid that portion of their vested Frozen Non-qualified Benefits from this Plan that would have been paid under the SRIP, ERIP or EBP, as applicable, in the form set forth in the respective plans for the duration of the calendar year including their dates of Retirement, and such amounts shall be deducted from the Participant's Frozen Non-qualified Benefits under this Plan. The 15 remaining portion of the vested Frozen Non-qualified Benefits and any earnings accruals credited under Article VIII shall be paid during the January next following his or her last day of work, and such Participants may not make the elections or requests for distributions provided for in subsections (b), (c), (d), (e) and (g) of this Section 6.1. (ii) A Participant shall begin to receive payment of his or her vested Make-up Contributions, Additional Matching Contributions and vested Frozen TCN Benefit, and any earnings accruals credited under Article VIII, during the January next following the later of (i) his or her date of termination of employment or (ii) his or her attainment of age 50, provided however, that Participants may make the elections or requests for distributions described in subsections (b), (c), (d), (e) and (g) of this Section 6.1. (g) A Participant may change the commencement date of payment only one time and subject to the following restrictions: (i) such election is made no later than July 1 in the calendar year that the Participant terminates employment (or such later date as the Administrative Committee shall determine), to be effective no earlier than the following calendar year; and (ii) the election is subject to the consent of the Administrative Committee. (h) Notwithstanding any other provision of this Section 6.1, or any other conflicting provision of the Plan, with respect to a Participant's Frozen Non-qualified Benefit hereunder, the Company may determine, in its sole discretion, that some or 16 all of such benefit shall be paid at a specified date that is earlier than the date otherwise applicable under this Section 6.1. 6.2 Form of Payments. (a) A Participant may elect to receive payments under this Plan in annual or quarterly installments. Such installments must commence as described in Section 6.1, and must be completed by the earlier of ten years after commencement or the calendar year in which the Participant attains age 85. (b) A Participant may elect to receive installment payments either (i) annually during each January or (ii) quarterly, commencing in the January that payment was otherwise due in accordance with Section 6.1. If a Participant does not elect the form of his or her installment payments, such installment payments shall be made annually during each January. (c) If a Participant does not elect the form of his or her payments, such payments shall be made in a lump sum payment. (d) A Participant may change the form of payment previously elected only one time and subject to the following restrictions: (i) such election is made no later than October 31 in the calendar year that the Participant terminates employment (or such later date as the Administrative Committee shall determine), to be effective no earlier than the following calendar year; and (ii) the election is subject to the consent of the Administrative Committee. 17 (e) (i) If a Participant dies at any time prior to receiving any portion of his or her account balance under this Plan, payment shall be made to the Participant's Beneficiary as follows: (A) If the Participant's Beneficiary is his or her surviving spouse, such Participant's entire account balance under this Plan shall be paid as follows: (i) ten annual installments or a shorter schedule, if so elected by the surviving spouse, or (ii) a lump sum payment payable on or about the January 1st following the Participant's death. (B) If the Participant's Beneficiary is someone other than his or her surviving spouse, such Participant's entire account balance under this Plan shall be paid in a lump sum payment as soon as practical following the Participant's death. (ii) If a Participant dies at any time after payment of his or her account balance under this Plan has begun, such Participant's Beneficiary shall continue to receive payment of the Participant's account in the same manner as the Participant elected, or such shorter payment schedule as elected by the Beneficiary. (f) If a Participant sustains a Disability, such Participant shall receive the full amount of his or her account balance (other than deferrals to a specific future date) paid out in ten annual installments or a shorter schedule, if so elected by the Participant. Payments shall begin on the first business day of the second calendar quarter following the onset of Disability. If a Participant has elected to receive a portion or all of his or her account balance on a specific future date, that election will not be affected by the Participant's Disability. (g) If any lump sum distribution otherwise payable under this Plan would be disallowed in any part as a deduction to the Company in accordance with 18 Section 162(m) (or a successor Section) of the Code, the Administrative Committee may determine to distribute the amount of such benefit in installments such that the Participant or Beneficiary shall receive the maximum amount permissible in each installment and still preserve the Company's full tax deduction. 6.3 Amount of Payment. Subject to Section 6.6 hereof: (a) If a Participant is terminated by the Company for cause: (i) with respect to that portion of the Participant's account balance attributable to the Participant's deferrals pursuant to Sections 5.3(a)(i), 5.3(a)(ii), and 5.3(a)(iii) hereof ("Participant Deferrals") only, the Participant shall receive the lesser of (A) his or her Participant Deferrals, less any previous payments made, or (B) his or her account balance attributable to Participant Deferrals. The Corporation's Board of Directors may determine whether the amount payable under this paragraph (i) shall be paid in the form previously elected by the Participant, or in some other form of payment. (ii) With respect to the remainder of the Participant's vested account balance, the Corporation's Board of Directors may determine whether some or all of such amounts shall be terminated or suspended or, if any such amounts are not terminated or suspended, the Corporation's Board may determine the applicable form of payment of such amounts. In no event shall a Participant under this subparagraph (a) receive any vested Frozen Non-qualified Benefit or vested Frozen TCN Benefit prior to age 50. (b) If a Participant terminates employment voluntarily, such Participant shall receive the full amount of his or her vested account balance. In no event shall a Participant under this subparagraph (b) receive any vested Frozen Non-qualified Benefit or vested Frozen TCN Benefit prior to age 50. 19 (c) If a Participant's employment is terminated for any reason other than termination by the Company for cause or voluntary termination, such Participant (or Beneficiary) shall receive the full amount of his or her vested account balance (other than deferrals to a specific future date) in the calendar year following the Participant's termination of employment. However, if a Participant has elected to receive a portion or all of his or her account balance on a specific future date, that election will remain in place. In no event shall a Participant under this subparagraph (c) receive any vested Frozen Non-qualified Benefit or vested Frozen TCN Benefit prior to age 50. 6.4 Payment in U.S. Dollars. All payments under this Plan shall be made in U.S. dollars. 6.5 Reduction of Payments. All payments under this Plan shall be reduced by any and all amounts that the Company is required to withhold pursuant to applicable law. 6.6 Detrimental Conduct. If the Board of Directors of the Corporation determines, after a hearing, that a Participant who is eligible to receive or is receiving his or her account balance under this Plan has engaged in Detrimental Conduct as defined below: (i) with respect to that portion of the Participant's account balance attributable to the Participant's deferrals pursuant to Sections 5.3(a)(i), 5.3(a)(ii), and 5.3(a)(iii) hereof ("Participant Deferrals"), the Participant shall receive the lesser of (A) his or her Participant Deferrals, less any previous payments made, or (B) his or her account balance attributable to Participant Deferrals. The Corporation's Board of Directors may determine whether the amount payable under this paragraph (i) shall be paid in the form previously elected by the Participant, or in some other form of payment. 20 (ii) With respect to the remainder of the Participant's vested account balance, the Corporation's Board of Directors may determine whether some or all of such amounts shall be terminated or suspended or, if any such amounts are not terminated or suspended, the Corporation's Board may determine the applicable form of payment of such amounts. (iii) "Detrimental Conduct" for these purposes includes activities which have been, are or would reasonably be expected to be detrimental to interests of the Corporation or any of its subsidiaries, as determined in the sole and good faith judgment of the Board of Directors of the Corporation. Such activities include, but are not limited to, unlawful conduct under securities, antitrust, tax or other laws, improper disclosure or use of confidential or proprietary information or trade secrets, competition with or improper taking of a corporate opportunity of any business of the Corporation or any of its subsidiaries, failure to cooperate in any investigation or legal proceeding, or misappropriation of property. ARTICLE VII BENEFICIARIES 7.1 A Participant may at any time, and from time to time, prior to his or her death designate one or more Beneficiaries to receive any payments to be made following the Participant's death. If no such designation is on file with the Company at the time of a Participant's death, the Participant's Beneficiary shall be the beneficiary or beneficiaries named in the beneficiary designation most recently filed by the Participant under the Savings Plan. If a Participant has not effectively designated a beneficiary under the Savings Plan, or if no designated beneficiary has survived the Participant, the Participant's Beneficiary shall be the Participant's surviving spouse or, if no spouse has survived the Participant, 21 the estate of the deceased Participant. If an individual Beneficiary cannot be located for a period of one year following the Participant's death, despite mail notification to the Beneficiary's last known address, and if the Beneficiary has not made a written claim for benefits within such period to the Administrative Committee, the Beneficiary shall be treated as having predeceased the Participant. The Administrative Committee may require such proof of death and such evidence of the right of any person to receive all or part of a deceased Participant's account balance as the Administrative Committee may consider appropriate. The Administrative Committee may rely upon any direction by the legal representatives of the estate of a deceased Participant, without liability to any other person. ARTICLE VIII EARNINGS ACCRUALS 8.1 Each Participant's account balance under this Plan shall be credited with earnings from the Date of Deferral through a date as close as practicable to the date such deferral is paid out or withdrawn pursuant to Article VI. Earnings under this Section 8.1 shall accrue at the rate elected in accordance with Section 8.2. Notwithstanding the foregoing, with respect to UCI Participants' accounts, earnings accruals will cease prior to the closing date of the UCI Sale, as close to such closing date as administratively feasible, as necessary to allow for a payout of such accounts as of the closing date of the UCI Sale. 8.2 (a) Earnings accruing in accordance with Section 8.1 shall accrue at the Applicable Investment Fund Rate. (b) Subject to subparagraph (c) of this Section 8.2, a Participant shall designate at the time of his or her election to defer any amounts under this Plan which accrual rate or rates shall apply to his or her deferrals; provided, however, such elections must 22 be in whole percentage points. Subject to subparagraph (c) of this Section 8.2, such elections shall be effective as of the Date of Deferral through a date as close as practicable to the date such deferral is paid out or withdrawn pursuant to Article VI. (c) A Participant may elect on a daily basis to change the accrual rate under this Section 8.2 with respect to any or all previous deferrals under this Plan. (d) Notwithstanding subparagraph (b) of this Section 8.2, a Participant who either (i) is subject to Section 16 of the Exchange Act or (ii) is deemed subject to Section 16 of the Exchange Act by the Administrative Committee may utilize the GrafTech Nonqualified Stock Fund rate at the time of his or her election to defer any amounts under this Plan; provided, however, that such allocated amounts shall not be eligible for reallocation to another accrual rate under this Section 8.2 for a period of 6 months from the Date of Deferral. ARTICLE IX GENERAL PROVISIONS 9.1 Prohibition of Assignment or Transfer. Any assignment, hypothecation, pledge or transfer of a Participant's or Beneficiary's right to receive payments under this Plan shall be null and void and shall be disregarded, except to the extent required by law. 9.2 Plan Not to Be Funded. The Company is not required, for the purpose of funding this Plan, to segregate any monies from its general funds, create any trusts, or make any special deposits, which will give a Participant greater rights than those of a general unsecured creditor of the Company, and the right of a Participant or Beneficiary to receive a payment under this Plan shall be no greater than the right of an unsecured general creditor of the Company. 9.3 Effect of Participation. Neither selection as a Participant, nor an election to participate or participation in this Plan, shall entitle a Participant to receive awards under the 23 Variable Compensation Plans, SRIP, ERIP or EBP, or the TCN Plan or affect the Company's right to discharge a Participant. 9.4 Communications To Be in Writing. All elections, requests and communications to the Company from Participants and Beneficiaries, and all communications to such persons from the Company, shall be in writing, and in such form and manner, and within such time, as the Company shall determine. In lieu of the foregoing, the Company may install a telephonic voice response system or utilize electronic means (such as e-mail or the internet) for such elections, requests and communications. 9.5 Absence of Liability. No officer, director or employee of the Company shall be personally liable for any acts or omission to act under this Plan or, except in circumstances involving bad faith, for such officer's, director's or employee's own act or omission to act. 9.6 Titles for Reference Only. The titles given herein to sections and subsections are for reference only and are not to be used to interpret the provisions of this Plan. 9.7 Delaware Law To Govern. All questions pertaining to the construction, regulation, validity and effect of the provisions of this Plan shall be determined in accordance with Delaware law. 9.8 Amendment. The Board with the consent of the Board of the Corporation (and, as described in the next sentence, the Administrative Committee) may amend this Plan at any time, but no amendment may be adopted which alters the payments due Participants or Beneficiaries, as of the date of the amendment, or the times at which payments are due, without the consent of each Participant affected by the amendment and of each Beneficiary (of a then deceased Participant) affected by the amendment. The Administrative Committee may authorize 24 any amendment which, either by itself or when aggregated with other amendments adopted during the calendar year, does not increase the Company's annual cost of any past or future benefits under this Plan by more than $500,000. 9.9 Plan Termination. The Board with the consent of the Board of the Corporation may terminate this Plan for any reason and at any time. In the event of such termination, the accounts of each Participant or Beneficiary under this Plan shall become immediately payable in accordance with Section 6.1; provided, however, that the Board, in its sole discretion, upon Plan termination or at any time thereafter, may decide to make lump sum payments in lieu of annual payments. 9.10 Successors of the Company. The Company will require any Successor to expressly assume and agree to perform this Plan 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. For purposes of this Plan, "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 the definition of Change of Control. UCAR CARBON COMPANY INC. By: _________________________________ 25 SCHEDULE A LIST OF FROZEN NON-QUALIFIED BENEFITS TRANSFERRED PURSUANT TO SECTION 5.4(a) OF THE PLAN -------------------------- The following schedule sets out the aggregate lump sum benefit amounts transferred from the SRIP, ERIP and EBP as of March 31, 2003 pursuant to Section 5.4(a) of the Plan, with respect to the indicated Participants as well as any other individual who becomes known to have such a benefit in the future. Name Lump Sum Amount ---- --------------- ASMUSSEN ERICK $ 17,860.60 BANZER JOSEPH 10,051.88 BARNARD PETRUS 1,404,779.90 BATTY LIONEL 36,924.31 BEIGHTOL FREDERICK 64,549.78 BELING LUIZ 794,147.13 BLAIR DARRELL 6,333.67 BLOWES BRIAN ERIC 5,725.28 BOARDMAN TIMOTHY 5,506.12 BOWER MICHAEL 29,657.58 BOWMAN BRIAN 48,908.39 BREWER KIM 42,476.14 BROOKS STEVEN 9,302.06 BURKETT THOMAS 21,048.26 BURSLEY JUANITA 6,337.30 CALARCO PAUL 168,985.47 CARR MICHAEL 14,566.94 Cate William 930,725.30 CHANG CHING-FENG 36,997.58 DEFAZIO CHARLES 26,462.44 DEGASPERIS CORRADO 45,609.56 DOW JR WILLIAM ARTH 5,593.38 DOWDLE THOMAS 12,622.29 DUNCANSON PETER 8,067.55 ERWIN J DEAN 21,479.79 FREITAS LUIZ 43,094.62 FRYDENBERG ALLEN 12,673.15 GAROFALO ELISE 8,054.67 GRIFFITHS MICHAEL 24,647.80 GRIGGS DOUGLAS 2,871.09 HAWORTH JOSEPH 57,057.12 1 HAWTHORNE JOEL 12,328.61 HEDGE JOHN 15,668.36 HEINZ STEPHEN 42,934.41 HIGGINS LUKE 7,954.49 HILMER DAVID 12,734.41 INTERMILL ALLAN 57,181.79 JACQUES THOMAS 3,488.52 JUDD BARRY 14,841.80 KAMPE DENNIS 9,977.76 KENT EDGAR 10,372.79 KLOTZ JAMES 33,769.46 KOLTS CARL 6,966.40 KORTOVICH JAMES 30,332.32 KRASSOWSKI DANIEL 3,794.97 LEWIS RICHARD 35,016.01 LYNCH RANDALL 20,092.04 MARICONDA JR ALBERT 2,683.21 MARINO GAIL CEHAK 12,654.60 MASON SCOTT CARTER 577,717.73 MERCURI ROBERT 40,115.45 MICHALS TED 3,759.58 MIESKOWSKI DAVID 14,963.76 MILLER DOUGLAS 2,998.63 MITCHEM RONNIE 291,172.56 NARWOLD KAREN LEE 151,242.60 NORLEY JULIAN 9,663.97 NORTHINGTON NANCY 10,066.46 OSTERMAN EDWARD 21,503.89 PEGRAM JAMES 3,532.64 PLAYFORD GILBERT 7,686,209.88 REEP DAVID 27,102.05 SHEN WEI-MING 21,376.15 SHULAR CRAIG 2,993,140.55 SMITH ROBERT 14,878.59 SMITH THOMAS 11,813.83 STAMM ROBERT 46,123.39 TONER JOHN A 98,786.50 TURK DAVID 51,431.60 WAYNE PAUL 28,769.56 WENSKE JAMES 35,252.14 WETULA JOHN 76,784.34 WHITE DONALD KENNE 18,742.64 2 SCHEDULE B LIST OF FROZEN TCN BENEFITS TRANSFERRED PURSUANT TO SECTION 5.4(b) OF THE PLAN The following schedule sets out the aggregate lump sum benefit amounts transferred from the TCN Plan as of October 31, 2003 pursuant to Section 5.4(b) of the Plan. Name Lump Sum Amount ---- --------------- Lionel Batty $57,916 Gerhard Hanson $20,244 EX-10 9 ucar_equalbenefitplan.txt EXHIBIT 10.21.0 Exhibit 10.21.0 UCAR CARBON EQUALIZATION BENEFIT PLAN (Amended and Restated as of March 31, 2003) 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 shall also apply to any participants in the Company's Selective Severance Program ("SSP") if such participant is otherwise entitled to a benefit under this 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 --------- Definitions ----------- 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) "Company" means UCAR Carbon Company Inc. (c) "Compensation Committee" means the Organization, Compensation and Pension Committee of the Board of Directors of GrafTech International Ltd. (d) "Enhanced Retirement Income Plan" means the UCAR Carbon Enhanced Retirement Income Plan, as amended from time to time. (e) "Equalization Retirement Income" means the benefit payable to a Participant pursuant to Article IV of this Plan. (f) "Participant" means an employee of the Company or any other Employer that has adopted the Retirement Plan for its employees, who is eligible to participate in the Plan pursuant to Article II. (g) "Plan" means this UCAR Carbon Equalization Benefit Plan, as amended and restated as of March 31, 2003, as amended from time to time. (h) "Retirement Plan" as used in this Plan means the UCAR Carbon Retirement Plan, as amended from time to time. (i) "Supplemental Retirement Income Plan" means the UCAR Carbon Supplemental Retirement Income Plan, as amended from time to time. 2 ARTICLE II ---------- 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. Section 2. An individual shall also be a Participant in this Plan if he or she is a participant in the SSP and is entitled to a benefit under this Plan pursuant to Section 1 above. Section 3. Effective March 31, 2003, no additional Participants shall be added to the Plan. ARTICLE III ----------- 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. 3 ARTICLE IV ---------- 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 IV, 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. 4 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. Section 5. Notwithstanding the foregoing, all benefits under the Plan shall be frozen as of March 31, 2003, no additional benefits shall accrue under the Plan after that date. Subject to Article VI, Section 6, the lump sum value of a Participant's benefits under the Plan shall be transferred to the UCAR Carbon Compensation Deferral Plan in accordance with Section (6)(c) of Article VI hereof. ARTICLE V --------- 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 VI ---------- Payments -------- Section 1. A Participant or such Participant's survivor shall become eligible to receive Equalization Retirement Income at such time as the Participant or survivor commences benefits under the Retirement Plan. The Participant's or survivor's benefits shall be paid as follows: (a) in or about January of the calendar year following such Participant's or survivor's eligibility to commence benefits, the Participant or survivor shall receive a lump sum 5 payment, representing the remaining amount of the Participant's or survivor's Equalization Retirement Income. (b) Notwithstanding the foregoing, subject to the consent of the Company, a Participant or survivor may elect during the calendar year in which the Participant or survivor becomes eligible to receive benefits to forgo the lump sum payment payable in the following year and may elect to commence receiving monthly payments instead. Section 2. Unless otherwise elected, Equalization Retirement Income payable in monthly payments 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. 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 3. The lump sum described above shall be calculated using (A) a discount rate for the month of October of the calendar year preceding the payment of the lump sum 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. Section 4. Notwithstanding anything in this Plan to the contrary, the Board of Directors may determine that a Participant or survivor shall not be eligible to receive a lump sum payment. Section 5. If the Board of Directors determines, after a hearing, that a Participant who is eligible to receive or is receiving Equalization 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 Company or any of its affiliates, such Equalization Retirement Income shall thereupon be terminated. 6 Section 6. (a) Notwithstanding the foregoing, except as provided in paragraphs (b) and (c) hereof, no further benefits shall be paid under this Article VI. (b) With respect to Participants receiving monthly payments pursuant to Section 1(a) of this Article VI hereof as of March 31, 2003, such monthly payments shall continue to be paid in accordance with the terms of this Plan. (c) With respect to all Participants other than those described in paragraph (b) above, the amount of such Participants' benefits under this Plan as of March 31, 2003, converted to a lump sum amount, shall be transferred to the UCAR Carbon Compensation Deferral Plan and paid in accordance with the terms of that Plan. The lump sum amounts described in the preceding sentence shall be determined by applying the provisions of Section 3 of Article VI hereof to a Participant's accrued benefit. The aggregate lump sum amount of each affected Participant's benefit under this Plan, the SRIP and the ERIP as of March 31, 2003, is set forth in Schedule A attached to the Compensation Deferral Plan. ARTICLE VII ----------- Miscellaneous ------------- Section 1. The Company 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 2. 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. 7 Section 3. 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 Company. Section 4. The Company 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 5. Neither selection as a Participant nor participation in this Plan shall affect the Company's right to discharge any Participant. ARTICLE VIII ------------- Selective Severance Program --------------------------- Section 1. This Article VIII shall apply to participants in the SSP. Section 2. The following terms shall have the designated meanings for purposes of this Article VIII: (i) "SP" or "Supplemental Pension" is the amount of a Participant's supplemental pension benefit under the SSP, and shall mean the amount determined as the sum of A, B and C, where: A = 1.8% of average monthly Compensation, B = .9% of average monthly Compensation if the Participant has five or more Years of Credited Service, and 0 if the Participant has fewer than five Years of Credited Service, and C = one-third of 1% of average monthly Compensation times the Participant's number of whole Years of Credited Service in excess of ten. Average monthly Compensation and Years of Credited Service for purposes of the foregoing formula shall have the same meanings as set forth in Section 5.8 of the Retirement Plan, determined without regard to the limitations of Code Section 401(a)(17). The benefit determined under the foregoing formula is defined to be a fifteen-year certain benefit. 8 (ii) "FSP" or "Former Severance Plan Benefit" shall mean the applicable benefit amount calculated under the Company's Selective Severance Program as in effect prior to January 1, 2001. (iii) "FSP" or "Qualified Supplemental Pension" shall mean the amount of a Participant's Supplemental Pension, if any, payable under the Retirement Plan after the limitations of Code Section 415 and Code Section 401(a)(17) have been applied. Section 3. The provisions of this Section 3 shall apply if the actuarial equivalent lump sum value of a Participant's QSP is greater than his or her FSP. (a) For Participants subject to this Section 3, the excess of the actuarial equivalent lump sum value of the Participant's QSP amount over his or her FSP amount is referred to as the "Benefit Reduction Amount" when expressed as an actuarial equivalent life annuity. (b) A Participant's Benefit Reduction Amount shall be used first to offset the amount of the Participant's benefit, if any, under the Enhanced Retirement Income Plan. If the Participant has no Enhanced Retirement Income Plan benefit or the Participant's Benefit Reduction Amount has reduced the Participant's Enhanced Retirement Income Plan benefit to zero, but there is still a remaining Benefit Reduction Amount, then the remaining Benefit Reduction Amount shall be used to offset the amount of the Participant's benefit, if any, under this Plan, except that the Participant's benefit under this Plan shall not be reduced to below 0. Section 4. The provisions of this Article VIII shall be effective only with respect to Participants who are offered participation in the SSP on or after January 15, 2003, and on or before May 31, 2001. UCAR CARBON COMPANY INC. By: -------------------------------- 9 EX-10 10 ucar_suppretireincomeplan.txt EXHIBIT 10.22.0 Exhibit 10.22.0 UCAR CARBON SUPPLEMENTAL RETIREMENT INCOME PLAN (Amended and Restated as of March 31, 2003) 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 shall also apply to any participants in the Company's Selective Severance Program ("SSP") if (1) the participant's SSP benefit payable under the Retirement Plan is limited by Code Section 415 or Code Section 401(a)(17), or (2) such participant is otherwise entitled to a benefit under this 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 --------- Definitions ----------- 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) "Company" means UCAR Carbon Company Inc. (c) "Compensation Committee" means the Organization, Compensation and Pension Committee of the Board of Directors of GrafTech International Ltd. (d) "Enhanced Retirement Income Plan" means the UCAR Carbon Enhanced Retirement Income Plan, as amended from time to time. (e) "Equalization Benefit Plan" means the UCAR Carbon Equalization Benefit Plan, as amended from time to time. (f) "Participant" means an employee of the Company or any other Employer that has adopted the Retirement Plan for its employees, who is eligible to participate in the Plan pursuant to Article II. (g) "Plan" means the UCAR Carbon Supplemental Retirement Income Plan, as amended and restated as of March 31, 2003, as amended from time to time. (h) "Retirement Plan" means the UCAR Carbon Retirement Plan, as amended from time to time. (i) "Supplemental Retirement Income" as used in this Plan means the benefit payable to a Participant pursuant to Article IV of this Plan. 2 ARTICLE II ---------- 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). Section 2. An individual shall also be a Participant in this Plan if he or she is a participant in the SSP and (a) and/or (b) apply: (a) the participant's SSP benefit payable under the Retirement Plan is limited by Code Section 415 or Code Section 401(a)(17); (b) the participant is entitled to a benefit under this Plan pursuant to Section 1 above. Section 3. Effective March 31, 2003, no additional Participants shall be added to the Plan. ARTICLE III ----------- 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 3 Compensation Committee, such person(s) or committee designated to administer this Plan shall have the same powers and responsibilities as the Compensation Committee. ARTICLE IV ---------- 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 IV, 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. 4 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. Section 5. Notwithstanding the foregoing, all benefits under the Plan shall be frozen as of March 31, 2003, no additional benefits shall accrue under the Plan after that date. Subject to Article VI, Section 6, the lump sum value of a Participant's benefits under the Plan shall be transferred to the UCAR Carbon Compensation Deferral Plan in accordance with Section 6(c) of Article VI hereof. ARTICLE V --------- 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 VI ---------- Payments -------- Section 1. A Participant or such Participant's survivor shall become eligible to receive Supplemental Retirement Income at such time as the Participant or survivor commences benefits under the Retirement Plan. The Participant's or survivor's benefits shall be paid as follows: 5 (a) in or about January of the calendar year following such Participant's or survivor's eligibility to commence benefits, the Participant or survivor shall receive a lump sum payment, representing the remaining amount of the Participant's or survivor's Supplemental Retirement Income. (b) Notwithstanding the foregoing, subject to the consent of the Company, a Participant or survivor may elect during the calendar year in which the Participant or survivor becomes eligible to receive benefits to forgo the lump sum payment payable in the following year and may elect to commence receiving monthly payments instead. Section 2. Unless otherwise elected, Supplemental Retirement Income payable in monthly payments 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. 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 3. The lump sum described above shall be calculated using (A) a discount rate for the month of October of the calendar year preceding the payment of the lump sum 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. Section 4. Notwithstanding anything in this Plan to the contrary, the Board of Directors may determine that a Participant or survivor shall not be eligible to receive a lump sum payment. 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 Company or any 6 of its affiliates, such Supplemental Retirement Income shall thereupon be terminated. Section 6. (a) Notwithstanding the foregoing, except as provided in paragraphs (b) and (c) hereof, no further benefits shall be paid under this Article VI. (b) With respect to Participants receiving monthly payments pursuant to Section 1(a) of this Article VI as of March 31, 2003, such monthly payments shall continue to be paid in accordance with the terms of this Plan. (c) With respect to all Participants other than those described in paragraph (b) above, the amount of such Participants' benefits under this Plan as of March 31, 2003, converted to a lump sum amount, shall be transferred to the UCAR Carbon Compensation Deferral Plan and paid in accordance with the terms of that Plan. The lump sum amounts described in the preceding sentence shall be determined by applying the provisions of Section 3 of Article VI hereof to a Participant's accrued benefits. The aggregate lump sum amount of each affected Participant's benefit under this Plan, the ERIP and the Equalization Plan as of March 31, 2003, is set forth in Schedule A attached to the Compensation Deferral Plan. ARTICLE VII ----------- Miscellaneous ------------- Section 1. The Company 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. 7 Section 2. 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 3. 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 Company. Section 4. The Company 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 5. Neither selection as a Participant nor participation in this Plan shall affect the Company's right to discharge any Participant. ARTICLE VIII ------------ Selective Severance Program --------------------------- Section 1. This Article VIII shall apply to participants in the SSP. Except as otherwise noted herein, the provisions of this Article VIII shall apply in lieu of the provisions of Articles IV, V and VI of this Plan. Section 2. The following terms shall have the designated meanings for purposes of this Article VIII: (i) "SP" or "Supplemental Pension" is the amount of a Participant's supplemental pension benefit under the SSP, and shall mean the amount determined as the sum of A, B and C, where: A= 1.8% of average monthly Compensation, B= .9% of average monthly Compensation if the Participant has five or more Years of Credited Service, and 0 if the Participant has fewer than five Years of Credited Service, and 8 C= one-third of 1% of average monthly Compensation times the Participant's number of whole Years of Credited Service in excess of ten. Average monthly Compensation and Years of Credited Service for purposes of the foregoing formula shall have the same meanings as set forth in Section 5.8 of the Retirement Plan, determined without regard to the limitations of Code Section 401(a)(17). The benefit determined under the foregoing formula is defined to be a fifteen-year certain benefit. (ii) "FSP" or "Former Severance Plan Benefit" shall mean the applicable benefit amount calculated under the Company's Selective Severance Program as in effect prior to January 1, 2001. (iii) "QSP" or "Qualified Supplemental Pension" shall mean the amount of a Participant's Supplemental Pension, if any, payable under the Retirement Plan after the limitations of Code Section 415 and Code Section 401(a)(17) have been applied. (iv) "NQSP" or "Non-qualified Supplemental Pension" shall mean the amount of a Participant's Supplemental Pension that cannot be paid under the Retirement Plan due to the limitations of Code Section 415 and Code Section 401(a)(17). A Participant's NQSP is determined under the following formula: SP - QSP =NQSP Section 3. A Participant shall be eligible for a Supplemental Pension under this Article VIII if he or she satisfies the requirements of (a) or (b) of this Section 3. The amount of a Participant's Supplemental Pension under this Plan is referred to as the "Additional Supplemental Pension," and shall be payable in accordance with Sections 4 through 7 of this Article VIII. (a) If a Participant's FSP is greater than the actuarial equivalent lump sum value of his or her SP, then an Additional Supplemental Pension equal to the NQSP shall be payable under this Plan. (b) If the actuarial equivalent lump sum value of a participant's SP is greater than or equal to his or her FSP, than the Additional Supplemental 9 Pension payable under this Plan expressed as an actuarial equivalent monthly life annuity, if any, shall be determined under the following formula: FSP - ACTUARIAL EQUIVALENT LUMP SUM VALUE OF QSP If the foregoing formula produces an amount equal to or less than 0, then no Additional Supplemental Pension is payable under this Plan. Section 4. The actuarial equivalent value of a Participant's Additional Supplemental Pension will be paid in one of the following forms as elected by the Participant subject to Section 5 hereof: (a) The normal form as otherwise provided for under the Retirement Plan, (except that a Participant may not elect the level income option under Section 5.6 of the Retirement Plan) ("Normal Form"), or (b) In monthly installments, as follows ("Immediate Payment Option"): Participant's Years of Credited Service (as defined in the Retirement Plan) Number of Installments --------------------------------------- ---------------------- Less than 5 2 months At least 5, but less than 10 3 months 10 or more 3 months plus three-eighths (3/8) of a month for each Year of Credited Service over 10 (which number shall be rounded down to the next whole number if a fractional number of months results from this formula) Section 5. (a) The Immediate Payment Option shall be paid out as soon as practicable following the Participant's termination of employment. In addition, a Participant's failure to elect the Immediate Payment Option upon termination of employment, shall be deemed to be an election to have the Additional Supplemental Pension paid in the Normal Form. 10 (b) A Participant may elect to commence payment of his or her Additional Supplemental Pension in the Normal Form at anytime on or after the first day of the first month following termination of employment. To the extent a Participant has not made an election to commence payment of his or her Additional Supplemental Pension, payment shall be made in the Normal Form at such time as the Participant becomes entitled to a full (unreduced) benefit under the Retirement Plan. Section 6. A Participant shall be immediately 100% vested in his or her Additional Supplemental Pension under this Plan. Section 7. If a Participant dies before all payments of the Additional Supplemental Pension payable under Section 4(b) above have been made, then the balance of the Additional Supplemental Pension shall continue to be paid to the Participant's Beneficiary (as defined in the Retirement Plan, except that if no Beneficiary is provided for, then to the Participant's estate), until all payments have been made. Section 8. The provisions of this Section 8 shall apply if the actuarial equivalent lump sum value of a Participant's QSP is greater than his or her FSP. (a) For Participants subject to this Section 8, the excess of the actuarial equivalent lump sum value of the Participant's QSP amount over his or her FSP amount is referred to as the "Benefit Reduction Amount" when expressed as an actuarial equivalent life annuity. (b) A Participant's Benefit Reduction Amount shall be used first to offset the amount of the Participant's benefit, if any, under the Enhanced Retirement Income Plan. If the Participant has no Enhanced Retirement Income Plan benefit or the Participant's Benefit Reduction Amount has reduced the Participant's Enhanced Retirement Income Plan benefit to zero, but there is still a remaining 11 Benefit Reduction Amount, then the remaining Benefit Reduction Amount shall be used to offset the amount of the Participant's benefit, if any, under the Equalization Benefit Plan. If the Participant has no Equalization Benefit Plan benefit or the Participant's remaining Benefit Reduction Amount has reduced the Participant's Equalization Benefit Plan benefit to zero, but there is still a remaining Benefit Reduction Amount, then the remaining Benefit Reduction Amount shall be used to offset the amount of the Participant's benefit, if any, under this Plan, except that the Participant's benefit under this Plan shall not be reduced to below 0. Section 9. The provisions of this Article VIII shall be effective only with respect to Participants who are offered participation in the SSP on and after January 15, 2003, and on or before May 31, 2001. UCAR CARBON COMPANY INC. By: ---------------------------- 12 EX-10 11 ucar_enhancedretireincplan.txt EXHIBIT 10.23.0 Exhibit 10.23.0 UCAR CARBON ENHANCED RETIREMENT INCOME PLAN (Amended and restated as of March 31, 2003) 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 successor 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 shall also apply to any participants in the Company's Selective Severance Program ("SSP") if such participant is otherwise entitled to a benefit under this 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 --------- Definitions ----------- 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 of the Company. (b) "Code" means the Internal Revenue Code of 1986, as amended. (c) "Company" means UCAR Carbon Company Inc. (d) "Compensation Committee" means the Organization, Compensation and Pension Committee of the Board of Directors of GrafTech International Ltd. (e) "Compensation Deferral Program" as used in this Plan means the UCAR Carbon Compensation Deferral Program. (f) "Enhanced Retirement Income" means the benefit payable to a Participant pursuant to Article IV of this Plan. (g) "Equalization Benefit Plan" means the UCAR Carbon Equalization Benefit Plan, as amended from time to time. 2 (h) "Participant" means an employee of the Company or any other Employer that has adopted the Retirement Plan for its employees, who is eligible to participate in this Plan pursuant to Article II. (i) "Plan" means this UCAR Carbon Enhanced Retirement Income Plan, as amended and restated March 31, 2003, as amended from time to time. (j) "Retirement Plan" means the UCAR Carbon Retirement Plan, as amended from time to time. (k) "Supplemental Retirement Income Plan" means the UCAR Carbon Supplemental Retirement Income Plan, as amended from time to time. ARTICLE II ---------- 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. Section 2. An individual shall also be a Participant in this Plan if he or she is a participant in the SSP and is entitled to a benefit under this Plan pursuant to Section 1 above. Section 3. Effective March 31, 2003, no additional Participants shall be added to the Plan. 3 ARTICLE III ----------- 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 IV ---------- 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 4 (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. 5 (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. (e) Notwithstanding the foregoing, the amount of a Participant's Enhanced Retirement Income shall include any additional non-qualified retirement benefits resulting from agreements entered into by the Company and the Participant. 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 IV, 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 IV, 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. 6 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. Section 6. Notwithstanding the foregoing, all benefits under the Plan shall be frozen as of March 31, 2003, no additional benefits shall accrue under the Plan after that date. Subject to Article VI, Section 6, the lump sum value of a Participant's benefits under the Plan shall be transferred to the UCAR Carbon Compensation Deferral Plan in accordance with Section 6(c) of Article VI hereof. ARTICLE V --------- 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 VI ---------- Payments -------- Section 1. A Participant or such Participant's survivor shall become eligible to receive Enhanced Retirement Income at such time as the Participant or survivor commences benefits under the Retirement Plan. The Participant's or survivor's benefit shall be paid as follows: (a) in or about January of the calendar year following such Participant's or survivor's eligibility to commence benefits, the Participant or survivor shall receive a lump sum payment, representing the remaining amount of the Participant's or survivor's Enhanced Retirement Income. 7 (b) Notwithstanding the foregoing, subject to the consent of the Company, a Participant or survivor may elect during the calendar year in which the Participant or survivor becomes eligible to receive benefits to forgo the lump sum payment payable in the following year and may elect to commence receiving monthly payments instead. Section 2. Unless otherwise elected, Enhanced Retirement Income payable in monthly payments 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. 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 3. The lump sum described above shall be calculated using (A) a discount rate for the month of October of the calendar year preceding the payment of the lump sum 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. Section 4. Notwithstanding anything in this Plan to the contrary, the Board of Directors may determine that a Participant or survivor shall not be eligible to receive a lump sum payment. 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 Company or any of its affiliates, such Enhanced Retirement Income shall thereupon be terminated. Section 6. (a) Notwithstanding the foregoing, except as provided in paragraphs (b) and (c) hereof, no further benefits shall be paid under this Article VI. 8 (b) With respect to Participants receiving monthly payments pursuant to Section 1(a) of this Article VI as of March 31, 2003, such monthly payments shall continue to be paid in accordance with the terms of this Plan. (c) With respect to all Participants other than those described in paragraph (b) above, the amount of such Participants' benefits under this Plan as of March 31, 2003, converted to a lump sum amount, shall be transferred to the UCAR Carbon Compensation Deferral Plan and paid in accordance with the terms of that Plan. The lump sum amounts described in the preceding sentence shall be determined by applying the provisions of Section 3 of Article VI hereof to a Participant's accrued benefit. The aggregate lump sum amount of each affected Participant's benefit under this Plan, the SRIP and the Equalization Plan as of March 31, 2003, is set forth in Schedule A attached to the Compensation Deferral Plan. ARTICLE VII ----------- Miscellaneous ------------- Section 1. The Company 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 2. 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 3. 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 9 a Participant and a survivor of a Participant shall be no greater than the right of an unsecured general creditor of the Company. Section 4. The Company 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 5. Neither selection as a Participant or participation in this Plan shall affect the Company's right to discharge any Participant. ARTICLE VIII ------------ Selective Severance Program --------------------------- Section 1. This Article VIII shall apply to participants in the SSP. Section 2. The following terms shall have the designated meanings for purposes of this Article VIII: (i) "SP" or "Supplemental Pension" is the amount of a Participant's supplemental pension benefit under the SSP, and shall mean the amount determined as the sum of A, B and C, where: A = 1.8% of average monthly Compensation, B = .9% of average monthly Compensation if the Participant has five or more Years of Credited Service, and 0 if the Participant has fewer than five Years of Credited Service, and C = one-third of 1% of average monthly Compensation times the Participant's number of whole Years of Credited Service in excess of ten. Average monthly Compensation and Years of Credited Service for purposes of the foregoing formula shall have the same meanings as set forth in Section 5.8 of the Retirement Plan determined without regard to the limitations of Code Section 401(a)(17). The benefit determined under the foregoing formula is defined to be a fifteen-year certain benefit. (ii) "FSP" or "Former Severance Plan Benefit" shall mean the applicable benefit amount calculated under the Company's Selective Severance Program as in effect prior to January 1, 2001. 10 (iii) "QSP" or "Qualified Supplemental Pension" shall mean the amount of a Participant's Supplemental Pension, if any, payable under the Retirement Plan after the limitations of Code Section 415 and Code Section 401(a)(17) have been applied. Section 3. The provisions of this Section 3 shall apply if the actuarial equivalent lump sum value of a Participant's QSP is greater than his or her FSP. (a) For Participants subject to this Section 3, the excess of the actuarial equivalent lump sum value of the Participant's QSP amount over his or her FSP amount is referred to as the "Benefit Reduction Amount" when expressed as an actuarial equivalent life annuity. (b) A Participant's Benefit Reduction Amount shall offset the amount of the Participant's benefit, if any, under this Plan, except that the Participant's benefit under this Plan shall not be reduced to below 0. Section 4. The provisions of this Article VIII shall be effective only with respect to Participants who are offered participation in the SSP on or after January 15, 2003, and on or before May 31, 2001. UCAR CARBON COMPANY INC. By: ------------------------------ EX-10 12 ucar_benefitsprottrust.txt EXHIBIT 10.24.0 Exhibit 10.24.0 UCAR CARBON BENEFITS PROTECTION TRUST UCAR CARBON BENEFITS PROTECTION TRUST This AMENDED AND RESTATED AGREEMENT, effective as of the first day of August, 2003, by and between UCAR Carbon Company Inc., a Delaware corporation ("Company"), and Vanguard Fiduciary Trust Company, a trust company incorporated under Chapter 10 of the Pennsylvania Banking Code ("Trustee"). W I T N E S S E T H: ------------------- WHEREAS, Company has adopted the plans, programs and severance compensation agreements listed on Schedule 1 (hereinafter referred to as defined in Schedule 1 or collectively as the "Plans") and may adopt or enter into other such plans, programs and agreements as will be listed from time to time on Schedule 1 and may, from time to time, amend, modify or terminate any such Plan in accordance with its terms; and WHEREAS, Company has previously established the UCAR Carbon Benefits Protection Trust and the UCAR Carbon Compensation Deferral Program Trust in order to ensure that its employees and their beneficiaries will receive the benefits which Company is obligated to provide for them or which they reasonably anticipate receiving pursuant to the Plans; and WHEREAS, these trusts are intended to be "grantor trusts" with the corpus and income of the trusts treated as assets and income of Company for federal income tax purposes pursuant to Sections 671 through 678 of the Internal Revenue Code of 1986 (the "Code"), as amended; and WHEREAS, Company intends that the assets of the trusts will be subject to the claims of creditors of Company as provided in Section 4; and WHEREAS, Company intends that the existence of the trusts will not alter the characterization of the Plans as "unfunded" and will not be construed to provide taxable income to any participant under the Plans or the Agreements prior to actual payment of benefits thereunder; and WHEREAS, Company wishes the amend and restate the trusts into a single UCAR Carbon Benefits Protection Trust Agreement (hereinafter referred to as the "Trust"); and WHEREAS, Company wishes to name Vanguard Fiduciary Trust Company as Trustee of the Trust; and WHEREAS, Trustee is not a party to the Plans and makes no representations with respect thereto, and all representations and recitals with respect to the Plans shall be deemed to be those of Company; NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: 1 SECTION 1. Definitions. ----------- (a) "Accounts" shall mean, collectively, the Non-Qualified Plans Account, the Compensation Deferral Account, the Defined Contribution Account, the Severance Agreements Account, the TCN Account, the Benefits Protection Account and such other Account(s) as may subsequently be established under Section 2. (b) "Administrative Committee" shall mean the Administrative Committee of the Benefits Protection Trust empowered to administer the Trust after a Change in Control, as described in Section 15. (c) "Authorized Person" shall mean an employee of Company or member of the Non-Qualified Plans Committee or the Administrative Committee who is authorized to execute and deliver, in the and on behalf of Company, the Non-Qualified Plans Committee or the Administrative Committee, documents or instructions relating to the Trust. (d) "Beneficiary" shall mean the beneficiary designated by a Participant under one or more of the Plans. (e) A "Change in Control" shall be deemed to occur if any of the following circumstances shall occur: (a) any "person" or "group" within the meaning of Section 13(d) or 14(d)(2) of the Exchange Act becomes the beneficial owner of 15% or more of the then outstanding Common Stock or 15% or more of the then outstanding voting securities of the Corporation; (b) any "person" or "group" within the meaning of Section 13(d) or 14(d)(2) of the Exchange Act acquires by proxy or otherwise the right to vote on any matter or question with respect to 15% or more of the then outstanding Common Stock or 15% or more of the combined voting power of the then outstanding voting securities of the Corporation; (c) Present Directors and New Directors cease for any reason to constitute a majority of the Board of Trustees of the Corporation (and, for purposes of this clause (c), "Present Directors" shall mean individuals who at the beginning of any consecutive twenty-four month period were members of the Board and "New Directors" shall mean individuals whose election by the Board or whose nomination for election as directors by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then in office who were Present Directors or New Directors); (d) the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation; or 2 (e) consummation of: (i) a reorganization, restructuring, recapitalization, reincorporation, merger or consolidation of the Corporation (a "Business Combination") unless, following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock and the voting securities of the Corporation outstanding immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the common equity securities and the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination (including, without limitation, a corporation or other entity which as a result of such Business Combination owns the Corporation or all or substantially all of the assets of the Corporation or Company either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of outstanding Common Stock and the combined voting power of the outstanding voting securities of the Corporation, respectively, (b) no "person" or "group" within the meaning of Section 13(d) or 14(d)(2) of the Exchange Act (excluding (1) any corporation or other entity resulting from such Business Combination and (2) any employee benefit plan (or related trust) of Company or any corporation or other entity resulting from such Business Combination) beneficially owns 15% or more of the common equity securities or 15% or more of the combined voting power of the voting securities of the corporation or other entity resulting from such Business Combination outstanding after such Business Combination, except to the extent that such beneficial ownership existed prior to such Business Combination with respect to the Common Stock and the voting securities of the Corporation, and (c) at least a majority of the members of the board of directors (or similar governing body) of the corporation or other entity resulting from such Business Combination were members of the Board of Trustees of the Corporation at the time of the execution of the initial agreement providing for such Business Combination or at the time of the action of the Board approving such Business Combination, whichever is earlier; or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation or Company, whether held directly or indirectly through one or more subsidiaries (excluding any pledge, mortgage, grant of security interest, sale-leaseback or similar transaction, but including any foreclosure sale), provided, that, for purposes of clauses (e)(i) and (e)(ii) above, the divestiture of less than substantially all of the assets of the Corporation or Company in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spin-off, sale of stock of or merger or consolidation of a subsidiary, transfer or otherwise, shall not constitute a Change in Control. 3 Notwithstanding the foregoing, a Change in Control of the Corporation shall not be deemed to occur pursuant to clause (a) or (b) above, solely because 15% or more of the then outstanding Common Stock or the then outstanding voting securities of the Corporation is or becomes beneficially owned or is directly or indirectly held or acquired by one or more employee benefit plans (or related trusts) maintained by Company. For purposes of this Agreement, references to "beneficial owner" and correlative phrases shall have the same definition as set forth in Rule 13d-3 under the Exchange Act (except that ownership by underwriters for purposes of a distribution or offering shall not be deemed to be "beneficial ownership"), references to the Act or rules and regulations thereunder shall mean those in effect on May 9, 2000 and references to "Common Stock" shall mean the common stock of the Corporation. (f) "Contract" shall mean a participating or nonparticipating insurance and/or annuity contract as described in Section 8. (g) "Investment Director" shall mean the person or entity chosen by Company or the Chief Financial Officer of Company prior to a Change in Control, or chosen by the Administrative Committee after a Change in Control, to direct the investment of certain assets in the Trust. (h) "Investment Manager" shall mean an institution chosen by Company or the Chief Financial Officer of Company prior to a Change in Control, or chosen by the Administrative Committee after a Change in Control, to serve as Investment Director. (i) "Compensation Deferral Program" shall mean the UCAR Carbon Compensation Deferral Program. (j) "Corporation" shall mean Graftech International Ltd. (k) "Defined Contribution Plan Amount" shall mean the amount of the make-up contributions and excess matching contributions made by Company to the Trust which are attributable to the excess contributions which, if not for Code limitations, would be made under UCAR Carbon Savings Plan, and which shall be paid under the Compensation Deferral Program. (l) "Insolvent" or "Insolvency" shall mean either: (i) Company is unable to pay its debts as they become due, or (ii) Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. 4 (m) "Non-Qualified Plans Amount" shall mean the lump sum amounts which are attributable to the prior non-qualified plans sponsored by Company and which will be paid under the Compensation Deferral Program. (n) "Non-Qualified Plans Committee" shall mean the Non-Qualified Plans Administrative Committee empowered to administer certain provisions of the Trust prior to a Change in Control, as described in the Benefits Protection Trust. (o) "Participant" shall mean a participant in one or more of the Plans. (p) "Plans" shall mean those plans, programs and agreements listed on Schedule 1 attached hereto or as hereafter added to Schedule 1. (q) "Severance Agreements" shall mean the Severance Compensation Agreements between certain individuals and Company, as in effect from time to time. (r) "TCN Plan" shall mean the UCAR TCN Pension Plan, as it may be amended from time to time. SECTION 2. Establishment of Trust. ---------------------- (a) Company hereby establishes with Trustee and Trustee hereby accepts a trust consisting of the following property (subject to the rights of Company to withdraw such property pursuant to Paragraph (e) of this Section 2): (1) such cash or other property acceptable to Trustee as shall be paid or delivered to Trustee from time to time as contributions with respect to Company's obligations attributable to the Non-Qualified Plans Amount, together with the earnings, income, additions and appreciation thereon and thereto (all of which is hereinafter called the "Non-Qualified Plan Account"); (2) such cash or other property acceptable to Trustee as shall be paid or delivered to Trustee from time to time as contributions with respect to Company's obligations under the Compensation Deferral Program, together with the earnings, income, additions and appreciation thereon and thereto (all of which is hereinafter called the "Compensation Deferral Account"); (3) such cash or other property acceptable to Trustee as shall be paid or delivered to Trustee from time to time as contributions with respect to Company's obligations attributable to the Defined Contribution Plan Amount, together with the earnings, income, additions and 5 appreciation thereon and thereto (all of which is hereinafter called the "Defined Contribution Account"); (4) such cash or other property acceptable to Trustee as shall be paid or delivered to Trustee from time to time to be used to satisfy future liabilities of Company with regard to Severance Compensation Agreements between certain individuals and Company, together with the earnings, income, additions and appreciation thereon and thereto (all of which is hereinafter called the "Severance Account"); and (5) such cash or other property acceptable to Trustee as shall be paid or delivered to Trustee from time to time to be used to satisfy future liabilities of Company with regard to the TCN Plan, together with the earnings, income, additions and appreciation thereon and thereto (all of which is hereinafter called the "TCN Plan Account"); and (6) such cash or other property acceptable to Trustee in the amount of two hundred fifty thousand dollars ($250,000), together with the earnings thereon, and realized and unrealized gains (net of any losses) attributable thereto (all of which is hereinafter called the "Benefits Protection Account"). Neither the cash nor any other property held in the Benefits Protection Account shall be available for payment of benefits to Participants and Beneficiaries under the Plans. (b) Trustee or the Investment Director, if applicable, for investment purposes only, may commingle all Trust assets and treat them as a single fund, but the records of Trustee or the Investment Director, if applicable, at all times shall show the amounts of the Trust allocable to the Non-Qualified Plans Account, the Defined Contribution Account, the Compensation Deferral Account, the Severance Account, the TCN Plan Account, the Benefits Protection Account and such other account(s) as may subsequently be established under this Trust. (c) The assets of the Accounts shall be used to discharge the obligations of Company as follows: (1) the assets of the Non-Qualified Plans Account, the Defined Contribution Plan Account and the Compensation Deferral Program Account shall be used to discharge the obligations of the Compensation Deferral Program; (2) the assets of the Severance Account shall be used to discharge the severance obligations of Company under the Severance Agreements; (3) the assets of the TCN Plan Account shall be used to discharge the obligations of Company under the TCN Plan; (4) the assets of the Benefits Protection Account may be used as set forth in Paragraph (c) of Section 8, and Section 15; 6 (5) after a Change of Control occurs, the assets of each Account, upon the termination or expiration of the plan, program or agreements for which such Account was established, and the satisfaction of all liabilities with regard to such terminated or expired plan, program or agreements, shall be distributed among such remaining Account(s) that the Administrative Committee determines in its sole discretion. (d) Prior to a Change in Control, the Trust hereby established is revocable by the Company. (e) Company may add funds to the Trust at any time and shall designate the Account to which such funds shall be credited. Any such additional funds shall also be available to pay the fees and expenses of Trustee and/or the Non-Qualified Plans Committee or the Administrative Committee if the amounts transferred pursuant to the Benefits Protection Account are exhausted. Prior to a Change in Control, the Company may make such withdrawals from the Trust as it shall determine. (f) The Trust is intended to be a grantor trust, of which Company is the grantor, within the meaning of Sections 671 through 678 if the Code, and shall be construed accordingly. (g) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Participants and general creditors as herein set forth. Participants and their Beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plans and this Trust shall be mere unsecured contractual rights of Participants and their Beneficiaries against Company. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency. (h) Company, in its sole discretion, may at any time, or from time to time, make additional deposits of cash, securities (including the Corporation's stock) or other property in trust with Trustee to augment the principal to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Neither Trustee nor any Participant or Beneficiary shall have any right to compel such additional deposits. (i) Upon a Change of Control, Company shall, as soon as possible, but in no event longer than five (5) days following the Change of Control make an irrevocable contribution to the Trust in an amount that is sufficient to pay each Participant or Beneficiary the benefits to which Participants or Beneficiaries would be entitled pursuant to the terms of the Plans as of the date on which the Change of Control occurred. SECTION 3. Payments to Participants and Their Beneficiaries. ------------------------------------------------ (a) Subject to Paragraph (f) of Section 2 hereof, Paragraph (b) of this Section 3 and Paragraph (b) of Section 16 hereof, Trustee, from time to time upon receipt of direction from the Non-Qualified Plans Committee prior to a Change in Control, and from the Administrative Committee after a Change in Control, shall make payments from the Trust, as specified in such direction to 7 such persons, in such manner and in such amounts as the Non-Qualified Plans Committee or the Administrative Committee, as the case may be, shall direct, and amounts paid pursuant to such direction thereafter no longer shall constitute a part of the Trust. (b) Company may, from time to time prior to a Change in Control, furnish Trustee with certain information regarding the Participants and Beneficiaries under the Plans and the determination of the benefits under the Plans (hereinafter referred to as "Participants Data"). Trustee shall be entitled to rely on the accuracy of the Participant Data provided by Company prior to a Change in Control, and shall have no duty to verify the accuracy thereof. Company shall, after a Change in Control, furnish the Administrative Committee and Trustee with Participant Data at least once each Plan Year. Such Participant Data shall include (1) names, addresses, dates of birth, and social security numbers of each Participant and Beneficiary in the Plans; (2) the amount and form of benefits under each of the Plans of each Participant and Beneficiary if such Participant would retire or die as of either the last day of such Plan Year or the last day of the Plan Year in which such Participant attained age 62; (3) earnings history, compensation (cash and deferred) and bonus history of each Participant; (4) amounts payable from the UCAR Carbon Retirement Plan on behalf of each Participant; (5) a schedule of the estimated yearly cash payments under the Plans; and (6) any other information regarding the Plan which the Administrative Committee may reasonably request or which the Administrative Committee may deem necessary to administer this Trust. Following a Change in Control and notwithstanding any other provisions of this Agreement, Trustee shall, without direction from Company, to the extent funds are available in the Trust for such purpose, make payments to Participants and Beneficiaries in such manner and in such amounts as the Administrative Committee shall determine they are entitled to be paid under the Plans based on the most recent Participant Data furnished to the Administrative Committee by Company and any supplemental information furnished to the Administrative Committee by a Participant or Beneficiary upon which the Administrative Committee may reasonably rely in making such determination. The Administrative Committee may make such reasonable inquiry of Company as is necessary to determine whether any amounts that would otherwise be payable under this Agreement have previously been paid by Company, and may reasonably rely on any information provided by Company with regard to such payment. A determination by the Administrative Committee with regard to a Participant's entitlement to payments under the terms of this Agreement shall be binding as to all Participants and Company. (c) In the event it shall be determined prior to a Change in Control that the Participants and/or Beneficiaries of the Plans are subject to any tax under the terms of the Trust created hereunder, then Trustee, upon receipt of direction from Company, shall make payments from the Trust to such persons, in such manner and in such amounts as Company shall direct, for purposes of (1) paying the amount of Federal and state tax and interest and any penalties thereon which such Participants and/or Beneficiaries may incur arising out of such determination or (2) distributing the interests of Participants and Beneficiaries in the Trust. In the event such a determination is made after a Change in Control occurs, then each Participant or Beneficiary who is subject to such tax, may notify the Administrative Committee, in writing, to direct Trustee to make payments from the Trust for either of the purposes set forth in section (1) or (2) of the preceding sentence. Trustee shall not make the payments for 8 the purposes set forth in the first sentence of this Paragraph (c) without such written direction and Trustee may request such documentation as it reasonably deems necessary to evidence the amount of such payments. (d) Payments to Participants and Beneficiaries pursuant to Paragraphs (b) and (c) of this Section 3 shall be made by Trustee to the extent that Trust funds for such purposes are sufficient to allow such payments. Subject to Paragraph (d) of Section 2, in any month in which the Administrative Committee directs Trustee to make payments from the Trust and the Administrative Committee determines that a particular Account in the Trust does not have sufficient funds to provide for the payment of all amounts otherwise payable to Participants and Beneficiaries in such month under a particular Plan, the amount otherwise payable to each such Participant or Beneficiary under such Plan during such month shall be multiplied by a fraction, the numerator of which is the amount of funds then available for the payment of benefits under such Plan and the denominator of which is the total of the benefits payable prior to such reduction during such month to all Participants and Beneficiaries under such Plan. (e) After a Change in Control occurs, Company shall make such contributions to the Trust created hereunder as shall be necessary to ensure the assets of the Trust shall at all times be sufficient to discharge Company's obligations under the Plans. SECTION 4. Trustee Responsibility Regarding Payments to Trust Beneficiary When Company is Insolvent. -------------------------------------------------------------- (a) Trustee shall cease payment of benefits to Participants and Beneficiaries if Company is Insolvent. (b) At all times during the continuance of this Trust, as provided in Section 2(h) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Company under federal and state law as set forth below. (1) The Board of Directors and the Chief Executive Officer of Company shall have the duty to inform Trustee in writing of Company's Insolvency. If a person claiming to be a creditor of Company alleges in writing to Trustee that Company has become Insolvent, Trustee shall determine whether Company is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to Participants or Beneficiaries. (2) Unless Trustee has actual knowledge of Company's Insolvency, or has received notice from Company or a person claiming to be a creditor alleging that Company is Insolvent, Trustee shall have no duty to inquire whether Company is Insolvent. Trustee may in all events rely on such evidence concerning Company's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Company's solvency. (3) If at any time Trustee has determined that Company is Insolvent, Trustee shall discontinue payments to Participants or Beneficiaries and shall hold the assets of the Trust for the benefit of Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Participants or Beneficiaries to pursue their rights as general creditors of Company with respect to benefits due under the Plan or otherwise. 9 (4) Trustee shall resume the payment of benefits to Participants or Beneficiaries in accordance with Section 4 of this Trust Agreement only after Trustee has determined that Company is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to subsection (b)(3) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Participants or Beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to Participants or Beneficiaries by Company in lieu of the payments provided for hereunder during any such period of discontinuance. SECTION 5. Payments to Company. ------------------- Except as provided herein, Company shall have no right or power to direct Trustee to return to Company or to divert to others any of the Trust assets before all payments of benefits have been made to Participants and Beneficiaries pursuant to the terms of the Plan. SECTION 6. Investment Authority. -------------------- (a) Subject to Paragraph (b) of this Section 6, Company, prior to a Change in Control, shall have exclusive authority and discretion to manage and control the Trust assets, and pursuant to such authority and discretion, may direct Trustee, to the extent permitted by law, to exercise, from time to time and at any time, the power: (1) To invest and reinvest the assets of the Trust, without distinction between principal and income, in shares of stock (whether common or preferred) or other evidences of ownership, bonds, debentures, notes or other evidences of indebtedness, unsecured or secured by mortgages on real or personal property wherever situated (including any part interest in a bond and mortgage or note and mortgage whether insured or uninsured) and other property, or part interest in property, real or personal, foreign or domestic, whether or not productive of income or consisting of wasting assets, and in order to reduce the rate of interest rate fluctuations, contracts, as either buyer or seller, for the future delivery of United States Treasury securities and comparable Federal-Government-backed securities; provided, however, that Trustee, upon specific directions in writing from Company, shall invest and reinvest some or all of the assets of the Trust in qualifying securities issued by Company or by an affiliate of Company, unless Trustee shall deem such directed investment or reinvestment to be inconsistent with the provisions of Paragraph (a) of Section 11 and that Trustee may retain any such securities acquired for the Trust at the direction of Company until Company directs Trustee to dispose of them; but no direction of Company to sell any securities issued by Company or by an affiliate of Company shall be binding if it would require Trustee to violate any law respecting the public distribution of securities, and, in any event, without limiting the generality of the provisions of Section 18, Company agrees, to the extent permitted by law, to indemnify Trustee and hold it harmless from and against any claim or liability that may be asserted against it, otherwise than on account of Trustee's breach of its own duties, by reason of Trustee's 10 investing in, or reinvesting in or selling such securities in accordance with any direction from Company or by reason of Trustee's failure to sell any such securities in the absence of any direction from Company to sell them; (2) To exercise, personally or by general or limited proxy, the right to vote any shares of stock, bonds or other securities held in the Trust; to delegate discretionary voting power to trustees of a voting trust for any period of time; and to exercise, personally or by power of attorney, any other right appurtenant to any securities or other property of the Trust in accordance with directions provided to the Trustee by the Company; (3) To join in or oppose any reorganization, recapitalization, consolidation, merger or liquidation, or any plan therefor, or any lease, mortgage or sale of the property of any organization the securities of which are held in the Trust; to pay from the Trust any assessments, charges or compensation specified in any plan of reorganization, recapitalization, consolidation, merger or liquidation; to deposit any property with any committee or depositary; and to retain any property allotted to the Trust in any reorganization, recapitalization, consolidation, merger or liquidation; (4) To exercise or sell any conversion or subscription or other rights appurtenant to any stock, security or other property held in the Trust; (5) To borrow from any lender money, in any amount and upon any reasonable terms and conditions, for purposes of this Agreement, and to pledge or mortgage any property held in the Trust to secure the repayment of any such loan; (6) To compromise, settle or arbitrate any claim, debt, or obligation of or against the Trust; to enforce or abstain from enforcing any right, claim, debt or obligation; and to abandon any property determined by the Company to be worthless; (7) To invest and reinvest any property in the Trust in any other form or type of investment not specifically mentioned in this Paragraph (b) of Section 4, so long as such form or type of investment is a form or type of investment approved by the Chief Financial Officer of Company, or such other person designated by Company, for the investment of assets of the Trust; (8) To collect and receive any and all money and other property due the Trust and give full discharge therefor; (9) To deposit cash into interest bearing accounts in the banking department of Trustee or an affiliated banking organization; (10) To commence or defend suits or legal proceedings to protect any interest of the Trust, and may represent the Trust in all suits or legal proceedings in any court or before any other body or tribunal; (11) To take all action necessary to pay for authorized transactions, including borrowing or raising monies from any lender, to settle security purchases and/or foreign exchange or contracts for foreign exchange, and securing the repayments thereof by pledging all or any part of the Account; 11 (12) To appoint custodians or subcustodians, domestic or foreign (including affiliates of Trustee), as to part or all of the Trust. Trustee shall not be responsible or liable for any losses or damages suffered by Company arising as a result of the insolvency of any custodian or subcustodian appointed by the Company or those appointed by the Trustee, except to the extent Trustee was negligent in its selection or continued retention of such agent; (13) To hold property in nominee name, in bearer form, or in book entry form, in a clearinghouse corporation or in a depository (including an affiliate of Trustee), so long as Trustee's records clearly indicate that the assets held are a part of the Trust. Trustee shall not be responsible for any losses resulting from the deposit or maintenance of securities or other property (in accordance with market practice, custom, or regulation) with any recognized foreign or domestic clearing facility, book-entry system, centralized custodial depository, or similar organization; and (14) To generally do all acts, whether or not expressly authorized, which Trustee may deem necessary or desirable for the protection of the Trust. (b) (1) (A) Prior to a Change in Control, the Chief Financial Officer of Company, or such other person designated by Company, at any time and from time to time may direct Trustee to segregate one or more specified portions of the Trust into a separate investment account or accounts (each hereinafter called a "Segregated Investment Account"), and may appoint and designate an Investment Director to direct Trustee in the management of the assets of each such Segregated Investment Account (hereinafter called "that Investment Director's Segregated Investment Account"). (B) Any Investment Director appointed by the Chief Financial Officer of Company may be an employee of Company or a subsidiary or affiliate of Company, or an Investment Manager who is not an employee, subsidiary or affiliate of Company. Any Investment Manager so appointed must be either (i) an investment adviser registered as such under the Investment Advisers Act; or (ii) a bank, as defined in that Act; or (iii) an insurance company qualified to perform services in the management, acquisition or disposition of the assets of the Trust under the laws of more than one State. Trustee until notified in writing to the contrary shall be fully protected in relying upon any written notice of the appointment of an Investment Director furnished to it by Company. In the event of any vacancy in the office of Investment Director, Company shall be deemed to be the Investment Director of that Investment Director's Segregated Investment Account until an Investment Director shall have been duly appointed to direct Trustee in the management of the assets of that Investment Director's Segregated Investment Account; and in such event until an Investment Director shall have been so appointed and qualified, references herein to Company's acting in respect of that Investment Director's Segregated Investment Account pursuant to direction from the Investment Director shall be deemed to authorize Company to direct Trustee on the investment or the assets of that Investment Director's Segregated Investment Account, and subparagraphs (4) and (5) of this Paragraph (b) shall have no effect and shall be disregarded. (2) Any Investment Director appointed pursuant to Paragraph (b) (1) of this Section 6 shall have exclusive authority and discretion to manage and control the assets of that Investment Director's Segregated Investment Account, 12 and pursuant to such authority and discretion may direct Trustee from time to time and at any time: (A) To invest and reinvest that Investment Director's Segregated Investment Account, without distinction between principal and income, in shares of stock (whether common or preferred) or other evidences of ownership, bonds, debentures, notes or other evidences of indebtedness, unsecured or secured by mortgages on real or personal property wherever situated (including any part interest in a bond and mortgage or note and mortgage whether insured or uninsured) and other property, or part interest in property, real or personal, foreign or domestic, whether or not productive of income or consisting of wasting assets, and in order to reduce the risk of interest rate fluctuations, contracts, as either buyer or seller, for the future delivery of United States Treasury securities and comparable Federal Government-backed securities; provided, however, that Trustee, upon specific directions in writing from that Investment Director, shall invest and reinvest some or all of the assets of that Investment Director's Segregated Investment Account in qualifying securities issued by Company or by an affiliate of Company, unless Trustee shall deem such directed investment or reinvestment to be inconsistent with the provisions of Paragraph (a) of Section 11 and that Trustee may retain any such securities acquired for that Investment Director's Segregated Investment Account at the direction of that Investment Director until that Investment Director directs Trustee to dispose of them; but no direction of any Investment Director to sell any securities issued by Company or by an affiliate of Company shall be binding if it would require Trustee to violate any law respecting the public distribution of securities, and, in any event, without limiting the generality of the provisions of Section 18, Company agrees, to the extent permitted by law, to indemnify Trustee and hold it harmless from and against any claim or liability that may be asserted against it, otherwise than on account of Trustee's breach of his own duties, by reason of Trustee's investing in, or reinvesting in or selling such securities in accordance with any direction from any Investment Director or by reason of Trustee's failure to sell any such securities in the absence of any direction from that Investment Director to sell them; and (B) To perform acts similar to those authorized to Trustee in subparagraphs (2) through (10) of Paragraph (a) of this Section 6. (3) In addition, each Investment Director may direct the Trustee to invest and reinvest funds of that Investment Director's Segregated Investment Account in debt securities (including obligations of the Government of the United States) payable on demand or having maturities not exceeding one year or in interests in any trust fund that has been or shall be created and maintained by Trustee as trustee for the collective short-term investment of funds, the instrument creating such trust fund, together with any amendments, modifications or supplements thereof, being hereby effective when and as such investments are made, incorporated in and made a part of this Agreement as fully and to all intents and purposes as if set forth herein at length. 13 (4) Trustee shall exercise in respect of each Investment Director's Segregated Investment Account the powers set forth in Paragraph (b) (2) of this Section 6 only when and to the extent directed in writing by that Investment Director. Each Investment Director, from time to time and at any time, may issue orders for the purchase or sale of securities directly to a broker or dealer, and for such purpose Trustee will upon request execute and deliver to that Investment Director one or more trading authorizations. Written notification of the issuance of each such order shall be given promptly to Trustee by that Investment Director, and the execution of each such order shall be confirmed by the broker to that Investment Director and to Trustee. Such notification shall be authority to Trustee to receive securities purchased against payment therefor and to deliver securities sold against receipt of the proceeds therefrom, as the case may be. (5) Unless Trustee participates knowingly in, or knowingly undertakes to conceal, an act or omission of any Investment Director, knowing such act or omission to be a breach of the fiduciary responsibility of that Investment Director with respect to the Trust, or enables such a breach to occur through Trustee's failure to comply with Trustee's own duties, Trustee shall not be liable for any act or omission of any Investment Director, and shall not be under any obligation to invest or otherwise manage the assets of the Trust which are subject to the management of any Investment Director. Without limiting the generality of the foregoing, Trustee shall not be liable by reason of its taking or refraining from taking at the direction of any Investment Director any action in respect of that Investment Director's Segregated Investment Account, pursuant to this Paragraph (b), or pursuant to a notification of an order to purchase or sell securities by the Administrative Committee or for the account of any Investment Director's Segregated Investment Account issued by that Investment Director nor shall Trustee be liable by reason of its refraining from taking any action with respect to any Investment Director's Segregated Investment Account because of the failure of such Investment Director to give such direction or order; Trustee shall be under no duty to question or to make inquiries as to any direction or order or failure to give direction or order by any Investment Director; and Trustee shall be under no duty to make any review of investments acquired for any Investment Manager's Segregated Investment Account at the direction or order of that Investment Manager and shall be under no duty at any time to make any recommendation with respect to disposing of or continuing to retain any such investment. (7) Without limiting the generality of the provisions of Section 18, Company agrees, to the extent permitted by law, to indemnify Trustee and hold it harmless from and against any claim or liability that may be asserted against it, otherwise than on account of Trustee's breach of his own duties, by reason of Trustee's taking or refraining from taking any action in accordance with this Paragraph (b), including, without limiting the generality of the foregoing, any claim or liability that may be asserted against Trustee on account of failure to receive securities purchased, or failure to deliver securities sold, pursuant to orders issued by an Investment Director directly to a broker or dealer. (c) After a Change in Control occurs and subject to Section 7 hereof, the Administrative Committee shall have the exclusive authority and discretion to manage and control the Trust assets, and may appoint an Investment Director or an Investment Manager including an affiliate of Company or Trustee to manage the investment of the Trust assets. Pursuant to such authority and discretion, the Administrative Committee, or any investment manager appointed pursuant to this 14 Paragraph (c), may exercise, from time to time and at any time, the power to hold or dispose of any assets held by the Trust on the date a Change in Control occurs, and shall invest and reinvest the Trust, without distinction between principal and income, in accordance with the provisions described in Paragraph (a) of this Section 6. (d) Contractual Settlement and Income; Market Practice Settlements (1) In accordance with Trustee's standard operating procedure, Trustee shall credit the Trust with income and maturity proceeds on securities on contractual payment date net of any taxes or upon actual receipt. To the extent Trustee credits income on contractual payment date, Trustee may reverse such accounting entries to the contractual payment date if Trustee reasonably believes that such amount will not be received. (2) In accordance with Trustee's standard operating procedure, Trustee will attend to the settlement of securities transactions on the basis of either contractual settlement date accounting or actual settlement date accounting. To the extent Trustee settles certain securities transactions on the basis of contractual settlement date accounting, Trustee may reverse to the contractual settlement date any entry relating to such contractual settlement if Trustee reasonably believes that such amount will not be received. (3) Settlements of transactions may be effected in trading and processing practices customary in the jurisdiction or market where the transaction occurs. Company acknowledges that this may, in certain circumstances, require the delivery of cash or securities (or other property) without the concurrent receipt of securities (or other property) or cash. In such circumstances, Trustee shall have no responsibility for nonreceipt of payment (or late payment) or nondelivery of securities or other property (or late delivery) by the counterparty. SECTION 7. Administrative Powers. Trustee shall have and in its sole and absolute discretion may exercise from time to time and at any time the following administrative powers and authority with respect to the Trust: (a) To hold property of the Trust in its own name or in the name of a nominee or nominees, without disclosure of the Trust, or in bearer form so that it will pass by delivery, but no such holding shall relieve Trustee of its responsibility for the safe custody and disposition of the Trust in accordance with the provisions of this Agreement; Trustee's books and records shall at all times show that such property is part of the Trust; and Trustee shall be absolutely liable for any loss occasioned by the acts of its nominee or nominees with respect to securities registered in the name of the nominee or nominees; (b) To continue to hold any property of the Trust whether or not productive of income; to reserve from investment and keep unproductive of income, without liability for interest, cash temporarily awaiting investment and such cash as Company from time to time may specify prior to a Change in Control in order to meet the administrative expenses of the Trust or anticipated distributions therefrom; and (c) To do all other acts that Trustee may deem necessary or proper to carry out any of the powers set forth in the Trust or otherwise in the best interests of the Trust. 15 SECTION 8. Insurance and Annuity Contracts. ------------------------------- (a) Trustee, upon written direction of Company prior to a Change in Control, or from the Administrative Committee after a Change in Control, shall pay from the Trust such sums to such insurance company or companies for the purpose of procuring participating or nonparticipating insurance and/or annuity contracts for the Trust (hereinafter in this Section 8 referred to as "Contracts"). Company, both prior to and after a Change in Control, shall prepare, or cause to be prepared in such form as it shall prescribe, the application for any Contract to be applied for. Trustee shall receive and hold in the Trust, subject to the provisions hereinafter set forth in this Section 8, all Contracts so obtained. (b) Trustee shall be the complete and absolute owner of Contracts held in the Trust and, upon written direction of Company prior to a Change in Control, shall have the power, without the consent of any other person, to exercise any and all of the rights, options or privileges that belong to the absolute owner of any Contract held in the Trust or that are granted by the terms of any such Contract or by the terms of this Agreement. Prior to a Change in Control, Trustee shall have no discretion with respect to the exercise of any of the foregoing powers or to take any other action permitted by any Contract held in the Trust, but shall exercise such powers or take such action only upon the written direction of Company and Trustee shall have no duty to exercise any of such powers or to take any such action unless and until it shall have received such direction. Trustee, upon the written direction of Company prior to a Change in Control, shall deliver any Contract held in the Trust to such person or persons as may be specified in the direction. (c) Trustee shall hold in the Trust the proceeds of any sale, assignment or surrender of any Contract held in the Trust and any and all dividends and other payments of any kind received in respect of any Contract held in the Trust. (d) Upon the written direction of Company prior to a Change in Control, Trustee shall pay from the Trust premiums, assessments, dues, charges and interest, if any, upon any Contract held in the Trust. Trustee shall have no duty to make any such payment unless and until it shall have received such direction. After a Change in Control, Trustee shall pay from the Trust premiums, assessments, dues, charges and interest, if any, upon any Contract held in the Trust, only upon direction from the Administrative Committee. (e) No insurance company that may issue any Contract or Contracts held in the Trust shall be deemed to be a party to this Agreement for any purpose, or to be responsible in any way for the validity of this Agreement or to have any liability under this Agreement other than as stated in each Contract that it may issue. Any insurance company may deal with Trustee as sole owner of any Contract issued by it and held in the Trust, without inquiry as to the authority of Trustee to act, and may accept and rely upon any written notice, instruction, direction, certificate or other communication from Trustee believed by it to be genuine and to be signed by an officer of Trustee and shall incur no liability or responsibility for so doing. Any sums paid out by any insurance company under any of the terms of a Contract issued by it and held in the Trust either to Trustee, or, in accordance with its direction, to any other person or persons designated as payees in such Contract shall be a full and complete discharge of the liability to pay such sums, and the insurance company shall have no obligation to look to the disposition of any sums so paid. No insurance company 16 shall be required to look into the terms of this Agreement, to question any action of Trustee or to see that any action of Trustee is authorized by the terms of this Agreement. (f) Anything contained herein to the contrary notwithstanding, neither Company, the Administrative Committee nor Trustee shall be liable for the refusal of any insurance company to issue or change any Contract or Contracts or to take any other action requested by Trustee; nor for the form, genuineness, validity, sufficiency or effect of any Contract or Contracts held in the Trust; nor for the act of any person or persons that may render any such Contract or Contracts null and void; nor for the failure of any insurance company to pay the proceeds and avails of any such Contract or Contracts as and when the same shall become due and payable; nor for any delay in payment resulting from any provision contained in any such Contract or Contracts; nor for the fact that for any reason whatsoever (other than their own negligence or willful misconduct) any Contract or Contracts shall lapse or otherwise become uncollectable. (g) After a Change in Control, the Administrative Committee shall exercise any of the powers set forth in this Section 8, including the power to negotiate for and purchase Contracts the rates of return and maturity dates of which may reasonably be expected to yield assets of the Trust sufficient to discharge any or all of the obligations of Company under the Plans. SECTION 9. Disposition of Income. --------------------- During the term of the Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested. SECTION 10. Accounting by Trustee. --------------------- Trustee shall keep accurate and detailed records of all investments, receipts and disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between Company and Trustee prior to a Change in Control and the Administrative Committee and Trustee after a Change in Control. Trustee will use its best efforts to deliver to Company, and the Administrative Committee after a Change in Control, within ninety (90) days following the close of each calendar year and within ninety (90) days after the removal or resignation of Trustee, but in no event later than one hundred twenty (120) days thereafter, a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts and disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. SECTION 11. Responsibility of Trustee. ------------------------- (a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that Trustee shall incur 17 no liability to any person for any action taken pursuant to a direction, request or approval given by Company which is contemplated by, and in conformity with, the terms of the Plans or this Trust and is given in writing by Company. In the event of a dispute between Company and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) If Trustee undertakes or defends any litigation arising in connection with this Trust, Company agrees to indemnify Trustee against Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If Company does not pay such costs, expenses and liabilities in a reasonably timely manner, Trustee may obtain payment from the Trust. (c) Trustee may consult with legal counsel (who may also be counsel for Company or the Administrative Committee generally) with respect to any of its duties or obligations hereunder. (d) Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. (e) Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein; provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor trustee, or to loan to any person the proceeds of any borrowing against such policy. (f) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. (g) Unless resulting from Trustee's negligence, willful misconduct, lack of good faith, or breach of its duties under this Agreement, Company shall indemnify and save harmless Trustee from, against, for and in respect of any and all damages, losses, obligations, liabilities, liens, deficiencies. costs and expenses, including, without limitation, reasonable attorneys' fees incident to any suit, action, investigation, claim or proceedings suffered, sustained, incurred or required to be paid by Trustee in connection with the Plans or this Trust. If Company does not pay such costs, expenses and liabilities for which it is liable hereunder in a reasonably timely manner, Trustee may obtain payment from the Trust. SECTION 12. Taxes, Compensation and Expenses of Trustee, the Non-Qualified Plans Committee and the Administrative Committee. -------------------------------------------------------------- (a) It is the intent of Company and Trustee that Company shall be responsible for determining and effecting all Federal and state tax aspects of the Plans and the Trust, including without limitation the payment of income taxes on the Trust's income, if any, any required withholding of income or other 18 payroll taxes in connection with the payment of benefits from the Trust pursuant to the Plans, and all reporting required in connection with any such taxes. To the extent that Company is required by applicable law to pay or withhold such taxes or to file such reports, such obligation shall be a responsibility allocated to Company, as the case may be, hereunder. To the extent Trustee is required by applicable law to pay or withhold such taxes or to file such reports, Company shall inform Trustee of such obligation, shall direct Trustee with respect to the performance of such obligations and shall provide Trustee with all information required by Trustee to meet such obligations. Company shall pay any Federal and state taxes imposed or levied with respect to the corpus and/or income of the Trust or any part thereof under existing or future laws, and Company, or the Administrative Committee, if applicable, in their discretion, or Trustee, in its discretion, may contest the validity or amount of any tax, assessment, claim or demand respecting the Trust or any part thereof. Upon direction from the Administrative Committee, Trustee shall deduct any payroll taxes required to be withheld with respect to any payments made pursuant to the Trust. (b) Trustee, without direction from Company, or the Administrative Committee, if applicable, shall pay from the Trust the reasonable and necessary expenses and compensation of counsel and all other reasonable and necessary expenses of managing and administering the Trust and the Administrative Committee that are not paid by Company including, but not limited to, Participant record keeping expenses, investment management fees, computer time charges, data retrieval and input costs, charges for time expended by personnel of Trustee in fulfilling Trustee's duties, expenses incurred by the members of the Non-Qualified Plans Committee or the Administrative Committee in performance of their duties, and the compensation of the Administrative Committee. (c) Company shall pay all administrative and Trustee's fees and expenses. If not so paid, the fees and expenses shall be paid from the Trust. Trustee shall be entitled to fees for services, as mutually agreed, between Company and Trustee prior to a Change in Control and as subsequently agreed upon renewal between the Administrative Committee and Trustee following a Change in Control. Company acknowledges that as part of Trustee's compensation, Trustee may earn interest on balances including disbursement balances and balances arising from purchase and sale transactions. If Trustee advances cash or securities to the Trust for any purpose, including the purchase or sale of foreign exchange or of contracts for foreign exchange, or in the event that Trustee shall incur or be assessed taxes, interest, charges, expenses, assessments, or other liabilities in connection with the performance of this Agreement, except such as may arise from its own negligent action, negligent failure to act or willful misconduct, any property at any time held in the Trust Fund shall be security therefor and Trustee shall be entitled to collect from the Trust sufficient cash for reimbursement, and if such cash is insufficient, dispose of the assets of the Trust Fund to the extent necessary to obtain reimbursement. (d) After a Change in Control, Trustee shall bill Company directly, on a quarterly basis, in arrears, for all expenses described in Paragraph (b) of this Section 12 and all fees described in Paragraph (c) thereof which amounts shall be immediately due and payable except as otherwise provided in Paragraph (c). If such amounts are not paid by Company within thirty (30) days of the billing 19 date, Trustee may pay such amounts from the Benefits Protection Account. Trustee may take such action as it deems necessary to recover such amounts from Company; provided that Trustee shall be obligated to take action if Company's failure to pay causes a reduction below $250,000 in the assets of the Trust attributable to the Benefits Protection Account. SECTION 13. Resignation and Removal of Trustee. ---------------------------------- (a) Trustee may resign at any time by written notice to Company, and the Administrative Committee after a Change in Control, which shall be effective forty-five (45) days after receipt of such notice unless prior to a Change in Control Company, and after a Change in Control the Administrative Committee, and Trustee agree otherwise. (b) Trustee may be removed by Company prior to a Change in Control, and the Administrative Committee after a Change in Control, on thirty (30) days notice or upon shorter notice accepted by Trustee. (c) If Trustee resigns or is removed after a Change in Control, the Administrative Committee shall select a successor trustee in accordance with the provisions of Section 14 hereof. (d) Upon resignation or removal of Trustee and appointment of a successor trustee, all assets shall subsequently be transferred to the successor trustee. The transfer shall be completed within ninety (90) days after receipt of notice of resignation, removal or transfer, unless Company prior to a Change in Control, and the Administrative Committee after a Change in Control, extends the time limit. (e) If Trustee resigns or is removed, a successor shall be appointed in accordance with Section 14 hereof, by the effective date of resignation or removal under paragraphs (a) or (b) of this section. In either case, Company prior to a Change in Control, or the Administrative Committee after a Change in Control, as the case may be, shall diligently seek to obtain a successor trustee. Until the appointment of a successor trustee, Trustee shall continue to perform its duties hereunder until the successor trustee is in place. If no such appointment has been made by the effective date of resignation or removal, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. SECTION 14. Appointment of Successor. ------------------------ (a) If Trustee resigns or is removed in accordance with Section 13(a) or (b) hereof, Company prior to a Change in Control, or the Administrative Committee after a Change in Control, as the case may be, may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by 20 Company prior to a Change in Control, and the Administrative Committee after a Change in Control, or the successor trustee to evidence the transfer. (b) The successor trustee need not examine the records and acts of any prior trustee and may retain or dispose of existing Trust assets, subject to Section 6 and 9 hereof. The successor trustee shall not be responsible for and Company shall indemnify and defend the successor trustee from any claim or liability resulting from any action or inaction of any prior trustee or from any other past event or any condition existing at the time it becomes successor trustee. SECTION 15. General Duties of the Administrative Committee. ---------------------------------------------- (a) The Administrative Committee shall discharge its duties under this Trust solely in the interest of the Participants and their Beneficiaries and: (1) for the exclusive purpose of providing benefits to such Participants and their Beneficiaries and defraying reasonable expenses of administering the Plans; (2) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; and (3) by diversifying the investments of the Trust so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; but the duties and obligations of the Administrative Committee shall be limited to those expressly imposed upon them by this Trust notwithstanding any reference herein to the Plans. (b) The Administrative Committee shall consist of either three (3) or five (5) members who, prior to a Change in Control, shall be appointed by, and serve at the pleasure of, the Board of Directors of the Corporation. The Board may, at any time prior to a Change in Control, designate the members of the Administrative Committee, fill vacancies or require the resignation of one or more of the members of the Administrative Committee with or without cause. In the event that a vacancy or vacancies shall occur on the Administrative Committee prior to a Change in Control, the remaining member or members shall act as the Administrative Committee until the Board fills such vacancy or vacancies. However, upon a Change in Control, no member may be removed, for any reason, by the Board. In the event that a vacancy occurs after a Change in Control, the Board shall have no authority to fill such vacancy and the remaining members of the Administrative Committee shall select a replacement to serve on the Administrative Committee. No person shall be ineligible to be a member of a Administrative Committee because he is, was or may become entitled to benefits under any of the Plans; or because he is a director and/or employee of Company, Affiliate or Trustee; provided, that no Participant who is a member of the Administrative Committee shall participate in any determination by the Administrative Committee specifically relating to the calculation or disposition of his benefits under any of the Plans. Prior to a Change in Control, the Board may appoint a member of the Administrative Committee to be the Chairman of the Administrative Committee. Upon a Change in Control, the Administrative Committee shall be responsible for appointing a member of the Administrative Committee as the Chairman of the Administrative Committee. (c) Except as otherwise expressly provided in this Trust or by the Board of Directors prior to a Change in Control: 21 (1) Within thirty (30) days after a Change in Control, Company shall notify Participants and Beneficiaries of the Plans, in a manner approved by the Administrative Committee, in writing of the Administrative Committee's availability to aid them in pursuing any claims they may have against Company under the terms of those of the Plans under which they are covered. If Company fails to do so, the Administrative Committee shall notify Participants and Beneficiaries of the Plans in writing of the Administrative Committee's availability to aid them in pursuing any claims they may have against Company under the terms of those of the Plans under which they are covered. (2) If, after a Change of Control, a Participant or Beneficiary notifies the Administrative Committee that Company (or insurance company, contract administrator or any other party, if applicable) has refused to pay a claim asserted by the Participant or Beneficiary under any of the Plans, and the Administrative Committee determines that the assets held in the Accounts are not available to pay such claim, then, unless the Administrative Committee shall determine that the claim has no basis in law and fact (in which case the Administrative Committee shall notify the Participant or Beneficiary of such determination and shall take no further action with respect to the claim), the Administrative Committee: (A) will promptly attempt to negotiate with Company (or insurance company, contract administrator or other party, if applicable) to obtain payment, settlement, or other disposition of the claim, subject to the consent of the Participant or Beneficiary; (B) will if (i) negotiations fail after sixty (60) days of their commencement to result in a payment, settlement or other disposition agreeable to the Participant or Beneficiary (hereafter referred to in this Paragraph (c) of Section 15 as the "Plaintiff"), (ii) the Administrative Committee at any time reasonably believes further negotiations not to be in the Plaintiff's best interest, or (iii) any applicable statute of limitations would otherwise expire within sixty (60) days, upon the receipt of written authorization from the Plaintiff in substantially the form attached as Exhibit A hereto, institute and maintain legal proceedings (the "Litigation") against Company or other appropriate person or entity to recover on the claim on behalf of the Plaintiff; and (C) may, subject to the written consent of the Plaintiff, settle or discontinue the Litigation. The Administrative Committee shall direct the course of the Litigation and shall keep the Plaintiff informed of the progress of the Litigation as the Administrative Committee deems appropriate, but no less frequently than quarterly. If, during the Litigation, (i) the Plaintiff directs in writing that the Litigation on behalf of the Plaintiff be settled or discontinued, the Administrative Committee shall take all appropriate action to follow such direction, provided that the written direction specifies the terms and conditions of the settlement or discontinuance, and further provided that the Plaintiff, if requested by the Administrative Committee, shall execute and deliver to the Administrative Committee a 22 document in a form acceptable to the Administrative Committee releasing and holding harmless the Administrative Committee from any liability resulting from the Administrative Committee following such direction; or (ii) the Plaintiff refuses to consent to the settlement or other disposition of the Litigation on terms recommended in writing by the Administrative Committee, the Administrative Committee may proceed, in its sole and absolute discretion, to take such action as it deems appropriate in the Litigation, including settlement or discontinuance of the Litigation, provided that the Administrative Committee shall afford the Plaintiff at least fourteen (14) days' advance notice of any decision to settle or otherwise discontinue the Litigation, subject to the provisions of the following sentence. If, at any time, the Plaintiff (x) revokes in writing (in substantially the form attached as Exhibit B hereto) the authorization of the Administrative Committee to proceed on his behalf and delivers such writing to the Administrative Committee and (y) appoints his own counsel and so notifies the Administrative Committee in writing, whose fees and expenses are not to be paid by the Trust and who shall appear in the Litigation on behalf of the Plaintiff in lieu of counsel retained by the Administrative Committee, then the Administrative Committee shall not be authorized to proceed in the Litigation on behalf of the Plaintiff. Thereafter, the Administrative Committee shall have no obligation to proceed further on behalf of such Plaintiff or to pay any costs or expenses incurred in the Litigation after the date of the delivery of such writing. The Administrative Committee is empowered to retain, at the expense of the Trust, counsel and other appropriate experts, including actuaries and accountants, to aid it in making any determination under this Paragraph (c) of Section 15 and in determining whether to pursue or settle any Litigation. The Administrative Committee shall have the discretion to determine the form and nature that any Litigation against Company or other appropriate person or entity shall take, and the procedural rules and laws applicable to such Litigation shall supersede any inconsistent provision of this Agreement. (d) Subparagraph (C) shall be inapplicable in respect of any Litigation involving the payment of benefits under any Plans in which the Administrative Committee is named a defendant. Any Plaintiff in an action in which the Administrative Committee or Trustee is named a defendant shall engage his own counsel, whose fees and expenses shall be paid by the Plaintiff, provided, however, that the Administrative Committee shall pay out of the assets of the Benefits Protection Account of the Trust any legal fees and costs awarded to the Plaintiff by a court in such Litigation. (e) In the event the Administrative Committee determines that the claim of a Participant or Beneficiary has no basis in law or fact and such Participant or Beneficiary pursues such claim against Company, then the Administrative Committee shall reimburse the Participant or Beneficiary out of the assets of the Benefits Protection Account for any reasonable legal fees and other reasonable costs incurred in pursuing such claim if such Participant or Beneficiary obtains a settlement or final judgment of a court of competent jurisdiction under which the Participant or Beneficiary is to receive not less 23 than 50% of the amount originally claimed to the Administrative Committee as the amount owed by Company. (f) With respect to claims by holders of Severance Compensation Agreements, such holders may elect to pursue their own claim (with counsel of their choice) or to have the Administrative Committee pursue such claim. In the event such holders elect to pursue their own claims, the Administrative Committee shall promptly reimburse such holders for all attorneys fees and other expenses incurred to the extent Company does not pay such amounts as provided in the Severance Compensation Agreements. (g) Company will, prior to a Change in Control, designate legal counsel to the Administrative Committee at the expense of the Trust after a Change in Control, to enforce the rights of Participants and Beneficiaries to benefits under the Plans, as described above. If the designated counsel declines to provide representation because of an ethical or legal conflict of interest, or the Administrative Committee is not satisfied with the quality of representation provided, the Administrative Committee, may, from time to time, dismiss the designated firm or any successor and engage another qualified law firm for this purpose including the same law firm which represents the Administrative Committee with respect to its responsibilities as Administrative Committee under this Agreement. Company may not dismiss or engage such counsel or cause the Administrative Committee to engage or dismiss such counsel after a Change in Control. (h) After a Change in Control, the Administrative Committee shall have the authority to invest and manage the assets of the Trust. (i) The Administrative Committee shall have all powers necessary or helpful for the carrying out of its responsibilities, and the decisions or actions of the Administrative Committee in good faith in respect of any matter hereunder shall be conclusive and binding upon all parties concerned. (j) After a Change in Control, the Administrative Committee shall have the authority to amend this Trust. No amendment shall be made without Trustee's consent thereto in writing if, and to the extent that, the effect of such amendment is to increase Trustee's responsibilities hereunder. (k) Without limiting the generality of the foregoing, the Administrative Committee shall have full discretionary authority to: (1) Construe all terms, provisions, conditions and limitations and determine all questions arising out of or in connection with the terms and provisions of the Trust except as otherwise expressly provided herein; 24 (2) Make rules and regulations and determine all questions relating to the administration of the Trust and the Administrative Committee which are not inconsistent with the terms and provisions of this Trust; and (3) Monitor the performance of Trustee for the Trust. In order to accomplish this, the Administrative Committee shall meet with Trustee, at such time as the Administrative Committee shall determine, and the Administrative Committee shall request Trustee to present a full report on the financial position of the Trust. The foregoing list of powers is not intended to be either complete or exclusive, and the Administrative Committee shall, in addition, have such powers as may be necessary for the performance of its duties under the Trust. (l) The Administrative Committee may employ such counsel as it may require in carrying out the provisions of the Trust. Unless paid by Company, the Administrative Committee shall charge the fees, charges and costs resulting from such employment as an expense of a trust established relating to the Trust. Unless otherwise provided by law, any person so employed by the Administrative Committee may be legal or other counsel to Company, an affiliate, a member of the Administrative Committee or an officer or member of the Board of Directors or an affiliate. (m) Each member of the Administrative Committee shall receive compensation, as mutually agreed between Company and the Administrative Committee prior to a Change in Control, or as determined by the Administrative Committee after a Change in Control, for their services in connection with the Trust. (n) The Administrative Committee may purchase such fiduciary liability insurance or such other insurance as it deems necessary relating to the performance of its obligations hereunder. Unless paid by Company, the Administrative Committee shall charge the premiums and charges resulting from such insurance as an expense of the Trust. SECTION 16. Amendment or Termination. ------------------------ (a) This Trust may be amended by a written instrument executed by Trustee and Company. After a Change in Control, the Administrative Committee, and not Company, shall have the authority to amend this Trust. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plans. (b) Subject bto the provisions of Section 2(d), the Trust shall not terminate until the date on which Participants and Beneficiaries are no longer entitled to benefits pursuant to the terms of the Plans. Upon termination of the Trust, any assets remaining in the Trust shall be returned to Company. SECTION 17. General Duties of the Non-Qualified Plans Committee. The Non-Qualified Plans Committee shall discharge their duties under this Agreement solely in the interest of the Participants in the Plans and their beneficiaries and (1) for the exclusive purpose of providing benefits to such Participants and 25 their beneficiaries and defraying reasonable expenses of administering the Plans; and (2) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. SECTION 18. Indemnification. Company agrees, to the extent permitted by law, to indemnify and hold Trustee, the Non-Qualified Plans Committee and the Administrative Committee harmless from and against any liability that they may incur in the administration of the Trust, unless arising from Trustee's, the Non-Qualified Plans Committee's or the Administrative Committee's own gross negligence or willful breach of the provisions of its obligations under this Agreement. If Company fails to indemnify and hold Trustee, the Non-Qualified Plans Committee or the Administrative Committee harmless from and against any liability that they may incur in the administration of this Trust pursuant to this Section 18, the Trust shall indemnify Trustee, the Non-Qualified Plans Committee or the Administrative Committee to the extent permitted by law. Trustee, the Non-Qualified Plans Committee or the Administrative Committee shall not be required to give any bond or any other security for the faithful performance of its duties under this Agreement, except as required by law. SECTION 19. Administration of the Plans; Communications. ------------------------------------------- (a) Company and/or the Non-Qualified Plans Committee or the Administrative Committee shall administer the Plans as provided therein and subject to any delegation by Company and/or the Non-Qualified Plans Committee or the Administrative Committee and assumption by Trustee of the duties of administering the Plans, Trustee shall not be responsible in any respect for administering the Plans nor shall Trustee be responsible for the adequacy of the Trust to meet and discharge all payments and liabilities under the Plans. Trustee shall be fully protected in relying upon any written notice, instruction, direction or other communication signed by an employee of Company or a member of the Non-Qualified Plans Committee or the Administrative Committee who is authorized to execute and deliver, in the name and on behalf of Company or the Non-Qualified Plans Committee or the Administrative Committee, documents or instruments relating to the Trust. Company and/or the Non-Qualified Plans Committee or the Administrative Committee, from time to time, shall furnish Trustee with the names and specimen signatures of the Authorized Persons and shall promptly notify Trustee of the termination of office of any Authorized Person and the appointment of a successor thereto. Until notified to the contrary, Trustee shall be fully protected in relying upon the most recent list of Authorized Persons furnished to it by Company and/or the Non-Qualified Plans Committee or the Administrative Committee. (b) Any action required by any provision of this Agreement to be taken by the Board of Directors of Company shall be evidenced by a resolution of such Board of Directors certified to Trustee by the Secretary or an Assistant Secretary of Company under its corporate seal, and Trustee shall be fully protected in relying upon any resolution so certified to it. Unless other evidence with respect thereto has been specifically prescribed in this Agreement, any other action of Company and/or the Non-Qualified Plans Committee or the Administrative Committee under any provision of this Agreement, including any approval of or exceptions to Trustee's accounts, shall be evidenced by a certificate signed by an Authorized Person, and Trustee shall be fully protected 26 in relying upon such certificate. Trustee may accept a certificate signed by an Authorized Person as proof of any fact or matter that it deems necessary or desirable to have established in the administration of the Trust (unless other evidence of such fact or matter is expressly prescribed herein), and Trustee shall be fully protected in relying upon the statements in the certificate. (c) Trustee shall be entitled conclusively to rely upon any written notice, instruction, direction, certificate or other communication believed by it to be genuine and to be signed by an Authorized Person, and Trustee shall be under no duty to make investigation or inquiry as to the truth or accuracy of any statement contained therein. (d) Until written notice is given to the contrary, communications to Trustee shall be sent to it at its office at 100 Vanguard Boulevard, Malvern, PA 19355, Attention: ERISA Legal Division; communications to Company shall be sent to it at its office at 1521 Concord Pike, Suite 301, Brandywine West Building, Wilmington, Delaware 19803, Attention Vice President, General Counsel, Human Resources & Secretary, communications to the Non-Qualified Plans Committee shall be sent to it at 3102 West End Avenue, Nashville, Tennessee 37203, and communications to the Administrative Committee of the UCAR Carbon Benefits Protection Trust shall be sent to it at 3102 West End Avenue, Nashville, Tennessee 37203. SECTION 20. Miscellaneous. ------------- (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Benefits payable to Participants and Beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (c) This Trust Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, this instrument has been executed as of the day and year first above written. ATTEST: UCAR CARBON COMPANY INC. By: ----------------------------- - ------------------------- Name: Title: ATTEST: VANGUARD FIDUCIARY TRUST COMPANY - ------------------------- By: ------------------------------ Name: Dennis Simmons Title: Principal 27 EXHIBIT A --------- Authorization Pursuant to Paragraph (c) of Section 15 of the UCAR Carbon Company Inc. Benefits Protection Trust ------------------------------------------------------ TO: This is to authorize the Trustee of the UCAR Carbon Benefits Protection Trust (the "Trust"), to institute and maintain legal proceedings against the Company (as defined in the Trust) or other appropriate person or entity to assert the following claim on my behalf: [nature of claim]. The Trustee shall have the powers and be subject to the procedures set forth in Paragraph (c) of Section 15 of the Trust. Any proceedings by the Trustee under this authorization may be initiated in my name as a plaintiff (or as a member of a class) or in the name of the Trustee, or both, as the Trustee determines is necessary or appropriate at the time proceedings are commenced. ------------------------------- Participant 28 EXHIBIT B --------- Revocation of Authorization Pursuant to Paragraph (c) of Section 15 of the UCAR Carbon Company Inc. Benefits Protection Trust ------------------------------------------------------ To: This is to notify you that I revoke any prior authorization I have given to you as Trustee of the UCAR Carbon Benefits Protection Trust (the "Trust") to maintain legal proceedings against the Company (as defined in the Trust) or other appropriate person or entity to assert the following claim on my behalf: [nature of claim]. I understand that this Revocation of Authorization is conditioned upon, and shall not be effective until, the appointment by me of my own counsel and the appearance of that counsel in any legal proceeding on my behalf in lieu of counsel retained by the Trustee. I understand further that, upon the occurrence of these conditions, the Trustee shall have no obligation to proceed further on my behalf, or to pay any costs or expenses incurred after the delivery of this Revocation of Authorization. ------------------------------- Participant 29 SCHEDULE 1 ---------- 1. The UCAR Carbon Compensation Deferral Program. 2. Severance Agreements between the Company and various individuals, respectively. 3. The UCAR TCN Plan. 30 TABLE OF CONTENTS SECTION 1. Definitions.................................................2 SECTION 2. Establishment of Trust......................................5 SECTION 3. Payments to Participants and Their Beneficiaries............7 SECTION 4. Trustee Responsibility Regarding Payments to Trust Beneficiary When Company is Insolvent.......................9 SECTION 5. Payments to Company........................................10 SECTION 6. Investment Authority.......................................10 SECTION 7. Administrative Powers......................................15 SECTION 8. Insurance and Annuity Contracts............................16 SECTION 9. Disposition of Income......................................17 SECTION 10. Accounting by Trustee......................................17 SECTION 11. Responsibility of Trustee..................................17 SECTION 12. Taxes, Compensation and Expenses of Trustee, the Non-Qualified Plans Committee and the Administrative Committee..................................................18 SECTION 13. Resignation and Removal of Trustee.........................20 SECTION 14. Appointment of Successor...................................20 SECTION 15. General Duties of the Administrative Committee.............21 SECTION 16. Amendment or Termination...................................25 SECTION 17. General Duties of the Non-Qualified Plans Committee........25 SECTION 18. Indemnification............................................26 SECTION 19. Administration of the Plans; Communications................26 SECTION 20. Miscellaneous..............................................27 EX-21 13 gti_2004ex21.txt EXHIBIT 21.1.0 Exhibit 21.1.0 Subsidiaries of GrafTech International Ltd. as of March 1, 2004(b)
- --------------------------------------------- ------------------------------------- -------------------------------------- Name of Subsidiary Jurisdiction of Incorporation Ownership by GrafTech International Ltd. - --------------------------------------------- ------------------------------------- -------------------------------------- GrafTech Finance Inc. Delaware 100% - --------------------------------------------- ------------------------------------- -------------------------------------- GrafTech Global Enterprises Inc. Delaware 100% - --------------------------------------------- ------------------------------------- -------------------------------------- - --------------------------------------------- ------------------------------------- -------------------------------------- Name of Subsidiary Jurisdiction of Incorporation Ownership by UCAR Global Enterprises Inc. - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Carbon Company Inc. Delaware 100% - --------------------------------------------- ------------------------------------- -------------------------------------- - --------------------------------------------- ------------------------------------- -------------------------------------- Name of Subsidiary Jurisdiction of Incorporation Ownership by UCAR Carbon Company Inc. - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Inc. Canada 100% - --------------------------------------------- ------------------------------------- -------------------------------------- Northanger Investments (Pty) Ltd.(a) South Africa 100% - --------------------------------------------- ------------------------------------- -------------------------------------- Advanced Energy Technology Inc. Delaware 97.5% - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR International Trading Inc. Delaware 100% - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR S.A. Switzerland 100%(b) - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Holding GmbH Austria 66.67%(c) - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Carbon (Malaysia) Sdn. Bhd.(a) Malaysia 100% - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Carbon Technology LLC Delaware 100% - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Holdings V Inc.(a) California 100% - --------------------------------------------- ------------------------------------- -------------------------------------- Union Carbide Grafito, Inc. New York 100% - --------------------------------------------- ------------------------------------- -------------------------------------- Graphite Electrode Network LLC Delaware 100% - --------------------------------------------- ------------------------------------- -------------------------------------- - --------------------------------------------- ------------------------------------- -------------------------------------- Name of Subsidiary Jurisdiction of Incorporation Ownership by Northanger Investments (Pty) Ltd.(a) - --------------------------------------------- ------------------------------------- -------------------------------------- AGM (Pty) Ltd. South Africa 100% - --------------------------------------------- ------------------------------------- -------------------------------------- - --------------------------------------------- ------------------------------------- -------------------------------------- Name of Subsidiary Jurisdiction of Incorporation Ownership by UCAR S.A. - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Limited United Kingdom 100% - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Electrodos Iberica, S.L. Spain 99.9%(d) - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Carbon Mexicana, S.A. de C.V. Mexico 97.27%(e) - --------------------------------------------- ------------------------------------- -------------------------------------- GrafTech S.p.A. Italy 100% - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Carbon S.A. Brazil 97.89% - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Holding GmbH Austria 33.33%(c) - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Holdings S.A.S. France 100% - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR South Africa (Pty.) Ltd. South Africa 100% - --------------------------------------------- ------------------------------------- --------------------------------------

- --------------------------------------------- ------------------------------------- -------------------------------------- Name of Subsidiary Jurisdiction of Incorporation Ownership by UCAR Holding GmbH - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Grafit OAO Russia 99.25% - --------------------------------------------- ------------------------------------- -------------------------------------- - --------------------------------------------- ------------------------------------- -------------------------------------- Name of Subsidiary Jurisdiction of Incorporation Ownership by UCAR Holdings S.A.S. - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR SNC France 100%(f) - --------------------------------------------- ------------------------------------- -------------------------------------- Carbone Savoie S.A.S. France 70% - --------------------------------------------- ------------------------------------- -------------------------------------- - --------------------------------------------- ------------------------------------- -------------------------------------- Name of Subsidiary Jurisdiction of Incorporation Ownership by UCAR Carbon S.A. - --------------------------------------------- ------------------------------------- -------------------------------------- UCAR Produtos de Carbono S.A. Brazil 99.98% - --------------------------------------------- ------------------------------------- -------------------------------------- - --------------------------------------------- ------------------------------------- -------------------------------------- Name of Subsidiary Jurisdiction of Incorporation Ownership by Carbone Savoie S.A.S. - --------------------------------------------- ------------------------------------- -------------------------------------- Carbone Savoie Holdings Brasil S/A(a) Brazil 97.90%(a) - --------------------------------------------- ------------------------------------- -------------------------------------- - --------------------------------------------- ------------------------------------- -------------------------------------- Name of Subsidiary Jurisdiction of Incorporation Ownership by Carbone Savoie Brasil S/A - --------------------------------------------- ------------------------------------- -------------------------------------- Carbone Savoie Brasil S/A Brazil 99.98% - --------------------------------------------- ------------------------------------- --------------------------------------
(a) In process of dissolution. (b) Directors Qualifying Shares of subsidiaries are deemed to be owned by their immediate parent entity. (c) 66.67% owned by UCAR Carbon Company Inc. and 33.33% owned by UCAR S.A. (d) One share held by UCAR Carbon Company Inc. (e) 97.27% owned by UCAR S.A. and 1.69% owned by UCAR Carbon Company Inc. (f) One share held by UCAR S.A. EX-23 14 gti-consent.txt EXHIBIT 23.1.0 Exhibit 23.1.0 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-26097 and No. 333-82417 on Form S-3, and No. 33-95546, No. 33-95548, No. 33-95550, No. 333-02560, No. 333-82393, No. 333-82411, No. 333-46680, and No 333-75774 on Form S-8 of our report dated March 12, 2004 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of Financial Accounting Standards No. 142, Goodwill and other Intangible Assets, effective January 1, 2002) appearing in this Annual Report on Form 10-K of GrafTech International Ltd. (formerly UCAR International Inc.) and subsidiaries for the year ended December 31, 2003. /s/ Deloitte & Touche LLP Philadelphia, Pennsylvania March 12, 2004 EX-31 15 shularcertif.txt EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION I, Craig S. Shular, certify that: 1. I have reviewed this Annual Report on Form 10-K of GrafTech International Ltd. (the "Registrant"); 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. By: /s/ Craig S. Shular __________________________ Craig S. Shular Chief Executive Officer and President March 12, 2004 EX-31 16 degasperiscertif.txt EXHIBIT 31.2 Exhibit 31.2 CERTIFICATION I, Corrado F. De Gasperis, certify that: 1. I have reviewed this Annual Report on Form 10-K of GrafTech International Ltd. (the "Registrant"); 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. By: /s/ Corrado F. De Gasperis __________________________ Corrado F. De Gasperis Vice President, Chief Financial Officer and Chief Information Officer March 12, 2004 EX-32 17 shular18usc.txt EXHIBIT 32.1 Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In accordance with the rules and regulations of the Securities and Exchange Commission, the following Certification shall not be deemed to be filed with the Commission under the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, notwithstanding any general incorporation by reference of the Annual Report of GrafTech International Ltd. (the "Corporation") on Form 10-K for the year ended December 31, 2003, as filed with the Commission on the date hereof (the "Report"), into any other document filed with the Commission In connection with the Report, I, Craig S. Shular, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation. A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished to the Commission or its staff upon request. /s/ Craig S. Shular - ------------------------------------ Craig S. Shular Chief Executive Officer March 12, 2004 EX-32 18 degasperis18usc.txt EXHIBIT 32.2 Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In accordance with the rules and regulations of the Securities and Exchange Commission, the following Certification shall not be deemed to be filed with the Commission under the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, notwithstanding any general incorporation by reference of the Annual Report of GrafTech International Ltd. (the "Corporation") on Form 10-K for the year ended December 31, 2003, as filed with the Commission on the date hereof (the "Report"), into any other document filed with the Commission. In connection with the Report, I, Corrado F. De Gasperis, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation. A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished to the Commission or its staff upon request. /s/ Corrado F. De Gasperis - ------------------------------------ Corrado F. De Gasperis Chief Financial Officer March 12, 2004 ~~-----END PRIVACY-ENHANCED MESSAGE-----~~

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549_________________

FORM 10-KFOR ANNUAL AND TRANSITION REPORTSPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934_________________

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

TABLE OF CONTENTS (continued)

TABLE OF CONTENTS (continued)

TABLE OF CONTENTS (continued)

PART I

Preliminary Notes

Item 1. Business

Introduction

Business Strategies

Our Lines of Business

Synthetic Graphite Line of Business

Worldwide steel production (Millions of metric tons)

Natural Graphite Line of Business

Advanced Carbon Materials Line of Business

Production Planning, Product Manufacturing and Distribution

Production Planning

Manufacturing

Distribution

Sales and Customer Service

Technology

Strategic Alliances

Competition

Environmental Matters

Insurance

Employees

Corporate History

Risk Factors and Forward Looking Statements

Risks Relating to Us

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

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

Risks Relating to our Securities and Pledges of Our Assets

Forward Looking Statements

Item 2. Properties

Item 3. Legal Proceedings

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

PART II

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

Market Information

Dividend Policies and Restrictions

Equity Compensation Plan Information

Item 6. Selected Financial Data

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

Repositioning Our Global Manufacturing Network and Other Initiatives

Recent Strategic Alliance Developments

Global Economic Conditions and Outlook

Financing Transactions

Litigation Against Our Former Parent Companies Initiated by Us

Antitrust Litigation Against Us

Customer Base

Results of Operations

Effects of Inflation

Currency Translation and Transactions

Effects of Changes in Currency Exchange Rates

Liquidity and Capital Resources

Restrictions on Dividends and Stock Repurchases

Costs Relating to Protection of the Environment

Critical Accounting Policies

Recent Accounting Pronouncements

Description of Our Financing Structure

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Independent Auditors’ Report

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Discussion of Business and Structure

(2) Summary of Significant Accounting Policies

(3) Financial Instruments

(4) Segment Reporting

(5) Long-Term Debt and Liquidity

(6) Income Taxes

(7) Other Expense (Income), Net

(8) Interest Expense

(9) Supplementary Balance Sheet Detail

(10) Leases and Other Long Term Obligations

(11) Benefit Plans

(12) Restructuring and Impairment Charges

(13) Management Compensation and Incentive Plans

(14) Contingencies

(15) Earnings Per Share

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
_________________

TABLE OF CONTENTS
(continued)

TABLE OF CONTENTS
(continued)

TABLE OF CONTENTS
(continued)

Worldwide steel production
(Millions of metric tons)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Balance Sheet
at December 31, 2003

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Condensed Consolidating Balance Sheet
at December 31, 2002

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003
(continued)

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003
(continued)

Condensed Consolidating Statements of Cash Flows
for the years ended December 31, 2001, 2002 and 2003

Condensed Consolidating Balance Sheet
at December 31, 2003

Condensed Consolidating Balance Sheet
at December 31, 2002

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003
(continued)

Condensed Consolidating Statements of Operations
for the years ended December 31, 2001, 2002 and 2003
(continued)

Condensed Consolidating Statements of Cash Flows
for the years ended December 31, 2001, 2002 and 2003